UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------
FORM 10-Q
-------------------------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-20330
GARDENBURGER, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0886359
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1411 SW MORRISON STREET, SUITE 400 PORTLAND, OREGON 97205
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 503-205-1500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ____X____ No ________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK WITHOUT PAR VALUE 8,839,251
(Class) (Outstanding at May 7, 1999)
================================================================================
<PAGE>
GARDENBURGER, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1. Financial Statements
Balance Sheets - March 31, 1999 and December 31, 1998 2
Statements of Operations - Quarters Ended March 31, 1999
and 1998 3
Statements of Cash Flows - Quarters Ended March 31, 1999
and 1998 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II - OTHER INFORMATION
- ---------------------------
Item 2. Changes in Securities and Use of Proceeds 10
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
GARDENBURGER, INC.
BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------ -------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,684 $ 2,320
Accounts receivable, net of allowances of
$208 and $148 6,391 14,969
Inventories, net 17,248 12,457
Prepaid expenses 3,854 4,515
Deferred income taxes 5,045 1,989
------------------ -------------------
Total Current Assets 34,222 36,250
Property, Plant and Equipment, net of accumulated
depreciation of $3,587 and $3,174 11,716 12,238
Deferred Income Taxes 4,242 4,242
Other Assets, net of accumulated amortization of
$620 and $534 2,401 2,318
------------------ -------------------
Total Assets $ 52,581 $ 55,048
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term note payable $ 17,105 $ 15,000
Accounts payable 9,897 9,708
Payroll and related liabilities payable 2,513 1,822
Other current liabilities 2,006 2,366
------------------ -------------------
Total Current Liabilities 31,521 28,896
Other Long-Term Liabilities 217 226
Convertible Notes Payable 15,000 15,000
Shareholders' Equity:
Preferred Stock, no par value, 5,000,000 shares
authorized; none issued - -
Common Stock, no par value, 25,000,000 shares
authorized; shares issued and outstanding:
8,787,271 and 8,733,811 10,092 9,717
Additional paid-in capital 4,275 4,275
Retained earnings (deficit) (8,524) (3,066)
------------------ -------------------
Total Shareholders' Equity 5,843 10,926
------------------ -------------------
Total Liabilities and Shareholders' Equity $ 52,581 $ 55,048
================== ===================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
GARDENBURGER, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three months ended March 31,
---------------------------------------
1999 1998
----------------- ------------------
Net sales $ 13,563 $ 13,040
Cost of goods sold 7,353 6,887
----------------- ------------------
Gross margin 6,210 6,153
Operating expenses:
Sales and marketing 11,072 11,421
General and administrative 1,916 1,440
Restructuring charge 1,100 -
----------------- ------------------
----------------- ------------------
14,088 12,861
----------------- ------------------
Operating loss (7,878) (6,708)
Other income (expense):
Interest income 15 -
Interest expense (654) (30)
Other, net 10 -
----------------- ------------------
----------------- ------------------
(629) (30)
----------------- ------------------
Loss before benefit from income taxes (8,507) (6,738)
Benefit from income taxes 3,051 2,420
----------------- ------------------
Net loss $ (5,456) $ (4,318)
================= ==================
Basic and diluted net loss per share $ (0.62) $ (0.50)
================= ==================
Shares used for net loss per share 8,761,479 8,612,973
================= ==================
The accompanying notes are an integral part of these statements.
3
<PAGE>
GARDENBURGER, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1999 1998
---------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,456) $ (4,318)
Effect of exchange rate on operating accounts (2) 1
Adjustments to reconcile net loss to net cash flows used in operating
activities:
Deferred income taxes (3,056) (2,400)
Depreciation and amortization 499 299
Other non-cash (income) expense (9) (58)
Loss on sale of fixed assets - 1
(Increase) decrease in:
Accounts receivable, net 8,578 975
Inventories, net (4,791) (3,456)
Prepaid expenses 661 (696)
Income taxes receivable - (24)
Increase (decrease) in:
Accounts payable 189 1,272
Payroll and related liabilities payable 691 (218)
Other current liabilities (360) 1,176
---------------- -----------------
Net cash used in operating activities (3,056) (7,446)
Cash flows from investing activities:
Payments for purchase of property and equipment (1,318) (1,903)
Proceeds from sale of property and equipment 1,427 4
Other assets, net (169) (51)
---------------- -----------------
Net cash used in investing activities (60) (1,950)
Cash flows from financing activities:
Proceeds from line of credit 2,105 2,000
Proceeds from issuance of convertible notes payable - 15,000
Financing fees related to issuance of convertible notes payable - (986)
Proceeds from exercise of common stock options 375 74
Income tax benefit of non-qualified stock option exercises
and disqualifying dispositions - 16
---------------- -----------------
Net cash provided by financing activities 2,480 16,104
---------------- -----------------
Increase (decrease) in cash and cash equivalents (636) 6,708
Cash and cash equivalents:
Beginning of period 2,320 2,602
---------------- -----------------
End of period $ 1,684 $ 9,310
================ =================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
GARDENBURGER, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS OR AS OTHERWISE INDICATED)
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
- ------------------------------
The financial information included herein for the quarterly periods ended March
31, 1999 and 1998 and the financial information as of March 31, 1999 is
unaudited; however, such information reflects all adjustments, consisting only
of normal recurring adjustments, which are, in the opinion of management,
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods. The financial information as
of December 31, 1998 is derived from Gardenburger, Inc.'s (the Company's) 1998
Annual Report on Form 10-K. The interim financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's 1998 Annual Report on Form 10-K.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
NOTE 2. INVENTORIES
- --------------------
Inventories are valued at standard cost, which approximates the lower of cost
(using the first-in, first-out (FIFO) method) or market, and include materials,
labor and manufacturing overhead.
MARCH 31, 1999 DECEMBER 31, 1998
---------------- -------------------
Raw materials $3,565 $2,843
Packaging and supplies 364 275
Finished goods 13,319 9,339
================ ===================
$17,248 $12,457
================ ===================
NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH ACTIVITY
- ----------------------------------------------------------------
Supplemental disclosure of cash flow information is as follows:
QUARTERLY PERIODS ENDED MARCH 31,
---------------------------------
1999 1998
------------ ------------
Cash paid during the period for income taxes $ 5 $ 4
Cash paid during the period for interest 307 56
Stock issued in exchange for interest expense 263 -
5
<PAGE>
NOTE 4. EARNINGS PER SHARE
- ---------------------------
Basic earnings per share ("EPS") and diluted EPS are the same for both periods
presented since the Company was in a loss position in both periods.
Potentially dilutive securities that are not included in the diluted EPS
calculation because they would be antidilutive are as follows:
MARCH 31,
--------------------------------
1999 1998
-------------- -------------
Stock options 3,084 2,752
Convertible notes 1,163 1,163
============== =============
Total 4,247 3,915
============== =============
NOTE 5. SUBSEQUENT EVENTS
- --------------------------
In April 1999, the Company closed a stock purchase agreement selling $32.5
million of convertible preferred stock to several investors. Under the terms of
the agreement, the Company sold an aggregate of 2,762,500 shares of Series A
convertible preferred stock and 487,500 shares of Series B convertible preferred
stock to members of the investor group, at a price of $10 per share for each
series, or an aggregate consideration of $32.5 million. The preferred shares are
convertible at a price of $10 per share at any time following issuance at the
discretion of the holder. The Series B conversion price will be adjusted to
$3.75 if the Company fails to meet specified performance targets for fiscal
years 1999 and 2000. Both series of preferred stock are entitled to a 12 percent
cumulative annual dividend payable upon redemption of the stock or in the event
of a sale or liquidation of the Company. Shares may not be redeemed until five
years after the original date of issuance, at which time they may be redeemed at
the election of the holders or, under certain conditions, at the discretion of
the Company.
In April 1999, the Company entered into an Amended and Restated Business Loan
Agreement (the "Agreement") with Bank of America NT & SA. The Agreement provides
for a credit line of up to $20 million with interest at the Bank's Reference
Rate or, at the option of the Company, at LIBOR plus 1.25 percentage points or
at the Offshore Rate plus 1.25 percentage points. The line of credit is
available until June 1, 2000. The Agreement also provides for a standby letter
of credit of up to $400,000 (included in the $20 million limit) with a maximum
maturity of March 31, 2001. The Agreement provides that the line of credit is to
be secured by all machinery, equipment, inventory, receivables and intangible
assets of the Company.
The Company is required to meet certain financial covenants under the Agreement
as follows:
- To maintain a current ratio of at least 1.5:1.0 measured monthly;
- Not to incur an operating loss of more than $5 million for the year
ending December 31, 1999; and
- To maintain a minimum fixed charge coverage ratio of at least
1.25:1.00 measured on a rolling four-quarter basis, beginning December
31, 2000.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
RESULTS OF OPERATIONS
Net sales increased 4.0 percent to $13.6 million for the first quarter of 1999
from $13.0 million for the first quarter of 1998. The increase is primarily
related to increased sales in the Company's club store and grocery channels as a
result of the Company's marketing emphasis. Sales in the first quarter of 1999
were lower than anticipated due to strong sales in the fourth quarter of 1998 in
the grocery channel to ensure that enough product would be available for a
try-free coupon promotion in January 1999. The Company's U.S. All Commodity
Volume ("ACV") was approximately 90 percent at the end of the first quarter of
1999 compared to approximately 75 percent at the end of the first quarter of
1998. ACV compares the total sales volume of the stores carrying the Company's
products to the total sales volume throughout the retail grocery channel.
For the first quarter of 1999, the Company attained an average market share of
46 percent in the grocery channel compared to 33 percent for the first quarter
of 1998. In addition, studies performed by Information Resources Incorporated
indicate that Gardenburger's repeat rate is at 39 percent and, despite the
try-free event in the first quarter of 1999, repeat sales accounted for 65
percent of brand sales in the first quarter of 1999 in the grocery channel.
Repeat sales made up only 48 percent of sales in the first quarter of 1998.
Gross margin remained constant at $6.2 million, or 45.8 percent of net sales,
for the first quarter of 1999 compared to 47.2 percent of net sales for the
first quarter of 1998. The decrease in the gross margin percentage is primarily
a result of start-up activities for a second production line in Clearfield,
Utah.
Sales and marketing expenses decreased to $11.1 million (81.6 percent of net
sales) for the first quarter of 1999 from $11.4 million (87.6 percent of net
sales) for the first quarter of 1998. The Company is continuing its aggressive
marketing campaign, which includes national television media advertising. The
slight decrease in dollars spent is a result of lower coupon and advertising
expense, offset in part by higher slotting and product demonstration expense.
General and administrative expenses increased to $1.9 million (14.1 percent of
net sales) for the first quarter of 1999 compared to $1.4 million (11.0 percent
of net sales) for the first quarter of 1998, primarily as a result of
incremental costs related to bringing a new, Year 2000 compliant management
information system on-line and general growth of the business.
The Company incurred a restructuring charge of $1.1 million in the first quarter
of 1999 related to the closure of its Portland, Oregon production facility. At
March 31, 1999, $631,000 remained in accrued liabilities related to this charge,
primarily for employee severance and other employee related costs.
Operating loss increased to $7.9 million for the first quarter of 1999 from $6.7
million for the first quarter of 1998 as a result of the individual line item
changes discussed above.
7
<PAGE>
Interest expense was $654,000 in the first quarter of 1999 compared to $30,000
in the first quarter of 1998 as a result of increased levels of debt associated
with the Company's aggressive marketing campaigns.
Income taxes are based on an estimated rate of 35.9 percent for the quarter
ended March 31, 1999 compared to the 36.6 percent rate used for all of 1998.
Net loss was $5.5 million for the first quarter of 1999 compared to net loss of
$4.3 million for the first quarter of 1998. Loss per share, both basic and
diluted, was $0.62 (on 8,761,479 shares) for the first quarter of 1999 compared
to loss per share, both basic and diluted, of $0.50 (on 8,612,973 shares) for
the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999 working capital was $2.7 million, including $1.7 million of
cash and cash equivalents. In the first quarter of 1999, working capital
decreased by $4.7 million compared to December 31, 1998 and the current ratio
decreased to 1.1:1 from 1.3:1.
Cash and cash equivalents decreased $636,000 from December 31, 1998 primarily
due to $3.1 million used in operations, offset by $2.1 million in proceeds from
the Company's line of credit and $375,000 of proceeds from the exercise of stock
options.
Accounts receivable decreased $8.6 million to $6.4 million at March 31, 1999
from $15.0 million at December 31, 1998 due primarily to significant sales at
the end of 1998 that were collected during the first quarter of 1999. Days sales
outstanding decreased to 42 at March 31, 1999 from 47 at December 31, 1998.
Inventories increased $4.7 million to $17.2 million at March 31, 1999 from $12.5
million at December 31, 1998 in order to support the increased level of sales
expected in the second quarter of 1999 as well as to help ensure adequate stock
during a transition period as the second production line comes on line in
Clearfield and the Portland facility ceased operations. Inventory turned 2.0
times on an annualized basis for the first quarter of 1999 compared to 5.3 times
on an annualized basis for the fourth quarter of 1998.
Capital expenditures of $1.3 million during the first quarter of 1999 primarily
resulted from expenditures for the Company's new management information system
and for production equipment in Clearfield not covered under the company's
operating leases. Capital expenditures are estimated to total approximately $4.0
million for 1999, primarily for information systems infrastructure and the
second production line in Clearfield.
The Company has outstanding $15 million of 7 percent Convertible Senior
Subordinated Notes (the "Notes") held by Dresdner Kleinwort Benson Private
Equity Partners L.P. ("Dresdner"). The Notes are convertible into shares of the
Company's Common Stock at the option of the holder until maturity in 2003, at
which time they will be due in full if not previously converted. The Company may
also elect to redeem the Notes, if not previously converted, at any time after
two years from the date of issuance. The conversion price of the Notes at April
30, 1999 was $12.13 per share, as adjusted to reflect the issuance of
convertible preferred stock as discussed below and the grant of certain stock
options to employees and consultants. Under the terms of the Note Purchase
Agreement relating to the Notes, the Company must comply with certain covenants
and maintain certain financial ratios as follows: current assets to current
8
<PAGE>
liabilities of at least 1.575 to 1.0, measured monthly; total liabilities,
exclusive of the Notes, to tangible net worth, inclusive of the Notes, not to
exceed 1.1 to 1.0, measured monthly; and a minimum fixed charge coverage ratio
of 1.08 to 1.0, measured annually. At March 31, 1999, the Company was out of
compliance with its financial ratio covenants under the Notes. The Company has
received a waiver of compliance from Dresdner through the period ending December
31, 1999.
In April 1999, the Company consummated the sale of $32.5 million of convertible
preferred stock to several investors pursuant to a stock purchase agreement
entered into in March 1999. Under the terms of the agreement, the Company sold
an aggregate of 2,762,500 shares of Series A convertible preferred stock and
487,500 shares of Series B convertible preferred stock to the investors, each at
a price of $10 per share, or an aggregate consideration of $32.5 million. The
preferred shares are convertible into shares of common stock at a conversion
price of $10 per share at any time following issuance at the discretion of the
holder. The Series B conversion price will be adjusted to $3.75 if the Company
fails to meet specified performance targets for fiscal years 1999 and 2000. Both
series of preferred stock are entitled to a 12 percent cumulative annual
dividend payable upon redemption of the stock or in the event of a sale or
liquidation of the Company. Shares may not be redeemed until five years after
the original date of issuance, at which time they may be redeemed at the
election of the holders or, under certain conditions, at the discretion of the
Company.
In April 1999, the Company entered into an Amended and Restated Business Loan
Agreement (the "Agreement") with Bank of America NT & SA. The Agreement provides
for a credit line of up to $20 million with interest at the Bank's Reference
Rate or, at the option of the Company, at LIBOR plus 1.25 percentage points or
at the Offshore Rate plus 1.25 percentage points. The line of credit is
available until June 1, 2000. The Agreement also provides for a standby letter
of credit of up to $400,000 (included in the $20 million limit) with a maximum
maturity of March 31, 2001. The Agreement provides that the line of credit is to
be secured by all machinery, equipment, inventory, receivables and intangible
assets of the Company.
The Company is required to meet certain financial covenants under the Agreement
as follows:
- To maintain a current ratio of at least 1.5:1.0 measured monthly;
- Not to incur an operating loss of more than $5 million for the year
ending December 31, 1999; and
- To maintain a minimum fixed charge coverage ratio of at least
1.25:1.00 measured on a rolling four-quarter basis, beginning December
31, 2000.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities ("SFAS 133").
SFAS 133 establishes accounting and reporting standards for all derivative
instruments. SFAS 133 is effective for fiscal years beginning after June 15,
1999. The Company currently does not have any derivative instruments and,
accordingly, the adoption of SFAS 133 is not expected to have an impact on the
Company's financial position or results of operations.
9
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
None.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- ------- -----------------------------------------
On April 14, 1999, the Company issued and sold 2,762,500 shares of its Series A
Convertible Preferred Stock (the "Series A Shares") and 487,500 shares of its
Series B Convertible Preferred Stock (the "Series B Shares" and, together with
the Series A Shares, the "Preferred Shares") to certain institutional and
accredited investors at a price of $10.00 per share, or total consideration of
$32,500,000. The Company paid BT Alex. Brown Incorporated, the Company's
placement agent in the transaction, a placement fee of $1,920,000. A summary of
the terms of the Preferred Shares and a related Investor Rights Agreement
follows. This summary does not contain all of the information included in those
documents, which are filed as exhibits to this report.
The Preferred Shares are convertible into shares of Common Stock at a conversion
price of $10 per share, or presently on a one-for-one basis, at any time at the
discretion of the holder. The conversion price is subject to adjustment for
stock dividends, stock splits, recapitalizations, and other anti-dilution
provisions. All shares of a series of the Preferred Shares will be automatically
converted into Common Stock upon the vote or written consent of the holders of
two-thirds of the outstanding shares of such series. The conversion price for
the Series B Shares will be adjusted to $3.75 if the Company fails to meet
specified performance targets for fiscal years 1999 and 2000.
The Preferred Shares are entitled to a 12% cumulative annual dividend payable
upon redemption of the shares or in the event of a sale or liquidation of the
Company. The Company is prohibited from paying cash dividends to holders of its
Common Stock ("Junior Dividends") unless dividends have been declared and paid
on all outstanding Preferred Shares in an amount equal to the greater of the 12%
cumulative dividends accrued on such Preferred Shares through the record date
for the Junior Dividend and the amount of the Junior Dividend payable on the
Preferred Shares on an as-converted basis, in each case less the amount of any
12% cumulative dividends previously paid on such Preferred Shares. All
accumulated dividends on any Preferred Shares which are converted shall be
forfeited other than dividends as to which the Company has previously breached
its payment obligation.
Upon the liquidation or dissolution of the Company, the holders of Preferred
Shares are entitled to receive a payment of $10.00 per share plus all
accumulated and unpaid dividends, including amounts payable in connection with
Junior Dividends. The right of holders of Common Stock to distribution of the
Company's assets upon liquidation is junior to the liquidation preference of the
Preferred Shares. Each holder of Preferred Shares may deem a merger, sale of all
or substantially all the assets of the Company, a capital reorganization of the
Company or a reclassification of the Common Stock to be a liquidation of the
Company.
10
<PAGE>
The Preferred Shares of each series may be redeemed at a price equal to the
liquidation preference at any time after December 31, 2004, at the election of a
majority of the holders of each series. The Preferred Shares may also be
redeemed at the option of the Company at a price equal to $10.50 per share plus
accumulated and unpaid dividends after December 31, 2004, provided that the
Common Stock then issuable upon conversion of the Preferred Shares is freely
tradable upon issuance and the market price of the Common Stock for the 60
trading days preceding notice of redemption is at least 200% of the conversion
price then in effect.
Each Preferred Share is entitled to one vote (or such other number of votes
equal to the number of shares of Common Stock into which such Preferred Share
shall be convertible from time to time) in the election of directors and any
other matters presented to the shareholders of the Company for their action or
consideration. Except to the extent otherwise required by law or the Company's
Articles of Incorporation, holders of Preferred Shares will vote together with
the holders of Common Stock as a single voting group.
As long as 1,408,875 Series A Shares remain outstanding, the holders of the
Series A Shares are entitled to elect two directors by a majority of the
outstanding Series A Shares, voting as a separate voting group. In accordance
with this provision, Kyle A. Anderson and Jason M. Fish were elected directors
of the Company effective April 14, 1999.
Also, as long as 552,500 Series A Shares and 97,500 Series B Shares remain
outstanding, the Preferred Shares are entitled to vote together as a single
voting group (that is, without the Common Shares) with respect to proposals by
the Company to engage in specified significant corporate actions.
Pursuant to a separate Investor Rights Agreement, the Company has agreed to
register the shares of Common Stock into which the Preferred Shares are
convertible for resale by the holders thereof within 120 days after April 14,
1999.
The Company relied upon the exemption from registration provided by Rule 506
under the Securities Act of 1933 with respect to the offer and sale of the
Preferred Shares.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) The exhibits filed as a part of this report are listed below and this list
is intended to comprise the exhibit index:
Exhibit No.
-----------
3.1 Restated Articles of Incorporation as amended April 14, 1999.
3.2 1995 Restated Bylaws of Gardenburger, Inc., as amended March
29, 1999.
10.1 Amended and Restated Business Loan Agreement dated April 14,
1999, between Bank of America NT & SA and Gardenburger, Inc.
10.2 Stock Purchase Agreement dated as of March 29, 1999, by and
among Gardenburger, Inc., and Rosewood Capital III, L.P.,
Farallon Capital Management LLC, Gruber & McBaine Capital
Management, LLC, BT Capital Investors LP, and certain other
purchasers identified therein. Incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed
April 1, 1999.
10.3 Amendment and Waiver of Stock Purchase Agreement dated April
14, 1999, by and among Gardenburger, Inc., and the Purchasers
identified on Exhibit A thereto.
10.4 Investor Rights Agreement dated April 14, 1999, by and among
Gardenburger, Inc., and the investors identified on Exhibit A
thereto.
10.5 Amendment No. 2 dated April 14, 1999, to Rights Agreement
dated as of April 25, 1996, between Gardenburger, Inc., and
First Chicago Trust Company of New York as Rights Agent.
27 Financial Data Schedule.
99 Description of Common Stock.
(b) Reports on Form 8-K filed since January 1, 1999:
A report on Form 8-K dated January 27, 1999, was filed on January 28,
1999, containing information related to discussions regarding a private
placement of preferred stock, under Item 5. Other Events.
A report on Form 8-K dated March 31, 1999, was filed on April 1, 1999,
containing information regarding the terms of a definitive stock
purchase agreement dated March 29, 1999, filed as an exhibit thereto
and relating to the sale of $32.5 million of the Company's convertible
preferred stock to certain investors, under Item 5. Other Events.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 13, 1999 GARDENBURGER, INC.
By: /s/ Lyle G. Hubbard
---------------------------------------------
Lyle G. Hubbard
Director, President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Richard C. Dietz
---------------------------------------------
Richard C. Dietz
Executive Vice President,
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
13
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
GARDENBURGER, INC.
(as amended through April 14, 1999)
ARTICLE I
NAME
The name of this corporation is Gardenburger, Inc.
ARTICLE II
AUTHORIZED STOCK
1. CLASS OF SHARES. The Corporation is authorized to issue two classes
of shares to be designated respectively "Preferred" and "Common." The total
number of Preferred shares authorized is 5,000,000, and the total number of
Common shares authorized is 25,000,000.
2. PREFERRED SHARES IN SERIES.
(a) The Preferred shares may be issued in one or more series at
such time or times and for such consideration or considerations as the Board of
Directors may determine. Each series shall be so designated to distinguish its
shares from the shares of all other series and classes. All Preferred shares of
a series shall have preferences, limitations, and relative rights identical with
those of other shares of the same series and, except to the extent otherwise
provided in the Articles of Amendment, adopted by the Board of Directors
creating the series, of those of other series of the same class. Except as
otherwise provided in the Restated Articles of Incorporation, different series
of Preferred shares shall not be construed to constitute different classes of
shares for the purpose of voting by classes.
(b) Subject to the foregoing, the Board of Directors is expressly
authorized to provide for the issuance of all or any Preferred shares in one or
more series, each with such preferences, limitations, and relative rights as
shall be stated in the Articles of Amendment adopted by the Board of Directors
to create such series and filed with the Oregon Secretary of State in accordance
with the Oregon Business Corporation Act. The authority of the Board of
Directors with respect to each such series shall include, without limitation of
the foregoing, the right to provide that the shares of each such series may (i)
have special conditional, or limited voting rights, or no voting rights, (ii) be
redeemable or convertible (x) at the option of the corporation, the shareholder,
or another person on the occurrence of a designated event, (y) for cash,
indebtedness, securities, or other property, or (z) in a designated amount or in
an amount determined in accordance with a designated formula or by reference to
extrinsic data or events, (iii) entitle the holders to distributions calculated
in any manner, including dividends that may be cumulative, noncumulative, or
partially cumulative, and (iv) have preference over any other classes or series
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of shares with respect to distributions, including dividends and distributions
upon the dissolution of the corporation; all as the Board of Directors may deem
advisable and as are not inconsistent with the Oregon Business Corporation Act
and the provisions of the Restated Articles of Incorporation.
3. RIGHTS OF COMMON STOCK. Subject to provisions governing Preferred
shares that may from time to time come into existence, the holders of the Common
shares shall have unlimited voting rights and the unlimited right to receive the
net assets of the corporation upon dissolution.
4. WAIVER OF PREEMPTIVE RIGHTS. The corporation elects to waive
preemptive rights.
5. VOTING OF COMMON STOCK. Except as otherwise required by law, each
outstanding Common share is entitled to one vote on each matter voted on at a
shareholder's meeting, and each outstanding Preferred share is entitled to such
vote or votes, if any, as fixed by the Board of Directors in the Articles of
Amendment filed pursuant to Paragraph 2 above.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address of the registered office of the corporation is 1411 S.W.
Morrison Street, Suite 400, Portland, Oregon 97205, and the name of the
registered agent at such address is Richard C. Dietz.
ARTICLE IV
NOTICES
The name and address to which the Corporation Division may mail notices
are Richard C. Dietz, 1411 S.W. Morrison Street, Suite 400, Portland, OR 97205.
ARTICLE V
DIRECTOR LIABILITY
To the full extent the Oregon Business Corporation Act, as it exists on
the date hereof or may hereafter be amended, permits the limitation or
elimination of liability of directors, a director shall not be liable to the
corporation or its shareholders for monetary damages for conduct as a director.
Any amendment to or repeal of this Article V shall not adversely affect any
right or protection of a director of the corporation for or with respect to any
acts or omissions of such directors occurring prior to such amendment or repeal.
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Gardenburger, Inc.
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Determination of Terms of Series A Convertible Preferred Stock
SERIES A CONVERTIBLE PREFERRED STOCK. The board of directors (the
"Board") of Gardenburger, Inc. (the "Corporation") hereby establishes out of the
authorized and unissued shares of Preferred Stock, no par value, of the
Corporation (the "Preferred Stock") a series of Preferred Stock designated as
"Series A Convertible Preferred Stock." The authorized number of shares of
Series A Convertible Preferred Stock and the preferences, limitations, and
relative rights and other matters pertaining to Series A Convertible Preferred
Stock are as follows:
1. NUMBER OF SHARES. The Series A Convertible Preferred Stock ("Series
A Preferred") shall consist of 2,762,500 shares. All shares of Series A
Preferred shall be identical with each other in all respects.
2. DIVIDENDS. Except as otherwise provided in this Section 2, the
holders of shares of Series A Preferred shall be entitled to receive out of any
legally available funds of the Corporation cumulative dividends at the rate of
twelve percent (12%) per annum ("12% Cumulative Dividends") commencing with the
date of original issuance of the shares of Series A Preferred (the "Original
Issuance Date") and payable only in the event of a liquidation or deemed
liquidation of the Corporation or the redemption of shares of Series A Preferred
by the Corporation in accordance with Section 4 below or as otherwise provided
herein. The 12% Cumulative Dividend per share shall be computed based upon a
rate of twelve percent (12%) on a base amount of $10.00 per share of Series A
Preferred. Any dividends declared upon shares of Series A Preferred shall be
declared pro rata per share among the series and pari passu among the shares of
Series A Preferred and all outstanding shares of Series B Convertible Preferred
Stock ("Series B Preferred"), which is entitled to an identical dividend amount.
No dividend may be paid on shares of the Corporation's common stock ("Common
Shares") or shares of any other class or series of the Corporation's capital
stock (other than the Series B Preferred) (collectively, "Junior Shares") unless
dividends have been or contemporaneously are declared and paid on all
outstanding shares of Series A Preferred and on all outstanding shares of Series
B Preferred in an amount equal to the greater of (i) the 12% Cumulative
Dividends accrued on such shares through the record date for such dividend on
the Junior Shares and (ii) the amount per share of Series A Preferred equal, on
an as-converted basis, to the amount of the dividend then proposed to be
declared and paid on the Junior Shares (the "Junior Dividends"), in each case
less the amount of any 12% Cumulative Dividends previously paid with respect to
such shares of the Series A Preferred and Series B Preferred. No Junior Shares
shall be redeemed, purchased or otherwise acquired by the Corporation so long as
any shares of Series A Preferred or Series B Preferred remain outstanding
without the unanimous written consent of all holders of shares of Series A
Preferred and Series B Preferred then outstanding. Holders of Series A Preferred
and of Series B Preferred shall not be entitled to any dividend, whether payable
in cash, property or stock, in excess of the greater of the Junior Dividends and
the 12% Cumulative Dividends accumulated with respect to such shares. Upon
conversion of any shares of Series A Preferred or of Series B Preferred, any
dividends accrued and payable with respect to such shares shall be forfeited and
the Corporation shall have no further obligation to the holder of such shares
for such accumulated dividends; provided that such forfeiture shall not apply to
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any dividends as to which the Corporation has breached its payment obligation.
No interest shall accrue on accumulated dividends prior to payment or
forfeiture.
3. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, or any distribution of assets to
its shareholders, whether voluntary or involuntary, the holders of outstanding
shares of Series A Preferred shall be entitled to receive for each share
thereof, out of any legally available assets of the Corporation, in preference
to the holders of Junior Shares but on a pari passu basis with the holders of
outstanding shares of Series B Preferred, an amount equal to $10.00 (the
"Original Issue Price") per share of Series A Preferred, plus any accumulated
and unpaid dividends (including any amounts payable in connection with the
payment of Junior Dividends) as of the date of liquidation, dissolution, or
winding up of the Corporation (the "Series A Liquidation Preference Amount"),
before any distribution shall be made to the holders of Junior Shares and
contemporaneously with the payment of the liquidation preference of the Series B
Preferred. After payment of the full amount to which such holders of shares of
Series A Preferred are entitled, the holders of such shares shall have no right
to any remaining assets of the Corporation. In the event that assets so
distributable to holders of Series A Preferred and Series B Preferred are
insufficient to permit payment of the full preferential amount to which holders
of such shares are entitled, the entire assets legally available for
distribution to shareholders shall be distributed ratably among the holders of
Series A Preferred and Series B Preferred in proportion to the aggregate
preferential amount to which each such holder is entitled. In case the
Corporation shall desire to liquidate, dissolve, or wind up the Corporation, it
shall give notice of such liquidation, dissolution, or winding up to holders of
the shares of Series A Preferred by first class mail to the last address as may
appear in the Corporation's records not less than 30 calendar days prior to the
date fixed for liquidation, dissolution, or winding up. Each holder of Series A
Preferred shall have the option to deem a merger or other business combination
in which the Corporation is not the surviving entity, a sale of all or
substantially all of the Corporation's assets, a capital reorganization of the
Corporation, or a reclassification of the Common Shares to be a liquidation for
purposes of this Section 3.
4. REDEMPTION. The shares of Series A Preferred may not be redeemed
before December 31, 2004. Thereafter, the holders of a majority of the Series A
Preferred outstanding may request that their shares of Series A Preferred be
redeemed at a price equal to the Series A Liquidation Preference Amount;
provided, however, that if at least $5,000,000 in principal amount of the 7%
Convertible Senior Subordinated Notes ("Dresdner Notes") issued to Dresdner
Kleinwort Benson Private Equity Partners, L.P.("Dresdner") remain outstanding,
and Dresdner and its affiliates continue to own at least a majority of the
outstanding principal amount of Dresdner Notes, then the Corporation may not
redeem shares of Series A Preferred without the consent of the holders of a
majority of the then outstanding principal amount of Dresdner Notes, and the
right of redemption provided herein is subject to the receipt of such consent.
Also after December 31, 2004, shares of Series A Preferred shall be redeemable
at the option of the Corporation, in whole but not in part, at a redemption
price equal to 105% of the Original Issue Price, plus all accumulated and unpaid
dividends (including any amounts payable in connection with the payment of
Junior Dividends); provided that (i) a registration statement covering the
resale of the Common Shares issuable upon conversion of the Series A Preferred
and the Series B Preferred is effective as of the date of the redemption, or is
no longer required to be effective, and (ii) the closing price of the Common
Shares as quoted on a national securities exchange or market is greater than or
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equal to 200% of the Conversion Price (as defined in Section 7) for 60
consecutive trading days prior to notice of redemption. In case the Corporation
shall desire to exercise its right to redeem all of the outstanding shares of
Series A Preferred, it shall give notice of such redemption to holders of such
shares by first class mail to the last address as may appear in the
Corporation's records not less than 30 calendar days prior to the date fixed for
redemption. Each notice shall specify the redemption date and the redemption
price at which shares are to be redeemed. The holders of Series A Preferred
shall continue to have the conversion rights specified in Section 7 until their
shares of Series A Preferred are in fact redeemed. Any shares of Series A
Preferred redeemed pursuant to this Section 4 shall be redeemed subject to the
right of shares of Series B Preferred to participate pari passu in such
redemption, the right of redemption of such shares being equal. Any partial
redemption of shares of Series A Preferred shall be conducted pro rata among the
series. Any shares that are redeemed or otherwise acquired by the Corporation
shall be retired and canceled and shall be restored to the status of authorized
but unissued shares of Preferred Stock without designation as to series, and may
thereafter be issued, but not as shares of the Series A Preferred.
5. VOTING RIGHTS. Except as otherwise required by law and herein, each
holder of Series A Preferred shall be entitled to a number of votes equal to the
number of full Common Shares into which that holder's shares of Series A
Preferred may be converted (eliminating any fractional shares that may result)
and the Series A Preferred shall vote together with the Common Shares and the
Series B Preferred as a single voting group. Notwithstanding the foregoing, so
long as more than 1,408,875 shares of Series A Preferred remain outstanding,
holders of Series A Preferred, voting as a separate voting group, shall by a
majority of the outstanding shares be entitled to elect two directors to the
Board. Holders of the Series A Preferred shall also be entitled to vote together
with holders of the Common Shares and the Series B Preferred as a single voting
group in the election of all other directors. Any director elected by the
holders of Series A Preferred may be removed during his or her term of office,
with or without cause, by, and only by, the affirmative vote of the holders of a
majority of the outstanding shares of Series A Preferred, either at a special
meeting of such shareholders duly called for that purpose or pursuant to a
unanimous written consent of such shareholders, and any vacancy thereby created
may be filled only by the holders of Series A Preferred at such special meeting
or pursuant to a unanimous written consent. If any of the directors elected by
the holders of Series A Preferred should cease to be a director for any reason,
the vacancy shall only be filled by the vote of holders of a majority of the
outstanding shares of Series A Preferred or pursuant to a unanimous written
consent of such shareholders.
6. ADDITIONAL CLASS VOTES BY SERIES A PREFERRED AND SERIES B PREFERRED.
Except to the extent otherwise required by law, so long as at least 552,500
shares of Series A Preferred remain outstanding, the Corporation may not,
without the consent of holders (voting together as a single voting group with
the Series B Preferred so long as such series has comparable rights or acting by
unanimous written consent) of at least a majority of the shares of Series A
Preferred then outstanding, do any of the following:
(a) authorize or issue any additional shares of Series A Preferred
or Series B Preferred or any class of Preferred Stock on a parity with or having
priority over the Series A Preferred or Series B Preferred as to the payment of
dividends or the distribution of assets upon the liquidation or dissolution of
the Corporation;
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(b) amend the Corporation's Articles of Incorporation or bylaws so
as to alter any existing provision relating to the Series A Preferred or Series
B Preferred or the holders thereof or adversely alter any of the rights granted
to holders of Series A Preferred or Series B Preferred (other than to effect a
reverse split of the Common Shares or to increase the number of authorized
Common Shares);
(c) effect a change of control, merger, liquidation or
recapitalization of the capital stock of the Corporation;
(d) sell or lease 25 percent or more of its assets, except in the
ordinary course of business;
(e) enter into any agreement, including any loan or credit
agreement, capital lease or joint venture which would obligate the Corporation
to incur capital lease obligations plus bank and other outstanding indebtedness
(including any renewals, extensions or amendments to any obligations which exist
on the Original Issuance Date) aggregating in excess of $35,000,000;
(f) declare or pay any dividends or make any distributions with
respect to its capital stock other than dividends payable on the Series A
Preferred or the Series B Preferred;
(g) purchase, redeem or otherwise acquire any of its equity
securities other than the Dresdner Notes (in accordance with their terms), the
Series A Preferred or the Series B Preferred;
(h) issue additional securities to the Corporation's employees or
directors, except for 3,370,123 Common Shares issuable upon the exercise of
options granted pursuant to plans existing on the Original Issuance Date;
(i) adopt, amend, or modify any stock option plan or employee stock
ownership plan;
(j) authorize or issue shares of any class or series of equity
security the issuance of which would result in an adjustment in, or require a
shareholder vote in order to adjust, the Conversion Price under Section 7(e)
other than the issuance of Rights pursuant to the Rights Agreement dated as of
April 25, 1996, as amended through the Original Issuance Date (the "Rights
Agreement");
(k) enter into any agreement or engage in any transaction which
would impair or reduce the rights and preferences of the holders of Series A
Preferred (except for increasing the number of authorized shares of Common
Stock);
(l) enter into any transaction (or series of transactions),
including loans, with any officer or director of the Company, or with their
affiliates and/or family members, involving $100,000 or more individually in any
one year or $500,000 or more in the aggregate in any one year, except as may be
contemplated by currently existing contractual commitments;
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(m) change the primary business of the Corporation as it is
presently conducted;
(n) acquire any stock or assets of any corporation or any other
business entity for an aggregate consideration in excess of $5,000,000;
(o) increase the authorized number of directors of the Corporation
above ten; and
(p) amend the Rights Agreement.
7. CONVERSION. Each share of Series A Preferred shall be convertible
into Common Shares as follows:
(a) CONVERSION RATIO. Shares of Series A Preferred shall be
convertible into such number of fully paid and nonassessable Common Shares as is
determined by dividing the Original Issue Price ($10.00 per share) by the
Conversion Price applicable to such share (determined as provided below) in
effect on the date the shares are surrendered for conversion. The initial
Conversion Price per share for shares of Series A Preferred shall be $10.00 (the
"Conversion Price"), subject to adjustment as set forth in Section 7(e).
(b) OPTIONAL CONVERSION. Each share of Series A Preferred shall be
convertible into Common Shares, at the option of the holder thereof, at any time
after the Original Issuance Date, at the offices of the Corporation or of any
transfer agent for the Common Shares.
(c) MANDATORY CONVERSION. Each share of Series A Preferred shall be
converted automatically into Common Shares at the then current Conversion Price
immediately upon the vote or written consent of 66.7% of the then outstanding
shares of Series A Preferred. Upon the occurrence of an event specified in this
Section 7(c), the outstanding shares of Series A Preferred shall be converted
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent. Upon the conversion of the Series A
Preferred, the holders thereof shall surrender the certificate or certificates
representing such shares, duly endorsed, at the principal office of the
Corporation or of any transfer agent for the Common Shares or the holder shall
notify the Corporation or such transfer agent that such certificate has been
lost, stolen, or destroyed and execute an agreement satisfactory to the
Corporation to indemnify the Corporation against any loss incurred by it in
connection therewith. Thereupon, the Corporation shall promptly issue and
deliver to such holder, in the holder's name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of
Common Shares into which the surrendered shares of Series A Preferred were
converted.
(d) MECHANICS OF CONVERSION. Before any holder of Series A Preferred
will be entitled to convert shares of Series A Preferred into Common Shares
(except as set forth in Section 7(c)), such holder shall surrender the
certificate therefor, duly endorsed, at the office of the Corporation or its
transfer agent for the Common Shares, and shall give written notice by mail,
postage prepaid, to the Corporation, at its principal corporate office, of the
election to convert shares of Series A Preferred and shall state in the notice
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the name in which the certificate for Common Shares should be issued. In the
event of a missing certificate, the holder may notify the Corporation or such
transfer agent that such certificate has been lost, stolen, or destroyed and
execute an agreement satisfactory to the Corporation to indemnify the
Corporation against any loss incurred by it in connection therewith. The
Corporation will promptly thereafter, issue and deliver to such holder a
certificate for the number of Common Shares to which such holder shall be
entitled after the conversion. The conversion will be deemed to have been
completed immediately prior to the close of business on the date of the
surrender of the shares of Series A Preferred to be converted and the person
entitled to receive the Common Shares issuable upon such conversion shall be
treated as the record holder of such Common Shares as of such date.
(e) CONVERSION PRICE ADJUSTMENTS. The Conversion Price of a share of
Series A Preferred shall be subject to adjustment from time to time as described
below. Capitalized terms used in this section but not otherwise defined have the
meanings given to them in the definitions in Section 7(e)(vii).
(i) ADJUSTMENTS FOR COMMON SHARE ISSUANCES BELOW CONVERSION
PRICE. Subject to shareholder approval if required at the time of adjustment,
the Conversion Price will be subject to adjustment if and whenever on or after
the Original Issuance Date, the Corporation issues or sells or in accordance
with Section 7(e)(i)(A) or 7(e)(i)(B) is deemed to have issued or sold, any
Common Shares for a consideration per share which is less than the Conversion
Price in effect immediately prior to such issuance or sale. Upon such an event
and subject to shareholder approval if required, the adjusted Conversion Price
shall be determined by dividing (1) an amount equal to the sum of (x) the
product derived by multiplying the Conversion Price in effect immediately prior
to such issue or sale or deemed issue or sale by the number of Common Shares
Deemed Outstanding immediately prior to such issue or sale or deemed issue or
sale, plus (y) the consideration, if any, received or deemed received by the
Corporation upon such issue or sale, by (2) the number of Common Shares Deemed
Outstanding immediately after such issue or sale or deemed issue or sale;
provided that no adjustment in the Conversion Price will be made pursuant to
this Section 7(e)(i) in connection with any Exempt Issuance. If any adjustment
to the Conversion Price is made upon the issuance of Options or Convertible
Securities and such Options or Convertible Securities expire without being
converted or exercised, then the Conversion Price shall be readjusted to the
amount that would have been in effect had such Options or Convertible Securities
never been issued or sold; provided that no readjustment provided for in Section
7(e) shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date
(immediately prior to the adjustment), or (ii) the Conversion Price that results
from any actual issuance of additional Common Shares between the original
adjustment date and such readjustment date. Conversion Price adjustments under
this Section 7(e) shall be calculated based on the following provisions in the
event Options or Convertible Securities are issued.
(A) ISSUANCE OF OPTIONS. If the Corporation in any manner
grants or sells any Options and the price per share for which Common Shares are
issuable upon the exercise of such Options, or upon the conversion or exchange
of any Convertible Securities issuable upon the exercise of such Options, is
less than the Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then the maximum number of Common Shares
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issuable upon the exercise of such Options, or upon conversion or exchange of
the maximum amount of such Convertible Securities issuable upon the exercise of
such Options, will be deemed to be outstanding and to have been issued and sold
by the Corporation at the time of the granting or sale of such Options for such
price per share. For purposes of this Section (7)(e)(i)(A), the "price per share
for which Common Shares are issuable upon the exercise of such Options, or upon
conversion or exchange of any Convertible Securities issuable upon exercise of
such Options" will be determined by dividing (A) the total amount, if any,
received or receivable by the Corporation as consideration for the granting or
sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the maximum number of Common Shares
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price will be made upon the actual issuance
of Common Shares or of such Convertible Securities upon the exercise of such
Options or upon the issuance of Common Shares upon conversion or exchange of
such Convertible Securities.
(B) EFFECT OF ISSUANCE OF CONVERTIBLE SECURITIES. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Shares are issuable upon the conversion or
exchange thereof is less than the Conversion Price in effect immediately prior
to the time of such issue or sale, then the maximum number of Common Shares
issuable upon conversion or exchange of all such Convertible Securities will be
deemed to be outstanding and to have been issued and sold by the Corporation at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section (7)(e)(i)(B), the "price per share
for which Common Shares are issuable upon conversion or exchange thereof" will
be determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the maximum number of Common Shares issuable upon the exchange of all such
Convertible Securities. No further adjustment of the Conversion Price will be
made upon the actual issuance of such Common Shares upon conversion or exchange
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of the Conversion Price had been or are to be made pursuant to other
provisions of this Section (7)(e), no further adjustment of the Conversion Price
will be made by reason of such issue or sale.
(C) INTEGRATED TRANSACTION. If Options or Convertible
Securities are issued in connection with the issue or sale of other securities
of the Corporation, together comprising one integrated transaction in which no
specific consideration is allocated to such Options or Convertible Securities by
the parties thereto, the Options or Convertible Securities will be deemed to
have been issued without consideration.
(D) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Shares, Options, or Convertible Securities are issued or sold or deemed to have
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been issued or sold for cash, then the consideration received therefor will be
deemed to be the net amount received by the Corporation. If any Common Shares,
Options, or Convertible Securities are issued or sold for a consideration other
than cash, then the amount of the consideration other than cash received by the
Corporation will be the fair value of such consideration as determined in good
faith by the Board, except where such consideration consists of securities, in
which case the amount of consideration received by the Corporation will be the
Market Price thereof as of the date of receipt. If any Common Shares, Options,
or Convertible Securities are issued to the owners of the non-surviving entity
in connection with any merger in which the Corporation is the surviving entity,
then the amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving entity as is
attributable to such Common Shares, Options or Convertible Securities, as the
case may be.
(ii) RECORD DATE FOR DIVIDEND OR SPLIT. In the event the
Corporation should fix a record date for (1) a split or subdivision of the
outstanding Common Shares or (2) a dividend or other distribution payable in
Common Shares or Options or Convertible Securities without payment of any
consideration, then, as of such record date the Conversion Price shall be
appropriately decreased so the number of Common Shares issuable on conversion of
each share of Series A Preferred shall be increased in proportion to such
increase in the aggregate number of Common Shares outstanding or issuable with
respect to such Options or Convertible Securities.
(iii) COMBINATIONS. If the number of Common Shares outstanding is
decreased by a combination of the outstanding Common Shares, then, as of the
record date of such combination, the Conversion Price for the Series A Preferred
shall be appropriately increased so the number of Common Shares issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding Common Shares.
(iv) RECAPITALIZATION, CONSOLIDATION, MERGER, ETC. In case of any
change in the Common Shares through recapitalization, reclassification, or other
change in the capital structure of the Corporation (other than a combination of
shares or the issuance of additional Common Shares by stock split or stock
dividend) or through any merger or consolidation which is effected such that
holders of Common Shares are entitled to receive stock, securities, cash, or
other assets in exchange for Common Shares, then, as a condition of the change
in capital structure or merger, provision shall be made so that the holders of
the Series A Preferred will have the right thereafter to receive upon conversion
the kind and amount of shares of stock or other securities or property to which
such holders would have been entitled if, immediately prior to such change in
capital structure, such holder had held the number of Common Shares issuable
upon conversion of the Series A Preferred. In addition, appropriate provision
will be made with respect to the holder's rights and interests to ensure that
the provisions in this Section 7 will thereafter be applicable in relation to
any shares of stock, securities, cash, or other assets thereafter deliverable
upon the conversion of Series A Preferred.
(v) SPECIAL CONVERSION PRICE ADJUSTMENT. If the Common Shares
issuable upon conversion of Series A Preferred ("Registrable Securities") are
not, within 120 days of the issuance of such shares ("Penalty Date"), subject to
an effective registration statement filed with the Securities and Exchange
Commission ("SEC"), then the Conversion Price of the Series A Preferred shall be
reduced five percent (5%), effective on the Penalty Date. Thereafter, for each
ninety (90) day period after the Penalty Date that such Common Shares remain
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unregistered, the Conversion Price shall be reduced by an additional five
percent. No further Conversion Price adjustments provided for in this Section
7(e)(v) shall be made once a registration statement covering the Registrable
Securities has been declared effective by the SEC.
(vi) PROTECTION AGAINST DILUTION. If any event occurs as to
which, in the opinion of the Board, the other provisions of this Section 7(e)
are not strictly applicable or would not fairly protect the rights of the
holders of Series A Preferred in accordance with the intent of these
anti-dilution provisions, then the Board shall make an adjustment in accordance
with the intent of these provisions to protect the holders' rights in the Series
A Preferred, but in no event shall any adjustment have the effect of increasing
the Conversion Price (except in the case of a combination of Common Shares
described in Section 7(e)(iii)).
(vii) DEFINITIONS FOR SECTION 7(E).
"COMMON SHARES DEEMED OUTSTANDING" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares that would be issued if all outstanding Options and Convertible
Securities exercisable for Common Shares or for other Options or Convertible
Securities were exercised or converted regardless of whether or not the
applicable securities are actually exercisable at such time, but excluding any
Common Shares issuable upon conversion of the Series A Preferred or any
outstanding shares of Series B Preferred.
"CONVERTIBLE SECURITIES" means any securities or other rights to
acquire securities directly or indirectly convertible into or exchangeable for
Common Shares.
"EXEMPT ISSUANCE" means the issuance of any Common Shares or other
securities (i) upon the exercise or conversion of Options or other securities
granted pursuant to plans existing on the Original Issuance Date, (ii) upon
exercise of Options granted or to be granted after the Original Issuance Date
under any employee benefit plan or plans adopted by the Board, provided that the
exercise price is not less than the fair market value on the date of grant,
(iii) upon conversion of outstanding shares of Series A Preferred or Series B
Preferred, or an adjustment to the Conversion Price or the conversion price of
the Series B Preferred, (iv) which are restricted securities subject to a
substantial risk of forfeiture issued pursuant to benefit plans adopted by the
Board, (v) pursuant to employee benefit plans qualified under Section 401(k) or
423 of the Internal Revenue Code, or (vi) to satisfy semi-annual interest
obligations to holders of the Dresdner Notes outstanding on the Original
Issuance Date.
"MARKET PRICE" of any security means the average of the closing
prices of such security's sales on all national securities exchanges or markets
on which such security may at the time be listed, or, if there has been no sale
on any such exchange or market on any day, or, if on any day such security is
not so listed, then the representative bid price of such security quoted in the
NASDAQ System as of 4:00 p.m., New York time, on such day, or, if on any day
such security is not quoted in the NASDAQ System, then the highest bid price of
such security on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case, averaged over a period of five days consisting
of the day as of which "Market Price" is being determined and the four
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consecutive business days prior to such day. If at any time such security is not
listed on any national securities exchange or market or quoted in the NASDAQ
System or the over-the-counter market, then the "Market Price" will be the fair
value thereof determined in good faith by the Board.
"OPTIONS" means any securities or other rights to subscribe for or
purchase, directly or indirectly, Common Shares or Convertible Securities.
(f) NOTICE OF CONVERSION PRICE ADJUSTMENTS. When an adjustment or
readjustment of the Conversion Price is required pursuant to Section 7(e), the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms of this Section 7 and prepare and
furnish to each holder of Series A Preferred a notice setting forth such
adjustment or readjustment and showing in reasonable detail the facts upon which
such adjustment or readjustment is based.
(g) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available from its authorized but unissued Common Shares such
number of Common Shares as shall be sufficient to effect the conversion of all
outstanding shares of Series A Preferred; and if at any time the number of
authorized but unissued Common Shares shall not be sufficient to effect the
conversion of all then outstanding shares of Series A Preferred, the Corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued Common Shares to such number
of shares as shall be sufficient for such purposes, including, without
limitation, engaging in reasonable efforts to obtain the requisite shareholder
approval of any necessary amendment to the Corporation's Articles of
Incorporation.
(h) NO FRACTIONAL SHARES. No fractional shares shall be issued upon
the conversion of shares of Series A Preferred, and the number of Common Shares
to be issued shall be rounded to the nearest whole share.
8. NOTICES. Any notice required by the provisions of Section 7 to be
given to the holders of shares of Series A Preferred shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at the holder's address appearing on the books of the
Corporation. A holder of shares of Series A Preferred may change such address by
written notice to the Corporation.
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Gardenburger, Inc.
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Determination of Terms of Series B Convertible Preferred Stock
SERIES B CONVERTIBLE PREFERRED STOCK. The board of directors (the
"Board") of Gardenburger, Inc. (the "Corporation") hereby establishes out of the
authorized and unissued shares of Preferred Stock, no par value, of the
Corporation (the "Preferred Stock") a series of Preferred Stock designated as
"Series B Convertible Preferred Stock." The authorized number of shares of
Series B Convertible Preferred Stock and the preferences, limitations, and
relative rights and other matters pertaining to Series B Convertible Preferred
Stock are as follows:
1. NUMBER OF SHARES. The Series B Convertible Preferred Stock ("Series
B Preferred") shall consist of 487,500 shares. All shares of Series B Preferred
shall be identical with each other in all respects.
2. DIVIDENDS. Except as otherwise provided in this Section 2, the
holders of shares of Series B Preferred shall be entitled to receive out of any
legally available funds of the Corporation cumulative dividends at the rate of
twelve percent (12%) per annum ("12% Cumulative Dividends") commencing with the
date of original issuance of the shares of Series B Preferred (the "Original
Issuance Date") and payable only in the event of a liquidation or deemed
liquidation of the Corporation or the redemption of shares of Series B Preferred
by the Corporation in accordance with Section 4 below or as otherwise provided
herein. The 12% Cumulative Dividend per share shall be computed based upon a
rate of twelve percent (12%) on a base amount of $10.00 per share of Series B
Preferred. Any dividends declared upon shares of Series B Preferred shall be
declared pro rata per share among the series and pari passu among the shares of
Series B Preferred and all outstanding shares of Series A Convertible Preferred
Stock ("Series A Preferred"), which is entitled to an identical dividend amount.
No dividend may be paid on shares of the Corporation's common stock ("Common
Shares") or shares of any other class or series of the Corporation's capital
stock (other than the Series A Preferred) (collectively, "Junior Shares") unless
dividends have been or contemporaneously are declared and paid on all
outstanding shares of Series B Preferred and on all outstanding shares of Series
A Preferred in an amount equal to the greater of (i) the 12% Cumulative
Dividends accrued on such shares through the record date for such dividend on
the Junior Shares and (ii) the amount per share of Series B Preferred equal, on
an as-converted basis, to the amount of the dividend then proposed to be
declared and paid on the Junior Shares (the "Junior Dividends"), in each case
less the amount of any 12% Cumulative Dividends previously paid with respect to
such shares of the Series A Preferred and Series B Preferred. No Junior Shares
shall be redeemed, purchased or otherwise acquired by the Corporation so long as
any shares of Series A Preferred or Series B Preferred remain outstanding
without the unanimous written consent of all holders of shares of Series A
Preferred and Series B Preferred then outstanding. Holders of Series A Preferred
and of Series B Preferred shall not be entitled to any dividend, whether payable
in cash, property or stock, in excess of the greater of the Junior Dividends and
the 12% Cumulative Dividends accumulated with respect to such shares. Upon
conversion of any shares of Series A Preferred or of Series B Preferred, any
dividends accrued and payable with respect to such shares shall be forfeited and
the Corporation shall have no further obligation to the holder of such shares
for such accumulated dividends; provided that such forfeiture shall not apply to
any dividends as to which the Corporation has breached its payment obligation.
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No interest shall accrue on accumulated dividends prior to payment or
forfeiture.
3. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, or any distribution of assets to
its shareholders, whether voluntary or involuntary, the holders of outstanding
shares of Series B Preferred shall be entitled to receive for each share
thereof, out of any legally available assets of the Corporation, in preference
to the holders of Junior Shares but on a pari passu basis with the holders of
outstanding shares of Series A Preferred, an amount equal to $10.00 (the
"Original Issue Price") per share of Series B Preferred, plus any accumulated
and unpaid dividends (including any amounts payable in connection with the
payment of Junior Dividends) as of the date of liquidation, dissolution, or
winding up of the Corporation (the "Series B Liquidation Preference Amount"),
before any distribution shall be made to the holders of Junior Shares and
contemporaneously with the payment of the liquidation preference of the Series A
Preferred. After payment of the full amount to which such holders of shares of
Series B Preferred are entitled, the holders of such shares shall have no right
to any remaining assets of the Corporation. In the event that assets so
distributable to holders of Series A Preferred and Series B Preferred are
insufficient to permit payment of the full preferential amount to which holders
of such shares are entitled, the entire assets legally available for
distribution to shareholders shall be distributed ratably among the holders of
Series A Preferred and Series B Preferred in proportion to the aggregate
preferential amount to which each such holder is entitled. In case the
Corporation shall desire to liquidate, dissolve, or wind up the Corporation, it
shall give notice of such liquidation, dissolution, or winding up to holders of
the shares of Series B Preferred by first class mail to the last address as may
appear in the Corporation's records not less than 30 calendar days prior to the
date fixed for liquidation, dissolution, or winding up. Each holder of Series B
Preferred shall have the option to deem a merger or other business combination
in which the Corporation is not the surviving entity, a sale of all or
substantially all of the Corporation's assets, a capital reorganization of the
Corporation, or a reclassification of the Common Shares to be a liquidation for
purposes of this Section 3.
4. REDEMPTION. The shares of Series B Preferred may not be redeemed
before December 31, 2004. Thereafter, the holders of a majority of the Series B
Preferred outstanding may request that their shares of Series B Preferred be
redeemed at a price equal to the Series B Liquidation Preference Amount;
provided, however, that if at least $5,000,000 in principal amount of the 7%
Convertible Senior Subordinated Notes ("Dresdner Notes") issued to Dresdner
Kleinwort Benson Private Equity Partners, L.P.("Dresdner") remain outstanding,
and Dresdner and its affiliates continue to own at least a majority of the
outstanding principal amount of Dresdner Notes, then the Corporation may not
redeem shares of Series B Preferred without the consent of the holders of a
majority of the then outstanding principal amount of Dresdner Notes, and the
right of redemption provided herein is subject to the receipt of such consent.
Also after December 31, 2004, shares of Series B Preferred shall be redeemable
at the option of the Corporation, in whole but not in part, at a redemption
price equal to 105% of the Original Issue Price, plus all accumulated and unpaid
dividends (including any amounts payable in connection with the payment of
Junior Dividends); provided that (i) a registration statement covering the
resale of the Common Shares issuable upon conversion of the Series A Preferred
and the Series B Preferred is effective as of the date of the redemption, or is
no longer required to be effective, and (ii) the closing price of the Common
Shares as quoted on a national securities exchange or market is greater than or
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equal to 200% of the Conversion Price (as defined in Section 7) for 60
consecutive trading days prior to notice of redemption. In case the Corporation
shall desire to exercise its right to redeem all of the outstanding shares of
Series B Preferred, it shall give notice of such redemption to holders of such
shares by first class mail to the last address as may appear in the
Corporation's records not less than 30 calendar days prior to the date fixed for
redemption. Each notice shall specify the redemption date and the redemption
price at which shares are to be redeemed. The holders of Series B Preferred
shall continue to have the conversion rights specified in Section 7 until their
shares of Series B Preferred are in fact redeemed. Any shares of Series B
Preferred redeemed pursuant to this Section 4 shall be redeemed subject to the
right of shares of Series A Preferred to participate pari passu in such
redemption, the right of redemption of such shares being equal. Any partial
redemption of shares of Series B Preferred shall be conducted pro rata among the
series. Any shares that are redeemed or otherwise acquired by the Corporation
shall be retired and canceled and shall be restored to the status of authorized
but unissued shares of Preferred Stock without designation as to series, and may
thereafter be issued, but not as shares of the Series B Preferred.
5. VOTING RIGHTS. Except as otherwise required by law and herein, each
holder of Series B Preferred shall be entitled to a number of votes equal to the
number of full Common Shares into which that holder's shares of Series B
Preferred may be converted (eliminating any fractional shares that may result)
and the Series B Preferred shall vote together with the Common Shares and the
Series A Preferred as a single voting group, including with respect to the
election of directors other than the two directors which the holders of the
Series A Preferred have the right to elect as a separate voting group.
Notwithstanding the foregoing, if the number of Common Shares into which shares
of Series B Preferred can be converted is increased pursuant to a Conversion
Adjustment under Section 7(e)(vi) below, the voting entitlement set forth herein
shall not be correspondingly increased and the voting rights of Series B
Preferred shall be calculated as if such Conversion Adjustment had not occurred.
6. ADDITIONAL CLASS VOTES BY SERIES A PREFERRED AND SERIES B PREFERRED.
Except to the extent otherwise required by law, so long as at least 97,500
shares of Series B Preferred remain outstanding, the Corporation may not,
without the consent of holders (voting together as a single voting group with
the Series A Preferred so long as such series has comparable rights, or acting
by unanimous written consent) of at least a majority of the shares of Series B
Preferred then outstanding, do any of the following:
(a) authorize or issue any additional shares of Series A Preferred
or Series B Preferred or any class of Preferred Stock on a parity with or having
priority over the Series A Preferred or Series B Preferred as to the payment of
dividends or the distribution of assets upon the liquidation or dissolution of
the Corporation;
(b) amend the Corporation's Articles of Incorporation or bylaws so
as to alter any existing provision relating to the Series A Preferred or Series
B Preferred or the holders thereof or adversely alter any of the rights granted
to holders of Series A Preferred or Series B Preferred (other than to effect a
reverse split of the Common Shares or to increase the number of authorized
Common Shares);
(c) effect a change of control, merger, liquidation or
recapitalization of the capital stock of the Corporation;
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(d) sell or lease 25 percent or more of its assets, except in the
ordinary course of business;
(e) enter into any agreement, including any loan or credit
agreement, capital lease or joint venture which would obligate the Corporation
to incur capital lease obligations plus bank and other outstanding indebtedness
(including any renewals, extensions or amendments to any obligations which exist
on the Original Issuance Date) aggregating in excess of $35,000,000;
(f) declare or pay any dividends or make any distributions with
respect to its capital stock other than dividends payable on the Series A
Preferred or the Series B Preferred;
(g) purchase, redeem or otherwise acquire any of its equity
securities other than the Dresdner Notes (in accordance with their terms), the
Series A Preferred or the Series B Preferred;
(h) issue additional securities to the Corporation's employees or
directors, except for 3,370,123 Common Shares issuable upon the exercise of
options granted pursuant to plans existing on the Original Issuance Date;
(i) adopt, amend, or modify any stock option plan or employee stock
ownership plan;
(j) authorize or issue shares of any class or series of equity
security the issuance of which would result in an adjustment in, or require a
shareholder vote in order to adjust, the Conversion Price under Section 7(e)
other than the issuance of Rights pursuant to the Rights Agreement dated as of
April 25, 1996, as amended through the Original Issuance Date (the "Rights
Agreement");
(k) enter into any agreement or engage in any transaction which
would impair or reduce the rights and preferences of the holders of Series B
Preferred (except for increasing the number of authorized shares of Common
Stock);
(l) enter into any transaction (or series of transactions),
including loans, with any officer or director of the Company, or with their
affiliates and/or family members, involving $100,000 or more individually in any
one year or $500,000 or more in the aggregate in any one year, except as may be
contemplated by currently existing contractual commitments;
(m) change the primary business of the Corporation as it is
presently conducted;
(n) acquire any stock or assets of any corporation or any other
business entity for an aggregate consideration in excess of $5,000,000;
(o) increase the authorized number of directors of the Corporation
above ten; and
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(p) amend the Rights Agreement.
7. CONVERSION. Each share of Series B Preferred shall be convertible
into Common Shares as follows:
(a) CONVERSION RATIO. Shares of Series B Preferred shall be
convertible into such number of fully paid and nonassessable Common Shares as is
determined by dividing the Original Issue Price ($10.00 per share) by the
Conversion Price applicable to such share (determined as provided below) in
effect on the date the shares are surrendered for conversion. The initial
Conversion Price per share for shares of Series B Preferred shall be $10.00 (the
"Conversion Price"), subject to adjustment as set forth in Section 7(e).
(b) OPTIONAL CONVERSION. Each share of Series B Preferred shall be
convertible into Common Shares, at the option of the holder thereof, at any time
after the Original Issuance Date, at the offices of the Corporation or of any
transfer agent for the Common Shares.
(c) MANDATORY CONVERSION. Each share of Series B Preferred shall be
converted automatically into Common Shares at the then current Conversion Price
immediately upon the vote or written consent of 66.7% of the then outstanding
shares of Series B Preferred. Upon the occurrence of an event specified in this
Section 7(c), the outstanding shares of Series B Preferred shall be converted
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent. Upon the conversion of the Series B
Preferred, the holders thereof shall surrender the certificate or certificates
representing such shares, duly endorsed, at the principal office of the
Corporation or of any transfer agent for the Common Shares or the holder shall
notify the Corporation or such transfer agent that such certificate has been
lost, stolen, or destroyed and execute an agreement satisfactory to the
Corporation to indemnify the Corporation against any loss incurred by it in
connection therewith. Thereupon, the Corporation shall promptly issue and
deliver to such holder, in the holder's name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of
Common Shares into which the surrendered shares of Series B Preferred were
converted.
(d) MECHANICS OF CONVERSION. Before any holder of Series B Preferred
will be entitled to convert shares of Series B Preferred into Common Shares
(except as set forth in Section 7(c)), such holder shall surrender the
certificate therefor, duly endorsed, at the office of the Corporation or its
transfer agent for the Common Shares, and shall give written notice by mail,
postage prepaid, to the Corporation, at its principal corporate office, of the
election to convert shares of Series B Preferred and shall state in the notice
the name in which the certificate for Common Shares should be issued. In the
event of a missing certificate, the holder may notify the Corporation or such
transfer agent that such certificate has been lost, stolen, or destroyed and
execute an agreement satisfactory to the Corporation to indemnify the
Corporation against any loss incurred by it in connection therewith. The
Corporation will promptly thereafter, issue and deliver to such holder a
certificate for the number of Common Shares to which such holder shall be
entitled after the conversion. The conversion will be deemed to have been
completed immediately prior to the close of business on the date of the
surrender of the shares of Series B Preferred to be converted and the person
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entitled to receive the Common Shares issuable upon such conversion shall be
treated as the record holder of such Common Shares as of such date.
(e) CONVERSION PRICE ADJUSTMENTS. The Conversion Price of a share of
Series B Preferred shall be subject to adjustment from time to time as described
below. Capitalized terms used in this section but not otherwise defined have the
meanings given to them in the definitions in Section 7(e)(viii).
(i) ADJUSTMENTS FOR COMMON SHARE ISSUANCES BELOW CONVERSION
PRICE. Subject to shareholder approval if required at the time of adjustment,
the Conversion Price will be subject to adjustment if and whenever on or after
the Original Issuance Date, the Corporation issues or sells or in accordance
with Section 7(e)(i)(A) or 7(e)(i)(B) is deemed to have issued or sold, any
Common Shares for a consideration per share which is less than the Conversion
Price in effect immediately prior to such issuance or sale. Upon such an event
and subject to shareholder approval if required, the adjusted Conversion Price
shall be determined by dividing (1) an amount equal to the sum of (x) the
product derived by multiplying the Conversion Price in effect immediately prior
to such issue or sale or deemed issue or sale by the number of Common Shares
Deemed Outstanding immediately prior to such issue or sale or deemed issue or
sale, plus (y) the consideration, if any, received or deemed received by the
Corporation upon such issue or sale, by (2) the number of Common Shares Deemed
Outstanding immediately after such issue or sale or deemed issue or sale;
provided that no adjustment in the Conversion Price will be made pursuant to
this Section 7(e)(i) in connection with any Exempt Issuance. If any adjustment
to the Conversion Price is made upon the issuance of Options or Convertible
Securities and such Options or Convertible Securities expire without being
converted or exercised, then the Conversion Price shall be readjusted to the
amount that would have been in effect had such Options or Convertible Securities
never been issued or sold; provided that no readjustment provided for in Section
7(e) shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date
(immediately prior to the adjustment), or (ii) the Conversion Price that results
from any actual issuance of additional Common Shares between the original
adjustment date and such readjustment date. Conversion Price adjustments under
this Section 7(e) shall be calculated based on the following provisions in the
event Options or Convertible Securities are issued.
(A) ISSUANCE OF OPTIONS. If the Corporation in any manner
grants or sells any Options and the price per share for which Common Shares are
issuable upon the exercise of such Options, or upon the conversion or exchange
of any Convertible Securities issuable upon the exercise of such Options, is
less than the Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then the maximum number of Common Shares
issuable upon the exercise of such Options, or upon conversion or exchange of
the maximum amount of such Convertible Securities issuable upon the exercise of
such Options, will be deemed to be outstanding and to have been issued and sold
by the Corporation at the time of the granting or sale of such Options for such
price per share. For purposes of this Section (7)(e)(i)(A), the "price per share
for which Common Shares are issuable upon the exercise of such Options, or upon
conversion or exchange of any Convertible Securities issuable upon exercise of
such Options" will be determined by dividing (A) the total amount, if any,
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received or receivable by the Corporation as consideration for the granting or
sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the maximum number of Common Shares
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price will be made upon the actual issuance
of Common Shares or of such Convertible Securities upon the exercise of such
Options or upon the issuance of Common Shares upon conversion or exchange of
such Convertible Securities.
(B) EFFECT OF ISSUANCE OF CONVERTIBLE SECURITIES. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Shares are issuable upon the conversion or
exchange thereof is less than the Conversion Price in effect immediately prior
to the time of such issue or sale, then the maximum number of Common Shares
issuable upon conversion or exchange of all such Convertible Securities will be
deemed to be outstanding and to have been issued and sold by the Corporation at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section (7)(e)(i)(B), the "price per share
for which Common Shares are issuable upon conversion or exchange thereof" will
be determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the maximum number of Common Shares issuable upon the exchange of all such
Convertible Securities. No further adjustment of the Conversion Price will be
made upon the actual issuance of such Common Shares upon conversion or exchange
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of the Conversion Price had been or are to be made pursuant to other
provisions of this Section (7)(e), no further adjustment of the Conversion Price
will be made by reason of such issue or sale.
(C) INTEGRATED TRANSACTION. If Options or Convertible
Securities are issued in connection with the issue or sale of other securities
of the Corporation, together comprising one integrated transaction in which no
specific consideration is allocated to such Options or Convertible Securities by
the parties thereto, the Options or Convertible Securities will be deemed to
have been issued without consideration.
(D) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Shares, Options, or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, then the consideration received therefor will be
deemed to be the net amount received by the Corporation. If any Common Shares,
Options, or Convertible Securities are issued or sold for a consideration other
than cash, then the amount of the consideration other than cash received by the
Corporation will be the fair value of such consideration as determined in good
faith by the Board, except where such consideration consists of securities, in
which case the amount of consideration received by the Corporation will be the
Market Price thereof as of the date of receipt. If any Common Shares, Options,
or Convertible Securities are issued to the owners of the non-surviving entity
in connection with any merger in which the Corporation is the surviving entity,
then the amount of consideration therefor will be deemed to be the fair value of
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such portion of the net assets and business of the non-surviving entity as is
attributable to such Common Shares, Options or Convertible Securities, as the
case may be.
(ii) RECORD DATE FOR DIVIDEND OR SPLIT. In the event the
Corporation should fix a record date for (1) a split or subdivision of the
outstanding Common Shares or (2) a dividend or other distribution payable in
Common Shares or Options or Convertible Securities without payment of any
consideration, then, as of such record date the Conversion Price shall be
appropriately decreased so the number of Common Shares issuable on conversion of
each share of Series B Preferred shall be increased in proportion to such
increase in the aggregate number of Common Shares outstanding or issuable with
respect to such Options or Convertible Securities.
(iii) COMBINATIONS. If the number of Common Shares outstanding is
decreased by a combination of the outstanding Common Shares, then, as of the
record date of such combination, the Conversion Price for the Series B Preferred
shall be appropriately increased so the number of Common Shares issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding Common Shares.
(iv) RECAPITALIZATION, CONSOLIDATION, MERGER, ETC. In case of any
change in the Common Shares through recapitalization, reclassification, or other
change in the capital structure of the Corporation (other than a combination of
shares or the issuance of additional Common Shares by stock split or stock
dividend) or through any merger or consolidation which is effected such that
holders of Common Shares are entitled to receive stock, securities, cash, or
other assets in exchange for Common Shares, then, as a condition of the change
in capital structure or merger, provision shall be made so that the holders of
the Series B Preferred will have the right thereafter to receive upon conversion
the kind and amount of shares of stock or other securities or property to which
such holders would have been entitled if, immediately prior to such change in
capital structure, such holder had held the number of Common Shares issuable
upon conversion of the Series B Preferred. In addition, appropriate provision
will be made with respect to the holder's rights and interests to ensure that
the provisions in this Section 7 will thereafter be applicable in relation to
any shares of stock, securities, cash, or other assets thereafter deliverable
upon the conversion of Series B Preferred.
(v) SPECIAL CONVERSION PRICE ADJUSTMENT. If the Common Shares
issuable upon conversion of Series B Preferred ("Registrable Securities") are
not, within 120 days of the issuance of such shares ("Penalty Date"), subject to
an effective registration statement filed with the Securities and Exchange
Commission ("SEC"), then the Conversion Price of the Series B Preferred shall be
reduced five percent (5%), effective on the Penalty Date. Thereafter, for each
ninety (90) day period after the Penalty Date that such Common Shares remain
unregistered, the Conversion Price shall be reduced by an additional five
percent. No further Conversion Price adjustments provided for in this Section
7(e)(v) shall be made once a registration statement covering the Registrable
Securities has been declared effective by the SEC.
(vi) RESET PROVISION. In the event that the Corporation does not
achieve (i) net sales of at least $135,000,000 and an operating loss, if any, of
less than $1,000,000 for fiscal year 1999 and (ii) net sales of at least
$180,000,000 and operating income of at least $18,000,000 for fiscal year 2000
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(each a "Performance Target"), then the Conversion Price promptly following the
determination of a failure to achieve a Performance Target based on the audited
financial statements of the Corporation, shall be reduced to an amount which
will allow all outstanding shares of Series B Preferred to be converted as of
the date of such adjustment into 1,300,000 Common Shares ("Conversion
Adjustment"), subject to any adjustments made to the Conversion Price prior to a
Conversion Adjustment. If a Conversion Adjustment occurs, the Corporation will
provide notice to each holder of Series B Preferred setting forth such
adjustment, the calculation of the new Conversion Price for the Series B
Preferred, and in reasonable detail the facts upon which such Conversion
Adjustment is based.
(vii) PROTECTION AGAINST DILUTION. If any event occurs as to
which, in the opinion of the Board, the other provisions of this Section 7(e)
are not strictly applicable or would not fairly protect the rights of the
holders of Series B Preferred in accordance with the intent of these
anti-dilution provisions, then the Board shall make an adjustment in accordance
with the intent of these provisions to protect the holders' rights in the Series
B Preferred, but in no event shall any adjustment have the effect of increasing
the Conversion Price (except in the case of a combination of Common Shares
described in Section 7(e)(iii)).
(viii) DEFINITIONS FOR SECTION 7(E).
"COMMON SHARES DEEMED OUTSTANDING" means, at any given time, the
number of Common Shares actually outstanding at such time, plus the number of
Common Shares that would be issued if all outstanding Options and Convertible
Securities exercisable for Common Shares or for other Options or Convertible
Securities were exercised or converted regardless of whether or not the
applicable securities are actually exercisable at such time, but excluding any
Common Shares issuable upon conversion of the Series B Preferred or any
outstanding shares of Series A Preferred.
"CONVERTIBLE SECURITIES" means any securities or other rights to
acquire securities directly or indirectly convertible into or exchangeable for
Common Shares.
"EXEMPT ISSUANCE" means the issuance of any Common Shares or other
securities (i) upon the exercise or conversion of Options or other securities
granted pursuant to plans existing on the Original Issuance Date, (ii) upon
exercise of Options granted or to be granted after the Original Issuance Date
under any employee benefit plan or plans adopted by the Board, provided that the
exercise price is not less than the fair market value on the date of grant,
(iii) upon conversion of outstanding shares of Series A Preferred or Series B
Preferred, or an adjustment to the Conversion Price or the conversion price of
the Series A Preferred, (iv) which are restricted securities subject to a
substantial risk of forfeiture issued pursuant to benefit plans adopted by the
Board, (v) pursuant to employee benefit plans qualified under Section 401(k) or
423 of the Internal Revenue Code, or (vi) to satisfy semi-annual interest
obligations to holders of the Dresdner Notes outstanding on the Original
Issuance Date.
"MARKET PRICE" of any security means the average of the closing
prices of such security's sales on all national securities exchanges or markets
on which such security may at the time be listed, or, if there has been no sale
on any such exchange or market on any day, or, if on any day such security is
-9-
<PAGE>
not so listed, then the representative bid price of such security quoted in the
NASDAQ System as of 4:00 p.m., New York time, on such day, or, if on any day
such security is not quoted in the NASDAQ System, then the highest bid price of
such security on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case, averaged over a period of five days consisting
of the day as of which "Market Price" is being determined and the four
consecutive business days prior to such day. If at any time such security is not
listed on any national securities exchange or market or quoted in the NASDAQ
System or the over-the-counter market, then the "Market Price" will be the fair
value thereof determined in good faith by the Board.
"OPTIONS" means any securities or other rights to subscribe for or
purchase, directly or indirectly, Common Shares or Convertible Securities.
(f) NOTICE OF CONVERSION PRICE ADJUSTMENTS. When an adjustment or
readjustment of the Conversion Price is required pursuant to Section 7(e), the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms of this Section 7 and prepare and
furnish to each holder of Series B Preferred a notice setting forth such
adjustment or readjustment and showing in reasonable detail the facts upon which
such adjustment or readjustment is based.
(g) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available from its authorized but unissued Common Shares such
number of Common Shares as shall be sufficient to effect the conversion of all
outstanding shares of Series B Preferred, including pursuant to Section 7(e)(vi)
hereof, and if at any time the number of authorized but unissued Common Shares
shall not be sufficient to effect the conversion of all then outstanding shares
of Series B Preferred, the Corporation will take such corporate action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued Common Shares to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in reasonable efforts to
obtain the requisite shareholder approval of any necessary amendment to the
Corporation's Articles of Incorporation.
(h) NO FRACTIONAL SHARES. No fractional shares shall be issued upon
the conversion of shares of Series B Preferred, and the number of Common Shares
to be issued shall be rounded to the nearest whole share.
8. NOTICES. Any notice required by the provisions of Section 7 to be
given to the holders of shares of Series B Preferred shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at the holder's address appearing on the books of the
Corporation. A holder of shares of Series B Preferred may change such address by
written notice to the Corporation.
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EXHIBIT 3.2
1995 RESTATED BYLAWS
OF
GARDENBURGER, INC.
(as amended March 29, 1999)
<PAGE>
CONTENTS
SECTION 1. OFFICES..................................................... 1
SECTION 2. SHAREHOLDERS................................................ 1
2.1 Annual Meeting........................................ 1
2.2 Special Meetings...................................... 1
2.3 Place of Meeting...................................... 1
2.4 Notice of Meeting..................................... 1
2.5 Waiver of Notice ..................................... 2
2.6 Fixing of Record Date for Determining Shareholders.... 2
2.7 Shareholders' List.................................... 3
2.8 Quorum................................................ 3
2.9 Manner of Acting...................................... 3
2.10 Proxies............................................... 4
2.11 Voting of Shares...................................... 4
2.12 Voting for Directors.................................. 4
2.13 Action by Shareholders Without a Meeting.............. 4
2.14 Voting of Shares by Corporation....................... 4
2.14.1 Shares Held by Another Corporation........... 4
2.14.2 Shares Held by the Corporation............... 4
2.15 Acceptance or Rejection of Shareholder Votes,
Consents, Waivers and Proxy Appointments................. 5
2.15.1 Documents Bearing Name of Shareholders....... 5
2.15.2 Documents Bearing Name of Third Parties...... 5
2.15.3 Rejection of Documents....................... 5
2.16 Subject of Meetings................................... 5
SECTION 3. BOARD OF DIRECTORS.......................................... 6
3.1 General Powers........................................ 6
3.2 Number, Tenure and Qualifications..................... 7
3.3 Nominations of Directors.............................. 7
3.4 Annual and Regular Meetings........................... 8
3.5 Special Meetings...................................... 8
3.6 Meetings by Telecommunications........................ 8
3.7 Notice of Special Meetings............................ 8
3.7.1 Personal Delivery............................ 9
3.7.2 Delivery by Mail............................. 9
3.7.3 Delivery by Telegraph........................ 9
3.7.4 Oral Notice.................................. 9
3.7.5 Notice by Facsimile Transmission............. 9
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<PAGE>
3.7.6 Notice by Private Courier.................... 9
3.8 Waiver of Notice...................................... 9
3.8.1 Written Waiver............................... 9
3.8.2 Waiver by Attendance......................... 9
3.9 Quorum................................................ 9
3.10 Manner of Acting...................................... 10
3.11 Presumption of Assent................................. 10
3.12 Action by Board or Committees Without a Meeting....... 10
3.13 Resignation........................................... 10
3.14 Removal .............................................. 10
3.15 Vacancies............................................. 10
3.16 Minutes............................................... 11
3.17 Executive and Other Committees........................ 11
3.17.1 Creation of Committees....................... 11
3.17.2 Authority of Committees...................... 11
3.17.3 Quorum and Manner of Acting.................. 11
3.17.4 Minutes of Meetings.......................... 12
3.17.5 Resignation.................................. 12
3.17.6 Removal...................................... 12
3.18 Compensation.......................................... 12
SECTION 4. OFFICERS..................................................... 12
4.1 Number................................................ 12
4.2 Appointment and Term of Office........................ 12
4.3 Resignation........................................... 12
4.4 Removal............................................... 13
4.5 Vacancies............................................. 13
4.6 Chair of the Board.................................... 13
4.7 President............................................. 13
4.8 Vice President........................................ 13
4.9 Secretary............................................. 13
4.10 Treasurer............................................. 14
4.11 Salaries.............................................. 14
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS........................ 14
5.1 Contracts............................................. 14
5.2 Loans to the Corporation.............................. 14
5.3 Loans to Directors.................................... 14
5.4 Checks, Drafts, Etc................................... 15
5.5 Deposits.............................................. 15
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<PAGE>
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER................... 15
6.1 Issuance of Shares.................................... 15
6.2 Escrow for Shares..................................... 15
6.3 Certificates for Shares............................... 15
6.4 Stock Records......................................... 15
6.5 Restriction on Transfer............................... 16
6.5.1 Securities Laws.............................. 16
6.5.2 Other Restrictions........................... 16
6.6 Transfer of Shares.................................... 16
6.7 Lost or Destroyed Certificates........................ 16
6.8 Transfer Agent and Registrar.......................... 16
6.9 Officer Ceasing to Act................................ 16
6.10 Fractional Shares..................................... 16
SECTION 7. BOOKS AND RECORDS.................................... 16
SECTION 8. FISCAL YEAR.......................................... 17
SECTION 9. SEAL................................................. 17
SECTION 10. INDEMNIFICATION............................................. 17
10.1 Directors and Officers............................... 17
10.2 Employees and Other Agents........................... 17
10.3 No Presumption of Bad Faith.......................... 17
10.4 Advances of Expenses................................. 17
10.5 Enforcement.......................................... 17
10.6 Nonexclusivity of Rights............................. 18
10.7 Survival of Rights................................... 18
10.8 Insurance............................................ 18
10.9 Amendments to Law.................................... 18
10.10 Savings Clause....................................... 19
10.11 Certain Definitions.................................. 19
SECTION 11. AMENDMENTS.................................................. 20
-iii-
<PAGE>
1995 RESTATED BYLAWS
OF
WHOLESOME & HEARTY FOODS, INC.
SECTION 1
OFFICES
The principal office of the Corporation shall be located at the
principal place of business or such other place as the Board of Directors (the
"Board") may designate. The Corporation may have such other offices, either
within or without the State of Oregon, as the Board may designate or as the
business of the Corporation may require from time to time.
SECTION 2
SHAREHOLDERS
2.1 ANNUAL MEETING. The annual meeting of the shareholders shall be
held in the month of May each year, or in such other month as fixed by the
Board, on such date and at such time as fixed by the Board, at the principal
office of the Corporation or at such other place as fixed by the Board, for the
purpose of electing Directors and transacting such other business as may
properly come before the meeting.
2.2 SPECIAL MEETINGS. The Board, the President or the Chair of the
Board may call special meetings of the shareholders for any purpose. The holders
of not less than one-tenth of all the outstanding shares of the Corporation
entitled to vote on any issue proposed to be considered at the proposed special
meeting, if they date, sign and deliver to the Corporation's Secretary a written
demand for a special meeting describing the purpose(s) for which it is to be
held, may call a special meeting of the shareholders for such stated purpose(s).
2.3 PLACE OF MEETING. All meetings shall be held at the principal
office of the Corporation or at such other place as designated by the Board, by
any persons entitled to call a meeting hereunder, or in a waiver of notice
signed by all of the shareholders entitled to vote at the meeting.
2.4 NOTICE OF MEETING.
2.4.1 The Corporation shall cause to be delivered to each
shareholder entitled to notice of or to vote at an annual or special meeting of
shareholders, either personally or by mail, not less than ten (10) nor more than
sixty (60) days before the meeting, written notice stating the date, time and
place of the meeting and, in the case of a special meeting, the purpose(s) for
which the meeting is called.
2.4.2 Notice to a shareholder of an annual or special
shareholder meeting shall be in writing. Such notice, if in comprehensible form,
is effective (a) when mailed, if it is mailed postpaid and is correctly
addressed to the shareholder's address shown in the Corporation's current record
of shareholders; or (b) when received by the shareholder, if it is delivered by
telegraph, facsimile transmission or private courier.
Page 1 - 1995 RESTATED BYLAWS
<PAGE>
2.4.3 If an annual or special shareholders' meeting is
adjourned to a different date, time, or place, notice need not be given of the
new date, time, or place if the new date, time, or place is announced at the
meeting before adjournment, unless a new record date for the adjourned meeting
is or must be fixed under Section 2.6.1 of these Bylaws or the Oregon Business
Corporation Act.
2.5 WAIVER OF NOTICE.
2.5.1 Whenever any notice is required to be given to any
shareholder under the provisions of these Bylaws, the Articles of Incorporation
or the Oregon Business Corporation Act, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or after the time
stated therein, and delivered to the Corporation for inclusion in the minutes
for filing with the corporate records, shall be deemed equivalent to the giving
of such notice.
2.5.2 The attendance of a shareholder at a meeting waives
objection to lack of, or defect in, notice of such meeting or of consideration
of a particular matter at the meeting, unless the shareholder, at the beginning
of the meeting or prior to consideration of such matter, objects to holding the
meeting, transacting business at the meeting, or considering the matter when
presented at the meeting.
2.6 FIXING OF RECORD DATE FOR DETERMINING SHAREHOLDERS.
2.6.1 For the purpose of determining shareholders entitled to
notice of, or to vote at, any meeting of shareholders or any adjournment
thereof, or shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other purpose, the Board
may fix in advance a date as the record date for any such determination. Such
record date shall be not more than seventy (70) days, and in case of a meeting
of shareholders, not less than ten (10) days, prior to the date on which the
particular action requiring such determination is to be taken. If no record date
is fixed for the determination of shareholders entitled to notice of or to vote
at a meeting, or to receive payment of a dividend, the date on which the notice
of meeting is mailed or on which the resolution of the Board declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination. Such determination shall apply to any adjournment of the meeting,
provided such adjournment is not set for a date more than 120 days after the
date fixed for the original meeting.
2.6.2 The record date for the determination of shareholders
entitled to demand a special shareholder meeting shall be the date the first
shareholder signs the demand.
Page 2 - 1995 RESTATED BYLAWS
<PAGE>
2.7 SHAREHOLDERS' LIST.
2.7.1 Beginning two (2) business days after notice of a
meeting of shareholders is given, a complete alphabetical list of the
shareholders entitled to notice of such meeting shall be made, arranged by
voting group, and within each voting group by class or series, with the address
of and number of shares held by each shareholder. This record shall be kept on
file at the Corporation's principal office or at a place identified in the
meeting notice in the city where the meeting will be held. On written demand,
this record shall be subject to inspection by any shareholder at any time during
normal business hours. Such record shall also be kept open at such meeting for
inspection by any shareholder.
2.7.2 A shareholder may, on written demand, copy the
shareholders' list at such shareholder's expense during regular business hours,
provided that:
(a) Such shareholder's demand is made in good faith and for a
proper purpose;
(b) Such shareholder has described with reasonable
particularity such shareholder's purpose in the written demand; and
(c) The shareholders' list is directly connected with such
shareholder's purpose.
2.8 QUORUM. A majority of the votes entitled to be cast on a matter at
a meeting by a voting group, represented in person or by proxy, shall constitute
a quorum of that voting group for action on that matter at a meeting of the
shareholders. If a quorum is not present for a matter to be acted upon, a
majority of the shares represented at the meeting may adjourn the meeting from
time to time without further notice. If the necessary quorum is present or
represented at a reconvened meeting following such an adjournment, any business
may be transacted that might have been transacted at the meeting as originally
called. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2.9 MANNER OF ACTING.
2.9.1 If a quorum exists, action on a matter (other than the
election of Directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the affirmative vote of a greater number is required by these Bylaws, the
Articles of Incorporation or the Oregon Business Corporation Act.
2.9.2 If a matter is to be voted on by a single group, action
on that matter is taken when voted upon by that voting group. If a matter is to
be voted on by two or more voting groups, action on that matter is taken only
when voted upon by each of those voting groups counted separately. Action may be
taken by one voting group on a matter even though no action is taken by another
voting group entitled to vote on such matter.
Page 3 - 1995 RESTATED BYLAWS
<PAGE>
2.10 PROXIES. A shareholder may vote by proxy executed in writing by
the shareholder or by his or her attorney-in-fact. Such proxy shall be effective
when received by the Secretary or other officer or agent authorized to tabulate
votes at the meeting. A proxy shall become invalid eleven (11) months after the
date of its execution, unless otherwise expressly provided in the proxy. A proxy
for a specified meeting shall entitle the holder thereof to vote at any
adjournment of such meeting but shall not be valid after the final adjournment
thereof.
2.11 VOTING OF SHARES. Each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
2.12 VOTING FOR DIRECTORS. Each shareholder may vote, in person or by
proxy, the number of shares owned by such shareholder that are entitled to vote
at an election of Directors, for as many persons as there are Directors to be
elected and for whose election such shares have a right to vote. Unless
otherwise provided in the Articles of Incorporation, Directors are elected by a
plurality of the votes cast by shares entitled to vote in the election at a
meeting at which a quorum is present.
2.13 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action which could
be taken at a meeting of the shareholders may be taken without a meeting if a
written consent setting forth the action so taken is signed by all shareholders
entitled to vote with respect to the subject matter thereof. The action shall be
effective on the date on which the last signature is placed on the consent, or
at such earlier or later time as is set forth therein. Such written consent,
which shall have the same force and effect as a unanimous vote of the
shareholders, shall be inserted in the minute book as if it were the minutes of
a meeting of the shareholders.
2.14 VOTING OF SHARES BY CORPORATION.
2.14.1 SHARES HELD BY ANOTHER CORPORATION. Shares standing in
the name of another corporation may be voted by such officer, agent or proxy as
the bylaws of such other corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine;
provided, however, such shares are not entitled to vote if the Corporation owns,
directly or indirectly, a majority of the shares entitled to vote for directors
of such other corporation.
2.14.2 SHARES HELD BY THE CORPORATION. Authorized but unissued
shares shall not be voted or counted for determining whether a quorum exists at
any meeting or counted in determining the total number of outstanding shares at
any given time. Notwithstanding the foregoing, shares of its own stock held by
the Corporation in a fiduciary capacity may be counted for purposes of
determining whether a quorum exists, and may be voted by the Corporation.
Page 4 - 1995 RESTATED BYLAWS
<PAGE>
2.15 ACCEPTANCE OR REJECTION OF SHAREHOLDER VOTES, CONSENTS, WAIVERS
AND PROXY APPOINTMENTS.
2.15.1 DOCUMENTS BEARING NAME OF SHAREHOLDERS. If the name
signed on a vote, consent, waiver or proxy appointment corresponds to the name
of a shareholder, the Secretary or other agent authorized to tabulate votes at
the meeting may, if acting in good faith, accept such vote, consent, waiver or
proxy appointment and give it effect as the act of the shareholder.
2.15.2 DOCUMENTS BEARING NAME OF THIRD PARTIES. If the name
signed on a vote, consent, waiver or proxy appointment does not correspond to
the name of its shareholder, the Secretary or other agent authorized to tabulate
votes at the meeting may nevertheless, if acting in good faith, accept such
vote, consent, waiver or proxy appointment and give it effect as the act of the
shareholder if:
(a) The shareholder is an entity and the name signed purports
to be that of an officer or an agent of the entity;
(b) The name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
Secretary or other agent requests, acceptable evidence of fiduciary status has
been presented;
(c) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder, and, if the Secretary or other agent
requests, acceptable evidence of this status has been presented;
(d) The name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the Secretary or
other agent requests, acceptable evidence of the signatory's authority to sign
has been presented; or
(e) Two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all
co-owners.
2.15.3 REJECTION OF DOCUMENTS. The Secretary or other agent
authorized to tabulate votes at the meeting is entitled to reject a vote,
consent, waiver or proxy appointment if such agent, acting in good faith, has
reasonable basis for doubt about the validity of the signature on it or about
the signatory's authority to sign for the shareholder.
2.16 SUBJECT OF MEETINGS. To be properly brought before an annual
meeting of shareholders, business must be either (i) specified in the notice of
the meeting (or any supplement or amendment thereto) given by or at the
direction of the Board, (ii) otherwise brought before the meeting by or at the
Page 5 - 1995 RESTATED BYLAWS
<PAGE>
direction of the Board, or (iii) otherwise brought before the meeting by a
shareholder who is a shareholder of record at the time of giving of the notice
provided for in this Section 2.16, who shall be entitled to vote at such meeting
and who complies fully with all of the notice procedures and other requirements
set forth in this Section 2.16. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting of
shareholders by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) calendar
days nor more than ninety (90) calendar days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is changed by more than thirty (30) calendar days
from such anniversary date, notice by the shareholder to be timely must be so
received not later than the close of business on the tenth (10th) calendar day
following the earlier of the day on which notice of the date of the meeting was
mailed or public disclosure was made. A shareholder's notice to the
Corporation's Secretary of business proposed to be conducted at any annual or
special meeting of shareholders shall set forth as to each matter the
shareholder proposes to bring before such meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (ii) the name and record address of the
shareholder proposing such business and the name and address of the beneficial
owner, if any, on whose behalf the proposal is made, (iii) the class, series and
number of shares of the capital stock of the Corporation which are owned
beneficially and of record by such shareholder and by the beneficial owner, if
any, on whose behalf the proposal is made, and (iv) any material interest of
such shareholder and the beneficial owner, if any, on whose behalf the proposal
is made in such business. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at a meeting of shareholders except in
accordance with the procedures set forth in this Section 2.16. The officer of
the Corporation presiding at a meeting of shareholders (the "Presiding Officer")
shall determine whether the proposed business is properly brought before the
meeting in accordance with the provisions of this Section 2.16. If the Presiding
Officer should determine that the proposed business is not properly brought
before the meeting, the Presiding Officer shall state such determination to the
meeting, whereupon any such business not properly brought before the meeting
shall not be transacted or otherwise brought before the meeting. Notwithstanding
the foregoing provisions of this Section 2.16, a shareholder shall also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder with respect to the matters
set forth herein.
SECTION 3
BOARD OF DIRECTORS
3.1 GENERAL POWERS. The business and affairs of the Corporation shall
be managed by the Board, except as may be otherwise provided in these Bylaws,
the Articles of Incorporation or the Oregon Business Corporation Act.
3.2 NUMBER, TENURE AND QUALIFICATIONS. The Board shall consist of no
less than three and no more than ten Directors, the specific number to be set
by resolution of the Board. The number of Directors may be changed from time to
Page 6 - 1995 RESTATED BYLAWS
<PAGE>
time by amendment to these Bylaws, but no decrease in the number of Directors
shall shorten the term of any incumbent Director. The terms of the Directors
expire at the next annual shareholder's meeting following their election.
Despite the expiration of a Director's term, however, the Director continues to
serve until the Director's successor is elected and qualifies or until there is
a decrease in the number of Directors. Directors need not be shareholders of the
Corporation or residents of the State of Oregon.
3.3 NOMINATIONS OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
Directors. Nominations of persons for election to the Board of the Corporation
at any meeting of shareholders may be made by or at the direction of the Board,
by any committee of persons appointed by the Board or at the meeting by any
shareholder of the Corporation who is a shareholder of record at the time of
giving notice provided for in this Section 3.3, who shall be entitled to vote
for the election of directors at the meeting and who complies fully with all of
the notice procedures and other requirements set forth in this Section 3.3 and
the procedures and requirements set forth in the Oregon Business Corporation
Act. Nominations by any shareholder shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation (a) in the case of an annual meeting, not less than
sixty (60) calendar days nor more than ninety (90) calendar days prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is changed by more than
thirty (30) calendar days from such anniversary date, notice by the shareholder
to be timely must be so received not later than the close of business on the
tenth (10th) calendar day following the earlier of the day on which notice of
the date of the meeting was mailed or public disclosure was made, and (b) in the
case of a special meeting at which Directors are to be elected, not later than
the earlier of (i) the close of business on the tenth (10th) calendar day
following the earlier of the day on which notice of the date of the meeting was
mailed or public disclosure was made or (ii) the close of business on the fifth
(5th) calendar day before the date of the meeting. Such shareholder's notice to
the Secretary or a written demand from shareholders pursuant to Section 60.204
of the Oregon Revised Statutes shall set forth (i) as to each person whom such
shareholders propose to nominate for election or reelection as a Director, (a)
the name, age, business address and residence address of the person, (b) the
principal occupation or employment of the person, (c) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
person, and (d) all other information relating to the person that is or would be
required to be disclosed in a solicitation for proxies for election of Directors
pursuant to the Rules and Regulations of the Securities and Exchange Commission
under Section 14 of the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a Director if elected); (ii) as to the shareholders giving
such notice or demand (a) the name and record address of the shareholders, (b)
the class and number of shares of capital stock of the Corporation which are
beneficially owned by each such shareholder and also which are owned of record
by each such shareholder and (c) any material interest or relationship each such
shareholder has in or with the proposed nominee; and (iii) as to each beneficial
Page 7 - 1995 RESTATED BYLAWS
<PAGE>
owner, if any, on whose behalf the nomination is made, (a) the name and address
of such person, (b) the class and number of shares of capital stock of the
Corporation which are beneficially owned by such person and (c) any material
interest or relationship such person has in or with the proposed nominee. The
Corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a Director of the Corporation. No person shall
be eligible for election as a Director of the Corporation unless nominated in
accordance with the procedures set forth herein. The Presiding Officer shall
determine whether the nomination is made in accordance with the foregoing
procedures. If the Presiding Officer should determine that the nomination was
not made in accordance with the foregoing procedures, the Presiding Officer
shall state such determination to the meeting, whereupon any such defective
nomination shall be disregarded and not otherwise brought before the meeting.
Notwithstanding the foregoing provisions of this Section 3.3, a shareholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder with respect
to the matters set forth herein.
3.4 ANNUAL AND REGULAR MEETINGS. An annual Board meeting shall be held
without further notice immediately after and at the same place as the annual
meeting of shareholders. By resolution, the Board, or any committee thereof, may
specify the time and place for holding regular meetings thereof without other
notice than such resolution.
3.5 SPECIAL MEETINGS. Special meetings of the Board or any committee
designated by the Board may be called by or at the request of the Chair of the
Board, or the President or any two Directors, and, in the case of any special
meeting of any committee designated by the Board, by the Chair thereof. The
person or persons authorized to call special meetings may fix any place either
within or without the State of Oregon as the place for holding any special Board
or committee meeting called by them.
3.6 MEETINGS BY TELECOMMUNICATIONS. Members of the Board or any
committee designated by the Board may participate in a meeting of such Board or
committee by use of any means of communication by which all persons
participating may simultaneously hear each other during the meeting.
Participation by such means shall be deemed presence in person at the meeting.
3.7 NOTICE OF SPECIAL MEETING. Notice of a special Board or committee
meeting stating the date, time and place of the meeting shall be given to a
Director in writing or orally by telephone or in person as set forth below.
Neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in the notice of such meeting.
3.7.1 PERSONAL DELIVERY. If delivery is by personal service,
the notice shall be effective if delivered at such address at least one day
before the meeting.
3.7.2 DELIVERY BY MAIL. If notice is delivered by mail, the
notice shall be deemed effective if deposited in the official government mail at
least five days before the meeting properly addressed to a Director at his or
her address shown on the records of the Corporation with postage prepaid.
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3.7.3 DELIVERY BY TELEGRAPH. If notice is delivered by
telegraph, the notice shall be deemed effective if the content thereof is
delivered to the telegraph company by such time that telegraph company
guarantees delivery at least one day before the meeting.
3.7.4 ORAL NOTICE. If notice is delivered orally, by telephone
or in person, the notice shall be effective if personally given to a Director at
least one day before the meeting.
3.7.5 NOTICE BY FACSIMILE TRANSMISSION. If notice is delivered
by facsimile transmission, the notice shall be deemed effective if the content
thereof is transmitted to the office of a Director, at the facsimile number
shown on the records of the Corporation, at least one day before the meeting,
and receipt is either confirmed by confirming transmission equipment or
acknowledged by the receiving office.
3.7.6 NOTICE BY PRIVATE COURIER. If notice is delivered by
private courier, the notice shall be deemed effective if delivered to the
courier, properly addressed and prepaid, by such time that the courier
guarantees delivery at least one day before the meeting.
3.8 WAIVER OF NOTICE.
3.8.1 WRITTEN WAIVER. Whenever any notice is required to be
given to any Director under the provisions of these Bylaws, the Articles of
Incorporation or the Oregon Business Corporation Act, a waiver thereof in
writing, executed at any time, specifying the meeting for which notice is
waived, signed by the person or persons entitled to such notice, and filed with
the minutes or corporate records, shall be deemed equivalent to the giving of
such notice.
3.8.2 WAIVER BY ATTENDANCE. The attendance of a Director at a
Board or committee meeting shall constitute a waiver of notice of such meeting,
unless the Director, at the beginning of the meeting, or promptly upon such
Director's arrival, objects to holding the meeting or transacting any business
at the meeting and does not thereafter vote for or assent to action taken at the
meeting.
3.9 QUORUM. A majority of the number of Directors fixed by or in the
manner provided by these Bylaws shall constitute a quorum for the transaction of
business at any Board meeting.
3.10 MANNER OF ACTING. The act of the majority of the Directors present
at a Board or committee meeting at which there is a quorum shall be the act of
the Board or committee, unless the vote of a greater number is required by these
Bylaws, the Articles of Incorporation or the Oregon Business Corporation Act.
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3.11 PRESUMPTION OF ASSENT. A Director of the Corporation present at a
Board or committee meeting at which action on any corporate matter is taken
shall be deemed to have assented to the action taken unless such Director
objects at the beginning of the meeting, or promptly upon such Director's
arrival, to holding the meeting or transacting business at the meeting; or such
Director's dissent is entered in the minutes of the meeting; or such Director
delivers a written notice of dissent or abstention to such action with the
presiding officer of the meeting before the adjournment thereof; or such
Director forwards such notice by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. A Director who
voted in favor of such action may not thereafter dissent or abstain.
3.12 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING. Any action which
could be taken at a meeting of the Board or of any committee appointed by the
Board may be taken without a meeting if a written consent setting forth the
action so taken is signed by each Director or by each committee member. The
action shall be effective when the last signature is placed on the consent,
unless the consent specifies an earlier or later date. Such written consent,
which shall have the same effect as a unanimous vote of the Directors or such
committee, shall be inserted in the minute book as if it were the minutes of a
Board or committee meeting.
3.13 RESIGNATION. Any Director may resign at any time by delivering
written notice to the Chair of the Board, the Board, or to the registered office
of the Corporation. Such resignation shall take effect at the time specified in
the notice, or if no time is specified, upon delivery. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. Once delivered, a notice of resignation is irrevocable unless
revocation is permitted by the Board.
3.14 REMOVAL. One or more members of the Board (including the entire
Board) may be removed at a meeting of shareholders called expressly for that
purpose, provided that the notice of such meeting states that the purpose, or
one of the purposes, of the meeting is such removal. A member of the Board may
be removed with or without cause, unless the Articles of Incorporation permit
removal for cause only, by a vote of the holders of a majority of the shares
then entitled to vote on the election of the Director(s). A Director may be
removed only if the number of votes cast to remove the Director exceeds the
number of votes cast to not remove the Director. If a Director is elected by a
voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove such Director.
3.15 VACANCIES. Any vacancy occurring on the Board, including a vacancy
resulting from an increase in the number of Directors, may be filled by the
shareholders, by the Board, by the affirmative vote of a majority of the
remaining Directors though less than a quorum of the Board, or by a sole
remaining Director. A Director elected to fill a vacancy shall be elected for
the unexpired term of his or her predecessor in office; except that the term of
a Director elected by the Board to fill a vacancy expires at the next
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shareholders' meeting at which Directors are elected. Any Directorship to be
filled by reason of an increase in the number of Directors may be filled by the
affirmative vote of a majority of the number of Directors fixed by the Bylaws
prior to such increase for a term of office continuing only until the next
election of Directors by the shareholders. Any Directorship not so filled by the
Directors shall be filled by election at the next annual meeting of shareholders
or at a special meeting of shareholders called for that purpose. If the vacant
Directorship is filled by the shareholders and was held by a Director elected by
a voting group of shareholders, then only the holders of shares of that voting
group are entitled to vote to fill such vacancy. A vacancy that will occur at a
specific later date by reason of a resignation effective at such later date or
otherwise may be filled before the vacancy occurs, but the new Director may not
take office until the vacancy occurs.
3.16 MINUTES. The Board shall keep minutes of its meetings and shall
cause them to be recorded in books kept for that purpose.
3.17 EXECUTIVE AND OTHER COMMITTEES.
3.17.1 CREATION OF COMMITTEES. The Board, by resolution
adopted by a majority of the number of Directors fixed in the manner provided by
these Bylaws, may appoint standing or temporary committees, including an
Executive Committee, from its own number and consisting of no less than two (2)
Directors. The Board may invest such committee(s) with such powers as it may see
fit, subject to such conditions as may be prescribed by the Board, these Bylaws,
the Articles of Incorporation and the Oregon Business Corporation Act.
3.17.2 AUTHORITY OF COMMITTEES. Each committee shall have and
may exercise all of the authority of the Board to the extent provided in the
resolution of the Board designating the committee and any subsequent resolutions
pertaining thereto and adopted in like manner, except that no such committee
shall have the authority to: (a) authorize distributions, except as may be
permitted by Section 3.17.2(g) of these Bylaws; (b) approve or propose to
shareholders actions required by the Oregon Business Corporation Act to be
approved by shareholders; (c) fill vacancies on the Board or any committee
thereof; (d) adopt, amend or repeal these Bylaws; (e) amend the Articles of
Incorporation; (f) approve a plan of merger not requiring shareholder approval;
or (g) authorize or approve reacquisition of shares, except within limits
prescribed by the Board.
3.17.3 QUORUM AND MANNER OF ACTING. A majority of the number
of Directors composing any committee of the Board, as established and fixed by
resolution of the Board, shall constitute a quorum for the transaction of
business at any meeting of such committee.
3.17.4 MINUTES OF MEETINGS. All committees so appointed shall
keep regular minutes of their meetings and shall cause them to be recorded in
books kept for that purpose.
3.17.5 RESIGNATION. Any member of any committee may resign at
any time by delivering written notice thereof to the Board, the Chair of the
Board or the Corporation. Any such resignation shall take effect at the time
specified in the notice, or if no time is specified, upon delivery. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Once delivered, a notice of resignation is
irrevocable unless revocation is permitted by the Board.
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3.17.6 REMOVAL. The Board may remove from office any member of
any committee elected or appointed by it, but only by the affirmative vote of
not less than a majority of the number of Directors fixed by or in the manner
provided by these Bylaws.
3.18 COMPENSATION. By Board resolution, Directors and committee members
may be paid their expenses, if any, of attendance at each Board or committee
meeting, or a fixed sum for attendance at each Board or committee meeting, or a
stated salary as Director or a committee member, or a combination of the
foregoing. No such payment shall preclude any Director or committee member from
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 4
OFFICERS
4.1 NUMBER. The Officers of the Corporation shall be a President and a
Secretary, each of whom shall be appointed by the Board. One or more Vice
Presidents, a Treasurer and such other Officers and assistant Officers may be
appointed by the Board; such Officers and assistant Officers to hold office for
such period, have such authority and perform such duties as are provided in
these Bylaws or as may be provided by resolution of the Board. Any Officer may
be assigned by the Board any additional title that the Board deems appropriate.
The Board may delegate to any Officer or agent the power to appoint any such
subordinate Officers or agents and to prescribe their respective terms of
office, authority and duties. Any two or more offices may be held by the same
person.
4.2 APPOINTMENT AND TERM OF OFFICE. The Officers of the Corporation
shall be appointed annually by the Board at the Board meeting held after the
annual meeting of the shareholders. If the appointment of Officers is not made
at such meeting, such appointment shall be made as soon thereafter as a Board
meeting conveniently may be held. Unless an Officer dies, resigns, or is removed
from office, he or she shall hold office until the next annual meeting of the
Board or until his or her successor is appointed.
4.3 RESIGNATION. Any Officer may resign at any time by delivering
written notice to the Corporation. Any such resignation shall take effect at the
time specified in the notice, or if no time is specified, upon delivery. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Once delivered, a notice of resignation is
irrevocable unless revocation is permitted by the Board.
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4.4 REMOVAL. Any Officer or agent appointed by the Board may be removed
by the Board, with or without cause, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Appointment of an
Officer or agent shall not of itself create contract rights.
4.5 VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification, creation of a new office or any other cause may be
filled by the Board for the unexpired portion of the term, or for a new term
established by the Board. If a resignation is made effective at a later date,
and the Corporation accepts such future effective date, the Board may fill the
pending vacancy before the effective date, if the Board provides that the
successor does not take office until the effective date.
4.6 CHAIR OF THE BOARD. If appointed, the Chair of the Board shall
perform such duties as shall be assigned to him or her by the Board from time to
time and shall preside over meetings of the Board and shareholders unless
another Director or an Officer is appointed or designated by the Board as Chair
of such meeting. The Chair of the Board shall not, by virtue of that position
alone, be deemed to be an Officer of the Corporation.
4.7 PRESIDENT. The President shall be the chief executive Officer of
the Corporation unless some other Officer is so designated by the Board, shall
preside over meetings of the Board and shareholders in the absence of a Chair of
the Board and, subject to the Board's control, shall supervise and control all
of the assets, business and affairs of the Corporation. The President shall have
authority to sign deeds, mortgages, bonds, contracts, or other instruments,
except when the signing and execution thereof have been expressly delegated by
the Board or by these Bylaws to some other Officer or agent of the Corporation,
or are required by law to be otherwise signed or executed by some other Officer
or in some other manner. In general, the President shall perform all duties
incident to the office of President and such other duties as are prescribed by
the Board from time to time.
4.8 VICE PRESIDENT. In the event of the death of the President or his
or her inability to act, the Vice President (or if there is more than one Vice
President, the Vice President who was designated by the Board as the successor
to the President, or if no Vice President is so designated, the Vice President
first appointed to such office) shall perform the duties of the President,
except as may be limited by resolution of the Board, with all the powers of and
subject to all the restrictions upon the President. Vice Presidents shall have,
to the extent authorized by the President or the Board, the same powers as the
President to sign deeds, mortgages, bonds, contracts or other instruments. Vice
Presidents shall perform such other duties as from time to time may be assigned
to them by the President or by the Board.
4.9 SECRETARY. The Secretary shall: (a) prepare and keep the minutes of
meetings of the shareholders and the Board in one or more books provided for
that purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) be responsible for custody
of the corporate records and seal of the Corporation; (d) keep registers of the
post office address of each shareholder and Director; (e) have general charge of
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the stock transfer books of the Corporation; and (f) in general perform all
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him or her by the President or by the Board. In the
absence of the Secretary, an Assistant Secretary may perform the duties of the
Secretary.
4.10 TREASURER. If required by the Board, the Treasurer shall give a
bond for the faithful discharge of his or her duties in such amount and with
such surety or sureties as the Board shall determine. The Treasurer shall have
charge and custody of and be responsible for all funds and securities of the
Corporation; receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the name
of the Corporation in banks, trust companies or other depositories selected in
accordance with the provisions of these Bylaws; and in general perform all of
the duties incident to the office of the Treasurer and such other duties as from
time to time may be assigned to him or her by the President or by the Board. In
the absence of the Treasurer, an Assistant Treasurer may perform the duties of
the Treasurer.
4.11 SALARIES. The salaries of the Officers shall be fixed from time to
time by the Board or by any person or persons to whom the Board has delegated
such authority. No Officer shall be prevented from receiving such salary by
reason of the fact that he or she is also a Director of the Corporation.
SECTION 5
CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 CONTRACTS. The Board may authorize any Officer or Officers, or
agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation. Such authority may
be general or confined to specific instances.
5.2 LOANS TO THE CORPORATION. No loans shall be contracted on behalf of
the Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board. Such authority may be general or
confined to specific instances.
5.3 LOANS TO DIRECTORS. The Corporation shall not lend money to or
guarantee the obligation of a Director unless: (a) the particular loan or
guarantee is approved by a majority of the votes represented by the outstanding
voting shares of all classes, voting as a single voting group, excluding the
votes of the shares owned by or voted under the control of the benefitted
Director; or (b) the Board determines that the loan or guarantee benefits the
Corporation and either approves the specific loan or guarantee or a general plan
authorizing the loans and guarantees. The fact that a loan or guarantee is made
in violation of this provision shall not affect the borrower's liability on the
loan.
5.4 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such Officer or Officers, or agent or agents,
of the Corporation and in such manner as is from time to time determined by
resolution of the Board.
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5.5 DEPOSITS. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board may select.
SECTION 6
CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 ISSUANCE OF SHARES. No shares of the Corporation shall be issued
unless authorized by the Board, which authorization shall include the maximum
number of shares to be issued and the consideration to be received for each
share. Before the Corporation issues shares, the Board shall determine that the
consideration received or to be received for such shares is adequate. Such
determination by the Board shall be conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether the shares are
validly issued, fully paid and nonassessable.
6.2 ESCROW FOR SHARES. The Board may authorize the placement in escrow
of shares issued for a contract for future services or benefits or a promissory
note, or may authorize other arrangements to restrict the transfer of shares,
and may authorize the crediting of distributions in respect of such shares
against their purchase price, until the services are performed, the note is paid
or the benefits received. If the services are not performed, the note is not
paid, or the benefits are not received, the Board may cancel, in whole or in
part, such shares placed in escrow or restricted and such distributions
credited.
6.3 CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation shall be in such form as shall be determined by the Board. Such
certificates shall be signed by any two of the following officers: the Chair of
the Board, the President, any Vice President, the Treasurer, the Secretary or
any Assistant Secretary. Any or all of the signatures on a certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar other than the Corporation itself or an employee of the
Corporation. All certificates shall be consecutively numbered or otherwise
identified.
6.4 STOCK RECORDS. The stock transfer books shall be kept at the
registered office or principal place of business of the Corporation or at the
office of the Corporation's transfer agent or registrar. The name and address of
each person to whom certificates for shares are issued, together with the class
and number of shares represented by each such certificate and the date of issue
thereof, shall be entered on the stock transfer books of the Corporation. The
person in whose name shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.
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6.5 RESTRICTION ON TRANSFER.
6.5.1 SECURITIES LAWS. Except to the extent that the
Corporation has obtained an opinion of counsel acceptable to the Corporation
that transfer restrictions are not required under applicable securities laws, or
has otherwise satisfied itself that such transfer restrictions are not required,
all certificates representing shares of the Corporation shall bear conspicuously
on the front or back of the certificate a legend or legends describing the
restriction or restrictions.
6.5.2 OTHER RESTRICTIONS. In addition, the front or back of
all certificates shall include conspicuous written notice of any further
restrictions which may be imposed on the transferability of such shares.
6.6 TRANSFER OF SHARES. Transfer of shares of the Corporation shall be
made only on the stock transfer books of the Corporation pursuant to
authorization or document of transfer made by the holder of record thereof or by
his or her legal representative, who shall furnish proper evidence of authority
to transfer, or by his or her attorney-in-fact authorized by power of attorney
duly executed and filed with the Secretary of the Corporation. All certificates
surrendered to the Corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificates for a like number of
shares shall have been surrendered and cancelled.
6.7 LOST OR DESTROYED CERTIFICATES. In the case of a lost, destroyed or
mutilated certificate, a new certificate may be issued therefor upon such terms
and indemnity to the Corporation as the Board may prescribe.
6.8 TRANSFER AGENT AND REGISTRAR. The Board may from time to time
appoint one or more Transfer Agents and one or more Registrars for the shares of
the Corporation, with such powers and duties as the Board shall determine by
resolution.
6.9 OFFICER CEASING TO ACT. In case any officer who has signed or whose
facsimile signature has been placed upon a stock certificate shall have ceased
to be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if the signer were such officer at the date
of its issuance.
6.10 FRACTIONAL SHARES. The Corporation shall not issue certificates
for fractional shares.
SECTION 7
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its shareholders
and Board and such other records as may be necessary or advisable.
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SECTION 8
FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year, provided
that if a different fiscal year is at any time selected for purposes of federal
income taxes, the fiscal year shall be the year so selected.
SECTION 9
SEAL
The seal of the Corporation, if any, shall consist of the name of the
Corporation and the state of its incorporation.
SECTION 10
INDEMNIFICATION
10.1 DIRECTORS AND OFFICERS. The Corporation shall indemnify its
directors and officers to the fullest extent not prohibited by law.
10.2 EMPLOYEES AND OTHER AGENTS. The Corporation shall have the power
to indemnify its employees and other agents to the fullest extent not prohibited
by law.
10.3 NO PRESUMPTION OF BAD FAITH. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the best interests of this Corporation, or, with respect to
any criminal proceeding, that the person had reasonable cause to believe that
the conduct was unlawful.
10.4 ADVANCES OF EXPENSES. The expenses incurred by a director or
officer in any proceeding shall be paid by the Corporation in advance at the
written request of the director or officer, if the director or officer:
10.4.1 Furnishes the Corporation a written affirmation of such
person's good faith belief that such person is entitled to be indemnified by the
Corporation; and
10.4.2 Furnishes the Corporation a written undertaking to
repay such advance to the extent that it is ultimately determined by a court
that such person is not entitled to be indemnified by the Corporation. Such
advances shall be made without regard to the person's ability to repay such
expenses and without regard to the person's ultimate entitlement to
indemnification under this Bylaw or otherwise.
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10.5 ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances under this Bylaw shall be
deemed to be contractual rights and be effective to the same extent and as if
provided for in a contract between the Corporation and the director or officer
who serves in such capacity at any time while this Bylaw and any other
applicable law, if any, are in effect. Any right to indemnification or advances
granted by this Bylaw to a director or officer shall be enforceable by or on
behalf of the person holding such right in any court of competent jurisdiction
if (a) the claim for indemnification or advances is denied, in whole or in part,
or (b) no disposition of such claim is made within ninety (90) days of request
thereof. The claimant in such enforcement action, if successful in whole or in
part, shall be entitled to be also paid the expense of prosecuting the claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in connection with any proceeding in advance of its
final disposition when the required affirmation and undertaking have been
tendered to the Corporation) that the claimant has not met the standards of
conduct which makes it permissible under the law for the Corporation to
indemnify the claimant, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because the claimant has met the
applicable standard of conduct, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
10.6 NONEXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of articles of incorporation,
bylaws, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in the person's official capacity and as to action in another
capacity while holding office. The Corporation is specifically authorized to
enter into individual contracts with any or all of its directors, officers,
employees or agents respecting indemnification and advances to the fullest
extent not prohibited by law.
10.7 SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
10.8 INSURANCE. To the fullest extent not prohibited by law, the
Corporation, upon approval by the Board of Directors, may purchase insurance on
behalf of any person required or permitted to be indemnified pursuant to this
Bylaw.
10.9 AMENDMENTS TO LAW. For purposes of this Bylaw, the meaning of
"law" within the phrase "to the fullest extent not prohibited by law" shall
include, but not be limited to, the Oregon Business Corporation Act, as the same
exists on the date hereof or as it may be amended; provided, however, that in
the case of any such amendment, such amendment shall apply only to the extent
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that it permits the Corporation to provide broader indemnification rights than
the Act permitted the Corporation to provide prior to such amendment.
10.10 SAVINGS CLAUSE. If this Bylaw or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, the
Corporation shall indemnify each director, officer or other agent to the fullest
extent permitted by any applicable portion of this Bylaw that shall not have
been invalidated, or by any other applicable law.
10.11 CERTAIN DEFINITIONS. For purposes of this Section, the following
definitions shall apply:
10.11.1 The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of any threatened, pending or completed action,
suit or proceeding, whether brought in the right of the Corporation or otherwise
and whether civil, criminal, administrative or investigative, in which the
director or officer may be or may have been involved as a party or otherwise by
reason of the fact that the director or officer is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
10.11.2 The term "expenses" shall be broadly construed and
shall include, without limitation, all costs, charges and expenses (including
fees and disbursements of attorneys, accountants and other experts) actually and
reasonably incurred by a director or officer in connection with any proceeding,
all expenses of investigations, judicial or administrative proceedings or
appeals, and any expenses of establishing a right to indemnification under these
Bylaws, but shall not include amounts paid in settlement, judgments or fines.
10.11.3 "Corporation" shall mean Wholesome & Hearty Foods,
Inc. and any successor corporation thereof.
10.11.4 Reference to a "director," "officer," "employee" or
"agent" of the Corporation shall include, without limitation, situations where
such person is serving at the request of the Corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
10.11.5 References to "other enterprises" shall include
employee benefit plans. References to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan. References to
"serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants, or beneficiaries. A person who
acted in good faith and in a manner the person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Bylaw.
Page 20 - 1995 RESTATED BYLAWS
<PAGE>
SECTION 11
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board at any regular or special meeting of the Board; provided,
however, that the shareholders, in amending or repealing a particular Bylaw, may
provide expressly that the Board may not amend or repeal that Bylaw. The
shareholders may also make, alter, amend and repeal the Bylaws of the
Corporation at any annual meeting or at a special meeting called for that
purpose. All Bylaws made by the Board may be amended, repealed, altered or
modified by the shareholders at any regular or special meeting called for that
purpose.
EXHIBIT 10.1
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BANK OF AMERICA NT & SA AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT
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This Agreement dated as of April 14, 1999 is between Bank of America NT & SA
(the "Bank") and Gardenburger, Inc (the "Borrower").
1. DEFINITIONS.
In addition to the terms which are defined elsewhere in this Agreement,
the following terms have the meanings indicated for the purposes of
this Agreement:
1.1 "BORROWING BASE" means the lesser of:
(a) Twenty Million Dollars; or
(b) the sum of:
(i) 70% of the balance due on Acceptable Receivables; and
(ii) (1) 50% of the value of Acceptable Inventory consisting of
finished goods, less (2) the amount of outstanding grower
payables, up to a maximum inventory advance amount of $5,000,000.
"Grower payables" means accounts payable that may give rise to a
statutory trust in favor of the grower, pursuant to the Perishable
Agricultural Commodities Act, 7 U.S.C. Section 499a et seq.
In determining the value of Acceptable Inventory to be included in the
Borrowing Base, the Bank will use the lowest of (i) the Borrower's
cost, (ii) the Borrower's estimated market value, or (iii) the Bank's
independent determination of the resale value of such inventory in such
quantities and on such terms as the Bank deems appropriate.
1.2 "ACCEPTABLE RECEIVABLE" means an account receivable which satisfies the
following requirements:
(a) The account has resulted from the sale of goods or the performance of
services by the Borrower in the ordinary course of the Borrower's
business.
(b) There are no conditions which must be satisfied before the Borrower is
entitled to receive payment of the account. Accounts arising from COD
sales, consignments or guaranteed sales are not acceptable.
(c) The debtor upon the account does not claim any defense to payment and
has not asserted any counterclaims against the Borrower.
(d) The account represents a genuine obligation of the debtor for goods
sold and accepted by the debtor, or for services performed for and
accepted by the debtor.
(e) The Borrower has sent an invoice to the debtor in the amount of the
account.
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AMENDED AND RESTATED -1-
BUSINESS LOAN AGREEMENT
<PAGE>
(f) The account is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of
the Bank.
(g) The debtor upon the account is not any of the following:
(i) an employee, affiliate, parent or subsidiary of the Borrower, or
an entity which has common officers or directors with the
Borrower.
(ii) the U.S. government or any agency or department of the U.S.
government unless the Bank agrees in writing to accept the
obligation and the Borrower complies with the procedures in the
Federal Assignment of Claims Act of 1940 with respect to the
obligation.
(iii) any state, county, city, town or municipality.
(iv) any person or entity located in a foreign country, other than
Canada, unless the account is supported by a letter of credit
issued by a bank acceptable to the Bank.
(v) any person or entity to whom the Borrower is obligated for goods
purchased by the Borrower or for services performed for the
Borrower.
(h) The account is not in default. An account will be considered in default
if any of the following occur:
(i) The account is not paid within the 90 day period starting on its
invoice date;
(ii) The debtor obligated upon the account suspends business, makes a
general assignment for the benefit of creditors, or fails to pay
its debts generally as they come due; or
(iii) Any petition is filed by or against the debtor obligated upon the
account under any bankruptcy law or any other law or laws for the
relief of debtors;
(i) The account, when added to all other accounts that are obligations of
the same debtor, does not cause that debtor's total obligations to the
Borrower to exceed 10% of the balance due on all of the Borrower's
accounts.
It is provided, however, that if the debtor obligated upon an account
is one of the debtors listed below, the above limitation will be
increased to the percentage set forth below:
Debtor Limitation
------ ----------
Sysco 20%
DOT Foods 20%
Norpac Sales 20%
Aggregate of C&S Metro and
C&S Wholesale Grocers 20%
(j) The account is not the obligation of a debtor who is in default (as
defined above) on 25% or more of the accounts upon which such debtor is
obligated.
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AMENDED AND RESTATED -2-
BUSINESS LOAN AGREEMENT
<PAGE>
(k) The account does not arise from the sale of goods which remain in the
Borrower's possession or under the Borrower's control.
(l) The account does not arise from the sale of minerals (including oil and
gas) at the wellhead or minehead.
(m) The account is not evidenced by a promissory note or chattel paper.
(n) The account is otherwise acceptable to the Bank.
1.3 "ACCEPTABLE INVENTORY" means inventory which satisfies the following
requirements:
(a) The inventory is owned by the Borrower free of any title defects or any
liens or interests of other except the security interest in favor of
the Bank.
(b) The inventory is permanently located at locations which the Borrower
has disclosed to the Bank and which are acceptable to the Bank. If the
inventory is covered by a negotiable document of title (such as a
warehouse receipt) that document must be delivered to the Bank.
Inventory which is in transit is not acceptable unless it is covered by
a commercial letter of credit issued by the Bank and the seller of the
inventory is required to present shipping or title documents to the
Bank as a condition to obtaining payment.
(c) The inventory is held for sale in the ordinary course of the Borrower's
business and is of good and merchantable quality. Inventory which is
obsolete, unsalable, damaged, defective, discontinued or slow-moving,
or which has been returned by the buyer, is not acceptable. Display
items and packing and shipping materials are not acceptable.
(d) The inventory is not placed on consignment.
(e) The inventory is otherwise acceptable to the Bank.
2. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the
"Facility No. 1 Commitment") is equal to the amount of the Borrowing
Base.
(b) This is a revolving line of credit with a within line facility for a
standby letter of credit. During the availability period, the Borrower
may repay principal amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal balance of
the line of credit plus the outstanding amounts of any standby letter
of credit to exceed the Facility No. 1 Commitment, including amounts
drawn on standby letter of credit and not yet reimbursed. If such
outstandings exceed the Facility No. 1 Commitment, the Borrower will
immediately pay the excess to the Bank upon the Bank's demand. The Bank
may apply payments received from the Borrower under this Paragraph to
the obligations of the Borrower to the Bank in the order and manner as
the Bank, in its discretion, may determine.
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AMENDED AND RESTATED -3-
BUSINESS LOAN AGREEMENT
<PAGE>
2.2 AVAILABILITY PERIOD. The line of credit is available between the date of
this Agreement and June 1, 2000 (the "Expiration Date") unless the Borrower is
in default.
2.3 INTEREST RATE.
(a) Unless the Borrower elects an Optional interest rate as described
below, the interest rate is the Reference Rate.
(b) The Reference Rate is the rate of interest publicly announced from time
to time by Bank as its Reference Rate. The Reference Rate is set based
on various factors, including Bank's costs and desired return, general
economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may price loans to its customers at,
above, or below the Reference Rate. Any change in the Reference Rate
shall take effect at the opening of business on the day specified in
the public announcement of a change in the Reference Rate.
2.4 CONDITIONS TO EACH EXTENSION OF CREDIT. Before each extension of credit
under the line of credit, including the first, the Borrower will deliver the
following to the Bank if requested by the Bank:
(a) a borrowing certificate, in form and detail satisfactory to the Bank,
setting forth the Acceptable Receivables and the Acceptable Inventory
on which the requested extension of credit is to be based.
(b) copies of the invoices or the record of invoices from the Borrower's
sales journal for such Acceptable Receivables and a listing of the
names and addresses of the debtors obligated thereunder.
(c) copies of the delivery receipts, purchase orders, shipping
instructions, bills of lading and other documentation pertaining to
such Acceptable Receivables.
2.5 REPAYMENT TERMS.
(a) The Borrower will pay interest on the first day of each month until
payment in full of any principal outstanding under this line of credit.
(b) The Borrower will repay in full all principal and any unpaid interest
or other charges outstanding under this line of credit no later than
the Expiration Date. Any amount bearing interest at an optional
interest rate (as described below) may be repaid at the end of the
applicable interest period, which shall be no later than the Facility
No. 1 Expiration Date.
2.6 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Reference
Rate, the Borrower may elect to have all or portions of the line of credit
(during the availability period) bear interest at the rate(s) described below
during an interest period agreed to by the Bank and the Borrower. Each interest
rate is a rate per year. Interest will be paid on the first day of every month
and on the last day of each interest period. At the end of any interest period,
the interest rate will revert to the rate based on the Reference Rate, unless
the Borrower has designated another optional interest rate for the portion.
2.7 LIBOR RATE. The Borrower may elect to have all or portions of the principal
balance of the line of credit bear interest at the LIBOR Rate plus 1.25
percentage points.
Designation of a LIBOR Rate portion is subject to the following
requirements:
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AMENDED AND RESTATED -4-
BUSINESS LOAN AGREEMENT
<PAGE>
(a) The interest period during which the LIBOR Rate will be in effect will
be one month to six months. The last day of the interest period will be
determined by the Bank using the practices of the London inter-bank
market.
(b) Each LIBOR Rate portion will be an amount not less than Five Hundred
Thousand Dollars ($500,000).
(c) The Borrower shall irrevocably request a LIBOR Rate portion no later
than 9:00 a.m. San Francisco time three (3) banking days before the
commencement of the interest period.
(d) The "LIBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Rate
---------------------------
(1.00 - Reserve Percentage)
Where
(i) "London Rate" means the interest rate (rounded upward to the
nearest 1/16th of one percent) at which the Bank's London Branch,
London, Great Britain, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the London
inter-bank market at approximately 11:00 a.m. London time two (2)
banking days before the commencement of the interest period.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by the
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in the Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The percentage
will be expressed as a decimal, and will include, but not be
limited to, marginal, emergency, supplemental, special, and other
reserve percentages.
(e) The Borrower may not elect a LIBOR Rate with respect to any portion of
the appreciable balance of the line of credit which is scheduled to be
repaid before the last day of the applicable interest period.
(f) Any portion of the principal balance of the line of credit already
bearing interest at the LIBOR Rate will not be converted to a different
rate during its interest period.
(g) Each prepayment of a LIBOR Rate portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee equal to
the amount (if any) by which:
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the
interest period, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the London inter-bank
market for a period starting on the date on which it was prepaid
and ending on the last day of the interest period for such
portion.
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AMENDED AND RESTATED -5-
BUSINESS LOAN AGREEMENT
<PAGE>
(h) The Bank will have no obligation to accept an election for LIBOR Rate
portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for periods equal to
the interest period, of a LIBOR Rate portion are not available in
the London inter-bank market; or
(ii) the LIBOR Rate does not accurately reflect the cost of a LIBOR
Rate portion.
2.8 OFFSHORE RATE. The Borrower may elect to have all or portions of the
principal balance of the line of credit bear interest at the Offshore Rate plus
1.25 percentage points.
Designation of an Offshore Rate portion is subject to the following
requirements:
(a) The interest period during which the Offshore Rate will be in effect
will be 7-180 days. The last day of the interest period will be
determined by the Bank using the practices of the offshore dollar
inter-bank market.
(b) Each Offshore Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000).
(c) The "Offshore Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
Offshore Rate = Grand Cayman Rate
---------------------------
(1.00 - Reserve Percentage)
(i) "Grand Cayman Rate" means the interest rate (rounded upward to the
nearest 1/16th of one percent) at which the Bank's Grand Cayman
Branch, Grand Cayman, British West Indies, would offer U.S. dollar
deposits for the applicable interest period to other major banks
in the offshore dollar inter-bank market.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in the Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The percentage
will be expressed as a decimal, and will include, but not be
limited to, marginal, emergency, supplemental, special, and other
reserve percentages.
(d) The Borrower may not elect an Offshore Rate with respect to any portion
of the principal balance of the line of credit which is scheduled to be
repaid before the last day of the applicable interest period.
(e) Any portion of the principal balance of the line of credit already
bearing interest at the Offshore Rate will not be converted to a
different rate during its interest period.
(f) Each prepayment of an Offshore Rate portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the amount
of accrued interest on the amount prepaid, and a prepayment fee equal
to the amount (if any) by which
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AMENDED AND RESTATED -6-
BUSINESS LOAN AGREEMENT
<PAGE>
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the
interest period, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the offshore dollar
market for a period starting on the date on which it was prepaid
and ending on the last day of the interest period for such
portion.
(g) The Bank will have no obligation to accept an election for an Offshore
Rate portion if any of the following described events has occurred and
is continuing:
(i) Dollar deposits in the principal amount, and for periods equal to
the interest period, of an Offshore Rate portion are not available
in the offshore Dollar inter-bank market; or
(ii) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
2.9 LETTERS OF CREDIT. This line of credit may be used for financing:
(i) a standby letter of credit with a maximum maturity of March 31,
2001 provided however that the maturity date may be automatically
extended each year for an additional year unless the Bank gives
written notice to the contrary.
(ii) the amount of the outstanding letter of credit, including amounts
drawn on the letter of credit and not yet reimbursed, may not
exceed at any one time Four Hundred Thousand Dollars ($400,000).
The Borrower agrees:
(a) so long as credit remains available from the Bank under the line of
credit, any sum drawn under the letter of credit may, at the option of
the Bank, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described
elsewhere in this Agreement.
(b) if there is a default under this Agreement, to immediately prepay and
make the Bank whole for any outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a letter of
credit is subject to the Bank's written approval and must be in form
and content satisfactory to the Bank and in favor of a beneficiary
acceptable to the Bank.
(d) to sign the Bank's form Application and Agreement for Standby Letter of
Credit.
(e) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of credit
for the Borrower.
(f) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
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AMENDED AND RESTATED -7-
BUSINESS LOAN AGREEMENT
<PAGE>
3. FEES AND EXPENSES
3.1 FEES.
(a) FACILITY NO. 1 LOAN FEE. The Borrower agrees to pay a Five Thousand
Dollar ($5,000) fee due upon date of execution of this Agreement. This
fee is non-refundable, and is fully-earned and due and payable in full
at closing.
(b) UNUSED COMMITMENT FEE. The Borrower agrees to pay an unused commitment
fee of 0.25% per annum on the daily amount by which the total
commitment ($20,000,000) exceeds the amount outstanding under Facility
No. 1, with such fee to be collected quarterly in arrears beginning
June 30, 1999.
3.2 EXPENSES. The Borrower agrees to reimburse the Bank for any expenses it
incurs in the preparation of this Agreement and any agreement or instrument
required by this Agreement. Expenses include, but are not limited to, reasonable
attorneys' fees, including any allocated costs of the Bank's in-house counsel.
4. COLLATERAL
4.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrower. In addition, all personal property
collateral securing this Agreement shall also secure all other present and
future obligations of the Borrower to the Bank (excluding any consumer credit
covered by the Federal Truth in Lending law, unless the Borrower has otherwise
agreed in writing). All personal property collateral securing any other present
or future obligations of the Borrower to the Bank shall also secure this
Agreement.
(a) Machinery, and equipment.
(b) Inventory.
(c) Receivables.
(d) Patents, trademarks and other general intangibles.
4.2 REAL PROPERTY. Bank hereby agrees to release the two deeds of trust it
currently holds as collateral; however, in exchange, Borrower hereby agrees not
to create, assume or allow any security interest or lien in favor of a third
party against any real property the Borrower now owns or acquires later without
Bank's prior written consent.
5. DISBURSEMENTS, PAYMENTS AND COSTS
5.1 REQUESTS FOR CREDIT. Each request for an extension of credit will be
made in writing in a manner acceptable to the Bank or by another means
acceptable to the Bank
5.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each
payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from
time to time;
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AMENDED AND RESTATED -8-
BUSINESS LOAN AGREEMENT
<PAGE>
(b) made for the account of the Bank's branch selected by the Bank from
time to time;
(c) made in immediately available funds, or such other type of funds
selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrower to sign one or more promissory
notes.
5.3 TELEPHONE AUTHORIZATION.
(a) The Bank may honor telephone instructions for advances or repayments or
for the designation of optional interest rates given by the individual
signer(s) of this Agreement or a person or persons authorized by the
signer(s) of this Agreement.
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number 28013 00537, or such other accounts with the
Bank as designated in writing by the Borrower.
(c) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) for, from and against all liability, loss, and
costs in connection with any act resulting from telephone instructions
it reasonably believes are made by a signer of this Agreement or a
person authorized by a signer. This indemnity and excuse will survive
this Agreement's termination.
5.4 DIRECT DEBIT (PRE-BILLING)
(a) The Borrower agrees that the Bank will debit the Borrower's deposit
account number 28013 00537 (the "Designated Account") on the date each
payment of principal and interest and any fees from the Borrower
becomes due (the "Due Date"). If the Due Date is not a banking day, the
Designated Account will be debited on the next banking day.
(b) Approximately 5 days prior to each Due Date, the Bank will mail to the
Borrower a statement of the amounts that will be due on that Due Date
(the "Billed Amount"). The calculation will be made on the assumption
that no new extensions of credit or payments will be made between the
date of the billing statement and the Due Date, and that there will be
no changes in the applicable interest rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount of principal due and interest accrued
(collectively. the "Accrued Amount". If the Billed Amount debited to
the Designated Account differs from the Accrued Amount, the discrepancy
will be treated as follows:
(i) If the Billed Amount is less than the Accrued Amount, the Billed
Amount for the following Due Date will be increased by the amount
of the discrepancy. The Borrower will not be in default by reason
of any such discrepancy.
(ii) If the Billed Amount is more than the Accrued Amount, the Billed
Amount for the following Due Date will be decreased by the amount
of the discrepancy. Regardless of any such discrepancy, interest
will continue to accrue based on the actual amount of principal
outstanding without compounding. The Bank will not pay the
Borrower interest on any overpayment.
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AMENDED AND RESTATED -9-
BUSINESS LOAN AGREEMENT
<PAGE>
(d) The Borrower will maintain sufficient funds in the Designated Account
to cover each debit. If there are insufficient funds in the Designated
Account on the date the Bank enters any debit authorized by this
Agreement, the debit will be reversed.
5.5 BANKING DAYS. Unless otherwise provided in this Agreement, a banking
day is a day other than a Saturday or a Sunday on which the Bank is open for
business in Oregon and banks are open for business in California. For amounts
bearing interest at an offshore rate (if any), a banking day is a day other than
a Saturday or a Sunday on which the Bank is open for business in Oregon and the
Bank is dealing in offshore dollars. All payments and disbursements which would
be due on a day which is not a banking day will be due on the next banking day.
All payments received on a day which is not a banking day will be applied to the
credit on the next banking day.
5.6 TAXES. The Borrower will not deduct any taxes from any payments it
makes to the Bank. If any government authority imposes any taxes or charges on
any payments made by the Borrower, the Borrower will pay the taxes or charges.
Upon request by the Bank, the Borrower will confirm that it has paid the taxes
by giving the Bank official tax receipts (or notarized copies) within 30 days
after the due date. However, the Borrower will not pay the Bank's net income
taxes.
5.7 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used.
5.8 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance,
any amount not paid when due under this Agreement (including interest) shall
bear interest from the due date at the Reference Rate. This may result in
compounding of interest.
5.9 DEFAULT RATE. Upon the occurrence and during the continuation of any
default under this Agreement, advances under this Agreement will at the option
of the Bank bear interest at a rate per annum which is 2.0 percentage points
higher than the rate of interest otherwise provided under this Agreement. This
will not constitute a waiver of any event of default.
6. CONDITIONS
The Bank must receive the following items, in form and content acceptable to the
Bank, before it is required to extend any credit to the Borrower under this
Agreement:
6.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance
by the Borrower of this Agreement and any instrument or agreement required under
this Agreement have been duly authorized.
6.2 SECURITY AGREEMENTS. Signed original security agreements, financing
statements and fixture filings together with collateral in which the Bank
requires a possessory security interest.
6.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in
favor of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing.
6.4 INSURANCE. Evidence of insurance coverage, as required in the
"Covenants" section of this Agreement.
6.5 SUBORDINATION AGREEMENTS. Subordination agreements in favor of the Bank
signed by Dresdner Kleinwort Benson Private Equity Partners LP.
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AMENDED AND RESTATED -10-
BUSINESS LOAN AGREEMENT
<PAGE>
6.6 ADDITIONAL EQUITY FUNDING. Evidence that an offering of two new series
of preferred stock has closed, resulting in disbursement of not less than
$32,000,000 in new equity funding to Borrower.
6.7 OTHER ITEMS. Any other items that the Bank reasonably requires.
7. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewed representation:
7.1 ORGANIZATION OF BORROWER. The Borrower is a corporation duly formed and
existing under the laws of the state where organized.
7.2 AUTHORIZATION. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers.
7.3 ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.
7.4 GOOD STANDING. In each state in which the Borrower does business, it is
properly licensed, in existence and in good standing, and, where required, in
compliance with fictitious name statutes.
7.5 NO CONFLICTS. This Agreement does not conflict with any law, agreement,
or obligation by which the Borrower is bound.
7.6 FINANCIAL INFORMATION. All financial and other information that has
been or will be supplied to the Bank is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's financial condition.
(b) in form and content required by the Bank
(c) in compliance with all government regulations that apply.
7.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.
7.8 COLLATERAL. All collateral required in this Agreement is owned by the
grantor of the security interest free of any title defects or any liens or
interests of others.
7.9 PERMITS, FRANCHISES. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged without conflict with the rights
of others.
- --------------------------------------------------------------------------------
AMENDED AND RESTATED -11-
BUSINESS LOAN AGREEMENT
<PAGE>
7.10 OTHER OBLIGATIONS. The Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
7.11 INCOME TAX RETURNS. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year, except as have been
disclosed in writing to the Bank.
7.12 NO EVENT OF DEFAULT. There is no event which is a default under this
Agreement.
7.13 YEAR 2000 COMPLIANCE. The Borrower has conducted a comprehensive review
and assessment of the Borrower's computer applications and made inquiry of the
Borrower's key suppliers, vendors and customers with respect to the "year 2000
problem" (that is, the risk that computer applications may not be able to
properly perform date-sensitive functions after December 31, 1999) and, based on
that review and inquiry, the Borrower does not believe the year 2000 problem
will result in a material adverse change in the Borrower's business condition
(financial or otherwise), operations, properties or prospects, or ability to
repay the credit.
8. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
8.1 USE OF PROCEEDS. To use the proceeds of the credit only for general
operating needs.
8.2 FINANCIAL INFORMATION. To provide the following financial information
and statements and such additional information as requested by the Bank from
time to time:
(a) Within 120 days of the Borrower's fiscal year end, the Borrower's
annual financial statements. These financial statements must be audited
by a Certified Public Accountant ("CPA") acceptable to the Bank,
accompanied by Borrower's certificate of compliance in form and content
satisfactory to the Bank
(b) Within 30 days after the period's end, the Borrower's monthly financial
statement.
(c) Within 45 days after the period's end, the Borrower's quarterly 10Q
statement, accompanied by Borrower's certificate of compliance in form
and content satisfactory to the Bank.
(d) Statements showing an aging of the Borrower's receivables within 20
days after the end of each month.
(e) A statement showing an aging of accounts payable within 20 days after
the end of each month.
(f) If the Bank requires the Borrower to deliver the proceeds of accounts
receivable to the Bank upon collection by the Borrower, a schedule of
the amounts so collected and delivered to the Bank.
(g) An inventory listing within 20 days after the end of each month; the
listing must include a description of the inventory, its location and
cost, and such other information as the Bank may require.
(h) Within 90 days after Borrower's fiscal year end, a financial forecast
for the succeeding fiscal year.
- --------------------------------------------------------------------------------
AMENDED AND RESTATED -12-
BUSINESS LOAN AGREEMENT
<PAGE>
8.3 CURRENT RATIO. To maintain a ratio of current assets to current
liabilities of at least 1.50:1.0, measured monthly. Non-compliance with this
covenant for the months ending January 31, 1999, February 28, 1999, and March
31, 1999, and the defaults caused thereby are hereby waived by Bank. Borrower
shall comply with this covenant in all future periods.
8.4 PROFITABILITY. To incur an operating loss of not more than $5,000,000
for the fiscal year ending December 31, 1999. For purposes of this covenant,
"net operating loss" means net operating loss as calculated in accordance with
generally accepted accounting principles.
8.5 MINIMUM FIXED CHARGE COVERAGE RATIO. To maintain minimum fixed charge
coverage ratio of at least 1.25:1 measured on a rolling four quarter basis,
beginning December 31, 2000.
"Minimum fixed charge coverage ratio" is defined as (earnings before interest
taxes depreciation and amortization plus lease expense minus unfinanced capital
expenditures minus dividends paid) divided by (lease expense plus interest plus
current portion long term debt). Current portion long term debt is measured as
of the last day of the period measured. Lease expense defined as payments made
under any operating lease, facility lease, or off balance sheet loan.
"Unfinanced capital expenditures" are all capital expenditures that are not
financed through capital leases, new term debt or new equity.
8.6 OTHER DEBTS. Not to have outstanding or incur any direct or contingent
debts (other than those to the Bank and its affiliates), or become liable for
the debts of others without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts and lines of credit and capital leases in existence on the date
of this Agreement disclosed in writing to the Bank
(e) Capital leases, direct or indirect guarantees, indemnities or
suretyships of any nature, and other miscellaneous types of
indebtedness incurred in the ordinary course of business in an
aggregate amount not to exceed Four Million Dollars ($4,000,000) at any
time.
(f) Indebtedness for borrowed money in an aggregate amount not greater than
Four Million Dollars ($4,000,000) at any time, the proceeds of which
are used exclusively for the purchase of assets in which the holder of
the indebtedness is granted a purchase money security interest.
(g) Incurring new operating or off-balance sheet lease obligations in an
aggregate amount for any fiscal year period not to exceed Ten Million
Dollars ($10,000,000).
8.7 OTHER LIENS. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank and its
affiliates.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing to
the Bank.
- --------------------------------------------------------------------------------
AMENDED AND RESTATED -13-
BUSINESS LOAN AGREEMENT
<PAGE>
(d) Additional purchase money security interests in personal property
acquired after the date of this Agreement.
(e) Security interests or liens subordinate to the interest of the Bank in
form satisfactory to Bank.
(f) Pledges or deposits made in the ordinary course of business to secure
payment of workers compensation, or to participate in any fund in
connection with workers compensation, unemployment insurance, old-age
pensions, or other social security programs.
(g) Liens of mechanics, materialmen, warehousemen, carriers, or other like
liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable.
(h) Good faith pledges or deposits made in the ordinary course of business
to secure performance of bids, tenders, contracts (other than for the
repayment of borrowed money), or leases, not in excess of ten percent
of the aggregate amount due thereunder, or to secure statutory
obligations, or surety appeal, indemnity, performance, or other similar
bonds required in the ordinary course of business.
(i) The following, if the validity or amount thereof is being contested in
good faith by appropriate and lawful proceedings, so long as levy and
execution thereon have been stayed and continue to be stayed and they
do not, in the aggregate, materially detract from the value of the
property of the Borrower, or materially impair the use thereof in the
operation of its business: (a) claims or liens for taxes, assessments,
or similar charges incurred in the ordinary course of business; (b)
claims, liens, and encumbrances upon, and defects of title to,
property, including any attachment of property or other legal process
prior to adjudication of a dispute on the merits; (c) claims or liens
of mechanics, materialmen, warehousemen, carriers, or other like liens;
and (d) adverse judgments on appeal.
8.8 CAPITAL EXPENDITURES. Capital expenditures not funded by operating
leases or off-balance sheet loans shall not exceed Four Million Dollars
($4,000,000) during any fiscal year.
8.9 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over One Hundred Thousand Dollars ($100,000) against the
Borrower.
(b) any substantial dispute between the Borrower and any government
authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's financial condition or
operations.
(e) any change in the Borrower's name, address or legal structure.
8.10 BOOKS AND RECORDS. To maintain adequate books and records.
8.11 AUDITS. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.
- --------------------------------------------------------------------------------
AMENDED AND RESTATED -14-
BUSINESS LOAN AGREEMENT
<PAGE>
8.12 COMPLIANCE WITH LAWS. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with authority
over the Borrower's business.
8.13 PRESERVATION OF RIGHTS. To maintain and preserve all rights,
privileges, and franchises the Borrower now has.
8.14 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or
replacements to keep the Borrower's properties in good working condition.
8.15 PERFECTION OF LIENS To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
8.16 COOPERATION. To take any action requested by the Bank to carry out the
intent of this Agreement.
8.17 INSURANCE.
(a) Insurance Covering Collateral. To maintain all risk property damage
insurance policies covering the tangible property comprising the
collateral. Each insurance policy must be in an amount acceptable to
the Bank. The insurance must be issued by an insurance company
acceptable to the Bank and must include a lender's loss payable
endorsement in favor of the Bank in a form acceptable to the Bank
(b) General Business Insurance. To maintain insurance as is usual for the
business it is in. To maintain insurance satisfactory to the Bank as to
amount, nature and carrier covering property damage (including loss of
use and occupancy) to any of the Borrower's properties, public
liability insurance including coverage for contractual liability,
product liability and workers' compensation, and any other insurance
which is usual for the Borrower's business.
(c) Evidence of Insurance. Upon the request of the Bank, to deliver to the
Bank a copy of each insurance policy, or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
8.18 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written
consent:
(a) engage in any business activities substantially different from the
Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) lease, or dispose of all or a substantial part of the Borrower's
business or the Borrower's assets except in the ordinary course of the
Borrower's business.
(d) sell or otherwise dispose of any assets for less than fair market
value, or enter into any sale and leaseback agreement covering any of
its fixed or capital assets.
9. HAZARDOUS WASTE
The Borrower will indemnify and hold harmless the Bank for, from, and against
any loss or liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrower's property or
operations or property leased to the Borrower. The indemnity includes but is not
limited to attorneys' fees (including the reasonable estimate of the allocated
- --------------------------------------------------------------------------------
AMENDED AND RESTATED -15-
BUSINESS LOAN AGREEMENT
<PAGE>
cost of in-house counsel and staff). The indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys and assigns. For these purposes, the term "hazardous
substances" means any substance which is or becomes designated as "hazardous" or
"toxic" under any federal, state or local law, or any petroleum products,
including crude oil and any product derived directly or indirectly from, or any
fraction or distillate of, crude oil. This indemnity will survive repayment of
the Borrower's obligations to the Bank.
10. DEFAULT
If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If a bankruptcy petition is filed with
respect to the Borrower, the entire debt outstanding under this Agreement will
automatically become due immediately.
10.1 FAILURE TO PAY. The Borrower fails to make a payment under this
Agreement when due.
10.2 NON-COMPLIANCE. The Borrower fails to meet the conditions of, or fails
to perform any obligation under:
(a) this Agreement,
(b) any other agreement made in connection with this loan, or
(c) any other agreement the Borrower has with the Bank or any affiliate of
the Bank.
10.3 CROSS-DEFAULT. Any default occurs under any other agreement for
borrowing money or receiving credit under which Borrower may be obligated as
borrower, lessee or guarantor, if such default (I) consists of the failure to
pay any indebtedness when due or (ii) gives the holder of the indebtedness the
right to accelerate the indebtedness.
10.4 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except
for any prior liens to which the Bank has consented in writing) on or security
interest in any property given as security for Borrower's obligations to Bank.
10.5 FALSE INFORMATION. The Borrower has given the Bank false or misleading
information or representations.
10.6 BANKRUPTCY. The Borrower files a bankruptcy petition, a bankruptcy
petition is filed against the Borrower, or the Borrower makes a general
assignment for the benefit of creditors.
10.7 RECEIVERS. A receiver or similar official is appointed for the
Borrower's business, or the business is terminated.
10.8 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower; or the Borrower enters into any settlement agreements with respect to
any litigation or arbitration, in an aggregate amount of Five Hundred Thousand
Dollars ($500,000) or more in excess of any insurance coverage.
10.9 GOVERNMENT ACTION. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's financial condition or
ability to repay.
- --------------------------------------------------------------------------------
AMENDED AND RESTATED -16-
BUSINESS LOAN AGREEMENT
<PAGE>
10.10 MATERIAL ADVERSE CHANGE. A material adverse change occurs in the
Borrower's financial condition properties or prospects, or ability to repay the
loan.
11. NOTICE OF DEFAULT; OPPORTUNITY TO CURE.
Bank shall provide Borrower with three (3) banking days notice and opportunity
to cure any default arising from the failure of Borrower to satisfy an
obligation of payment under this Agreement and with fifteen (15) calendar days
notice and opportunity to cure any other act or omission constituting a default
hereunder. Notwithstanding anything to the contrary stated herein, Borrower
shall not be entitled to a notice and opportunity to cure a default under
Paragraphs 10.5, 10.6, or 10.7.
12. ENFORCING THIS AGREEMENT; MISCELLANEOUS
12.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
12.2 OREGON LAW. This Agreement is governed by Oregon law.
12.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and
the Bank's successors and assignees. The Borrower agrees that it may not assign
this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.
12.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, including but not limited to those
that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for injury to
persons, property or business interests (torts).
(b) At the request of the Borrower or the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United
States Arbitration Act. The United States Arbitration Act will apply
even though this Agreement provides that it is governed by Oregon law.
(c) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its commercial rules of
arbitration.
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent
of the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to decide whether
any such claim or controversy is barred by the statute of limitations
and, if so, to dismiss the arbitration on that basis.
- --------------------------------------------------------------------------------
AMENDED AND RESTATED -17-
BUSINESS LOAN AGREEMENT
<PAGE>
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of the Borrower or the Bank to:
(i) exercise self-help remedies such as setoff,
(ii) foreclose against or sell any real or personal property
collateral; or
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or
(B) additional or supplementary remedies.
(h) The pursuit of or a successful action for provisional, interim,
additional or supplementary remedies, or the filing of a court action,
does not constitute a waiver of the right of the Borrower or the Bank,
including the suing party, to submit the controversy or claim to
arbitration if the other party contests the lawsuit.
(i) If the Bank forecloses against any real property securing this
Agreement, the Bank has the option to exercise the power of sale under
the deed of trust or mortgage, or to proceed by judicial foreclosure.
12.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement must be
in writing.
12.6 COSTS. If the Bank incurs any expenses in connection with enforcing
this Agreement or administering this Agreement (including in connection with
extending, amending, renewing or modifying this Agreement), or if the Bank takes
collection action under this Agreement, it is entitled to costs and reasonable
attorneys' fees, including any allocated costs of in-house counsel.
12.7 ATTORNEYS' FEES. In the event of a lawsuit or arbitration proceeding,
the prevailing party is entitled to recover costs and reasonable attorneys, fees
(including any allocated costs of in-house counsel) incurred in connection with
the lawsuit or arbitration proceeding, as determined by the court or arbitrator
(and not by a jury). Such costs and attorneys' fees shall include, without
limitation, those incurred on any appeal, as determined by the appellate court,
and any anticipated costs and attorneys' fees to pursue or collect any
judgement.
12.8 ONE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively:
- --------------------------------------------------------------------------------
AMENDED AND RESTATED -18-
BUSINESS LOAN AGREEMENT
<PAGE>
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit including, but not limited to, the
Business Loan Agreement dated April 28, 1998; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail
12.9 EXCHANGE OF INFORMATION. The Borrower agrees that the Bank may exchange
financial information about the Borrower with BankAmerica Corporation affiliates
and other related entities.
12.10 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on the
signature page of this Agreement, or to such other addresses as the Bank and the
Borrower may specify from time to time in writing.
12.11 HEADINGS. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
12.13 WRITTEN AGREEMENTS. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY THE BANK AFTER OCTOBER 3. 1989, CONCERNING LOANS AND OTHER
CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL. FAMILY OR HOUSEHOLD PURPOSES OR
SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS
CONSIDERATION AND BE SIGNED BY THE BANK TO BE ENFORCEABLE.
This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA NT & SA GARDENBURGER, INC.
X /s/ Edward R. Kluss X /s/ Richard C. Dietz
------------------------------------ -----------------------------------
By: Edward R. Kluss By: Richard C. Dietz
Title: Vice President Title: Executive V-P & CFO
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE BORROWER
ARE TO BE SENT: ARE TO BE SENT:
Oregon Commercial Banking Office #2089 1411 S.W. Morrison Street
P. O. Box 6400 Ste. 400, Fourth Floor
Portland, Oregon 97228 Portland, Oregon 97205
- --------------------------------------------------------------------------------
AMENDED AND RESTATED -19-
BUSINESS LOAN AGREEMENT
EXHIBIT 10.2
- -------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
GARDENBURGER, INC.
MARCH 29, 1999
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<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Definitions...............................................................1
2. Authorization and Sale of Preferred Stock; Use of Proceeds................4
2.1 Authorization of the Shares......................................4
2.2 Sale of Securities...............................................5
2.3 Use of Proceeds..................................................5
3. Closing Date; Delivery....................................................5
3.1 Closing Date.....................................................5
3.2 Delivery.........................................................5
4. Representations and Warranties of the Company.............................5
4.1 Organization, Corporate Power and Licenses.......................5
4.2 Capital Stock and Related Matters................................5
4.3 Subsidiaries; Investments........................................6
4.4 Authorization; No Breach.........................................6
4.5 Financial Statements.............................................7
4.6 Absence of Undisclosed Liabilities...............................7
4.7 No Material Adverse Change.......................................8
4.8 Absence of Certain Developments..................................8
4.9 Assets...........................................................9
4.10 Tax Matters......................................................9
4.11 Contracts and Commitments.......................................10
4.12 Intellectual Property Rights....................................12
4.13 Litigation, etc.................................................13
4.14 Brokerage.......................................................14
4.15 Consents........................................................14
4.16 Insurance.......................................................14
4.17 Employees.......................................................14
4.18 ERISA...........................................................14
4.19 Compliance with Laws............................................15
4.20 Environmental and Safety Matters................................15
4.21 Affiliated Transactions.........................................17
4.22 Disclosure......................................................17
4.23 Investment Company..............................................17
4.24 Projections.....................................................17
4.25 SEC Filings.....................................................17
5. Representations and Warranties of the Purchasers.........................18
5.1 Authority of Purchasers.........................................18
5.2 Investment Representations......................................18
5.3 Legends.........................................................19
5.4 Removal of Legend and Transfer Restrictions.....................19
5.5 Confidentiality.................................................19
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
6. Pre-closing Covenants....................................................20
6.1 Conduct of Business.............................................20
6.2 Cooperation.....................................................20
6.3 No Solicitation of Transaction..................................20
6.4 Access to the Company...........................................20
6.5 Notification of Breach of Representations,
Warranties and Covenants........................................21
6.6 Changes in Capital Stock........................................21
6.7 Litigation Developments.........................................21
6.8 No Shopping.....................................................21
7. Conditions to Closing....................................................21
7.1 Conditions to Purchasers'Obligations............................21
7.2 Conditions to Obligations of the Company........................23
8. Termination..............................................................24
8.1 Termination.....................................................24
8.2 Effect of Termination...........................................24
9. Miscellaneous............................................................25
9.1 Governing Law...................................................25
9.2 Survival........................................................25
9.3 Successors and Assigns..........................................25
9.4 Entire Agreement; Amendment.....................................25
9.5 Notices.........................................................25
9.6 Expenses........................................................26
9.7 Delays or Omissions.............................................26
9.8 Severability of this Agreement..................................26
9.9 Finder's Fees...................................................26
9.10 Titles and Subtitles............................................27
9.11 Counterparts....................................................27
9.12 Gender..........................................................27
9.13 Public Announcement.............................................27
-ii-
<PAGE>
TABLE OF CONTENTS
EXHIBITS
INITIAL EXHIBIT
------- -------
A Schedule of Purchasers
B Terms of Series A Stock and Series B Stock
C Schedule of Exceptions
D Restated Articles of Incorporation, as amended, of
Gardenburger, Inc. as of March 29, 1999
E Form of Investor Rights Agreement
F Form of Opinion of Company's Counsel
G Indemnification Agreement
-iii-
<PAGE>
GARDENBURGER, INC.
2,762,500 Shares of Series A Convertible Preferred Stock
487,500 Shares of Series B Convertible Preferred Stock
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of the 29th day of March, 1999, by and among Gardenburger, Inc., an Oregon
corporation (the "Company"), and the purchasers identified on Exhibit A hereto
(collectively, the "Purchasers").
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS. For the purposes of this Agreement, the following terms
have the meanings set forth below:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"AFFILIATED GROUP" means any affiliated group as defined in IRC ss.
1504 that has filed a consolidated return for federal income tax purposes (or
any similar group under state, local or foreign law) for a period during which
the Company was a member.
"ANCILLARY AGREEMENTS" means all agreements and certificates provided
for herein, including those items described in Section 7 hereof.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, or any successor
federal statute.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System.
"ENVIRONMENTAL AND SAFETY LAWS" means any and all applicable present
and future federal, state, local and foreign statutes, laws, regulations,
ordinances and similar provisions having the force or effect of law, all
judicial and administrative orders and determinations, all contractual
obligations and common law concerning public health or safety, worker health or
safety or pollution or protection of the environment, including, without
limitation, those relating to any emissions, discharges or Releases of Hazardous
Materials to ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, control, cleanup or handling of Hazardous Materials.
"ENVIRONMENTAL PERMITS" means all material permits, licenses and other
authorizations which are required under Environmental and Safety Laws and
applicable to the conduct of the Company's business.
<PAGE>
"EQUITY SECURITY" of any Person means any capital stock or other
ownership or equity interest or profit participation or similar right with
respect to such Person (including any partnership or membership interest, any
stock appreciation, phantom stock or similar right or plan, and any note or debt
security having or containing equity or profit participation features), or any
option, warrant or other security or right which is directly or indirectly
convertible into or exercisable or exchangeable for any other Equity Security of
such Person.
"HAZARDOUS MATERIAL" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Environmental and Safety Laws as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, "TLCP" toxicity or "EP" toxicity; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; (d) underground storage tanks, whether empty or containing any
substance or surface impoundments; and (e) asbestos in any form or electrical
equipment which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls.
"INDEBTEDNESS" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade payables
and other current liabilities incurred in the ordinary course of business), (iv)
any commitment by which a Person assures a creditor against loss (including,
without limitation, contingent reimbursement obligations with respect to letters
of credit), (v) any indebtedness guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) any indebtedness secured by a Lien on a Person's
assets and (vii) any unsatisfied obligation for "withdrawal liability" to a
"multi-employer plan" as such terms are defined under ERISA (as defined in
Section 4.18 hereof); provided that "Indebtedness" does not include the Shares
or operating leases.
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
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specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
and (vii) copies and tangible embodiments thereof (in whatever form or medium).
"INVESTMENT" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person, in each case other than
investments in money market funds or similar short-term non-equity investments.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified. "IRS" means the United States Internal Revenue Service.
"LATEST BALANCE SHEET" means the unaudited consolidated balance sheet
of the Company as of February 28, 1999.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute other than to reflect ownership by a third party of property leased to
the Company under a lease which is not in the nature of a conditional sale or
title retention agreement, or any subordination arrangement in favor of another
Person (other than any subordination arising in the ordinary course of
business).
"PERMITTED LIENS" means:
(i) tax liens with respect to taxes not yet due and payable or
which are being contested in good faith by appropriate proceedings and
for which appropriate reserves have been established in accordance with
generally accepted accounting principles, consistently applied;
(ii) purchase money security interests in any property
acquired by the Company;
(iii) trust deeds or mortgages on real property acquired by
the Company;
(iv) interests or title of a lessor under any lease;
(v) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction for amounts not yet due
and payable; and
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(vi) easements, rights-of-way, restrictions and other similar
charges and encumbrances on real property not interfering with the
ordinary conduct of the business of the Company or detracting from the
value of the assets of the Company.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended.
"RELEASE" means any "release" as such term is defined in 42 U.S.C. ss.
9601(22), or any successor federal statute or analogous state law.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" means the United States Securities
and Exchange Commission, including any governmental body or agency succeeding to
the functions thereof.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"SHARES" has the meaning set forth in Section 2.2 hereof.
"TAX" or "TAXES" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
2. AUTHORIZATION AND SALE OF PREFERRED STOCK; USE OF PROCEEDS.
2.1 AUTHORIZATION OF THE SHARES. At the Closing (as defined in
Section 3.1), the Company's Restated Articles of Incorporation, as amended (the
"Restated Articles"), will authorize two million seven hundred sixty two
thousand five hundred (2,762,500) shares of Series A Convertible Preferred
Stock, no par value ("Series A Stock"), and four hundred eighty seven thousand
five hundred (487,500) shares of Series B Convertible Preferred Stock, no par
value ("Series B Stock"). The shares of Series A Stock and Series B Stock
(collectively, the "Preferred Stock") will have the rights, privileges and
preferences set forth in Exhibit B attached hereto.
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2.2 SALE OF SECURITIES. Subject to the terms and conditions
hereof, on the Closing Date (as defined in Section 3.1) the Company will issue
and sell to the Purchasers, and the Purchasers severally and not jointly agree
to purchase on a pro rata basis from the Company, an aggregate of two million
seven hundred sixty two thousand five hundred (2,762,500) shares of Series A
Stock and four hundred eighty seven thousand five hundred (487,500) shares of
Series B Stock (collectively, the "Shares"), at a purchase price of Ten Dollars
($10.00) per Share for an aggregate purchase price of Thirty Two Million Five
Hundred Thousand ($32,500,000) in the amounts set forth on Exhibit A. The
obligation of each Purchaser to purchase the respective number of shares
assigned to it on Exhibit A is several and not joint and none of the Purchasers
shall be obligated to purchase any Shares which any other Purchaser fails to
purchase.
2.3 USE OF PROCEEDS. Twenty-Five Million Dollars ($25,000,000)
of the net proceeds from the sale of the Shares shall be used to pursue the
Company's strategic business plan, which includes a national television
advertising campaign, and the balance shall be used as working capital to be
utilized at the discretion of the Company's Board of Directors.
3. CLOSING DATE; DELIVERY.
3.1 CLOSING DATE. The closing of the purchase and sale of the
Shares (the "Closing") shall be held at the offices of Miller, Nash, Wiener,
Hager & Carlsen LLP, 111 S.W. Fifth Avenue, Portland, Oregon 97204-3699, at
12:00 p.m., on April 14, 1999, or at such other time and place to which the
Company and a majority of the Purchasers may agree (the "Closing Date").
3.2 DELIVERY. At the Closing, the Company shall deliver to the
Purchasers certificates representing the Shares against payment of the purchase
price therefor by a cashier's check or by wire transfer to the bank account of
the Company. The Closing is subject to the conditions set forth in Section 7 of
this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchasers as of the date hereof and as of the
Closing Date that:
4.1 ORGANIZATION, CORPORATE POWER AND LICENSES. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of Oregon and is qualified to do business in every jurisdiction in which
its ownership of property or conduct of business requires it to qualify. The
Company possesses all requisite corporate power and authority and all material
licenses, permits and authorizations necessary to own and operate its
properties, to carry on its business as now conducted and presently proposed to
be conducted and to carry out the transactions contemplated by this Agreement.
The copies of the Company's charter documents (a copy of which is attached
hereto as Exhibit D) and bylaws which have been furnished to the Purchasers
reflect all amendments made thereto at any time prior to the date of this
Agreement and are correct and complete.
4.2 CAPITAL STOCK AND RELATED MATTERS. Except as set forth in
the Schedule of Exceptions:
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(i) On the date hereof, the authorized capital stock
of the Company consists of (a) 25,000,000 shares of Common Stock, no
par value ("Common Stock"), of which 8,787,271 shares are issued and
outstanding, 4,062,500 shares are reserved for issuance upon conversion
of the Shares, 3,370,123 shares are reserved for issuance in connection
with the Company's stock option plans (which includes options to
purchase 270,000 shares granted to members of the senior management
team of the Company identified on the Schedule of Exceptions attached
hereto as Exhibit C and delivered to the Purchasers prior to the
execution of this Agreement ("Schedule of Exceptions")) of which
options for 3,189,667 shares are outstanding as of the date of this
Agreement, and options to purchase 180,456 remain available for
issuance and 1,162,790 shares are reserved for issuance in connection
with the conversion of the 7% Convertible Senior Subordinated Notes
dated March 27, 1998 (the "Notes") in the aggregate principal amount of
Fifteen Million Dollars ($15,000,000) and interest payments due on the
Notes. As of the Closing and immediately thereafter, the authorized
capital stock shall include 2,762,500 shares of Series A Stock and
487,500 shares of Series B Stock, which will be issued and outstanding.
As of the Closing, the Company shall not be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any of its Equity Securities, except as set forth on the Schedule of
Exceptions and except pursuant to this Agreement. As of the Closing,
the Company shall not have outstanding any Equity Securities, except as
set forth above or on the Schedule of Exceptions. As of the Closing,
all of the outstanding shares of the Company's capital stock shall be
validly issued, fully paid and nonassessable.
(ii) There are no statutory or contractual
shareholders preemptive rights or rights of refusal with respect to the
issuance of the Shares hereunder or the issuance of the Common Stock
upon conversion of the Shares. The Company has not violated any
applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer,
sale and issuance of the Shares hereunder do not require registration
under the Securities Act or any applicable state securities laws. To
the best of the Company's knowledge, there are no agreements between
the Company's shareholders with respect to the voting or transfer of
the Company's capital stock or with respect to any other aspect of the
Company's affairs, except as set forth in the Schedule of Exceptions or
this Agreement.
4.3 SUBSIDIARIES; INVESTMENTS. The Company has no
subsidiaries. The Company does not own or hold any Equity Security or the right
to acquire any Equity Security or other Investment in any other Person.
4.4 AUTHORIZATION; NO BREACH. Except as set forth in the
Schedule of Exceptions, the execution, delivery and performance by the Company
of this Agreement has been duly authorized by the Company and the execution,
delivery and performance by the Company of the Ancillary Agreements will at the
Closing be duly authorized by the Company. This Agreement constitutes and the
Ancillary Agreements to which the Company will be a party, upon issuance or
execution by the Company, each will constitute (assuming due execution by the
other party or parties thereto), a valid and binding obligation of the Company,
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enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy laws or other similar laws affecting creditors' rights
generally, and except insofar as the availability of equitable remedies may be
limited by applicable law from time to time. The execution and delivery by the
Company of this Agreement and the Ancillary Agreements to which the Company is a
party, the offering, sale and issuance of the Shares hereunder, the issuance of
the Common Stock upon conversion of the Shares and the fulfillment of and
compliance with the respective terms hereof and thereof by the Company, assuming
receipt of all consents listed on the Schedule of Exceptions, do not and will
not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in the creation of
any Lien upon the Company's capital stock or assets pursuant to, (iv) give any
third party the right to modify, terminate or accelerate any obligation under,
(v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency pursuant to,
the charter or bylaws of the Company, or any law, statute, rule or regulation to
which the Company is subject, or any agreement, instrument, order, judgment or
decree to which the Company is subject.
4.5 FINANCIAL STATEMENTS. Set forth on the Schedule of
Exceptions are the following financial statements:
(i) the audited consolidated balance sheets of the
Company as of December 31, 1996 and December 31, 1997 and the related
statements of income and cash flows (or the equivalent) for the fiscal
years then ended, respectively, and the draft balance sheet dated
December 31, 1998, and the related draft statements of income and cash
flows (or the equivalent) for the fiscal year then ended (including the
notes thereto); and
(ii) the Latest Balance Sheet, and the related
statement of income (or the equivalent) for the two-month period then
ended.
Each of the foregoing financial statements (including
in all cases the notes thereto, if any) is accurate and complete in all
material respects, is consistent with the books and records of the
Company (which, in turn, are accurate and complete in all material
respects) and has been prepared in accordance with generally accepted
accounting principles, consistently applied, subject in the case of the
unaudited financial statements to the absence of footnote disclosure
and changes resulting from normal year-end adjustments (none of which
would, alone or in the aggregate, be materially adverse to the
financial condition, operating results, assets or operations of the
Company).
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
the Schedule of Exceptions, the Company does not have and will not have as of
the Closing any obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known to the Company, whether due or
to become due and regardless of when asserted) arising out of transactions
entered into at or prior to the date of this Agreement, or any action or
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inaction at or prior to the date of this Agreement, or any state of facts
existing at or prior to the date of this Agreement other than: (i) liabilities
and obligations which have arisen after the date of the Latest Balance Sheet in
the ordinary course of business (none of which is a liability resulting from
breach of contract, breach of warranty, tort, infringement, claim or lawsuit),
(ii) other liabilities and obligations expressly disclosed in the Schedule of
Exceptions to this Agreement and (iii) liabilities which individually or in the
aggregate do not and could not reasonably be expected to have a material adverse
effect on the business, assets, operations, or financial condition of the
Company.
4.7 NO MATERIAL ADVERSE CHANGE. Except as set forth in the
Schedule of Exceptions, since December 31, 1998, there has been no material
adverse change in the financial condition, operating results, assets,
operations, business prospects, or employee, governmental, customer, provider or
supplier relations of the Company.
4.8 ABSENCE OF CERTAIN DEVELOPMENTS.
(i) Except as expressly contemplated by this
Agreement or as set forth in the attached Schedule of Exceptions, since
December 31, 1998, the Company has not:
(a) issued any notes, bonds or other debt
securities or any capital stock or other Equity Securities;
(b) borrowed any amount or incurred or
become subject to any Indebtedness or other liabilities,
except current liabilities incurred in the ordinary course of
business and liabilities under contracts entered into in the
ordinary course of business;
(c) discharged or satisfied any Lien or paid
any obligation or liability, other than current liabilities
paid in the ordinary course of business;
(d) declared or made any payment or
distribution of cash or other property to its shareholders
with respect to its capital stock or other Equity Securities
or purchased or redeemed any shares of its capital stock or
other Equity Securities;
(e) mortgaged or pledged any of its
properties or assets or subjected them to any Lien, except
Permitted Liens;
(f) sold, assigned or transferred any of its
tangible assets, except inventory or obsolete or replaced
equipment disposed of in the ordinary course of business, or
canceled any debts or claims;
(g) sold, assigned or transferred any
Intellectual Property Rights, or disclosed any proprietary
confidential information to any Person (other than the
Purchasers or any representative thereof);
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(h) suffered any extraordinary losses or
waived any material rights of value, whether or not in the
ordinary course of business or consistent with past practice;
(i) made capital expenditures or commitments
therefor that aggregate in excess of $500,000;
(j) made any loans or advances to,
guarantees for the benefit of, or any Investments in, any
Persons in excess of $100,000 in the aggregate;
(k) made any charitable contributions or
pledges in excess of $10,000 in the aggregate;
(l) suffered any damage, destruction or
casualty loss exceeding in the aggregate $100,000 whether or
not covered by insurance;
(m) made any Investment in or taken steps to
incorporate any Person;
(n) entered into any other material
transaction whether or not in the ordinary course of business;
or
(o) committed or agreed to do any of the
foregoing.
(ii) The Company has not at any time made any bribes,
kickback payments or other illegal payments.
4.9 ASSETS. Except as set forth in the Schedule of Exceptions,
the Company has good and marketable title to, or a valid leasehold interest in,
the properties and tangible assets used in and material to its business, free
and clear of all Liens, except for inventory and obsolete or replaced equipment
disposed of in the ordinary course of business since the date of the Latest
Balance Sheet and except for Liens disclosed in the Financial Statements
included in the Schedule of Exceptions (including any notes thereto) or
otherwise set forth in the Schedule of Exceptions and except for Permitted
Liens. Except as described in the Schedule of Exceptions, the Company's
buildings, equipment and other tangible assets used in and material to its
business are in good operating condition in all material respects (ordinary wear
and tear excepted) and are fit for use in the ordinary course of business. The
Company owns, or has a valid leasehold interest in, all tangible assets
necessary for the conduct of its business as presently conducted and as
presently proposed to be conducted.
4.10 TAX MATTERS. Except as set forth in the Schedule of
Exceptions:
(i) The Company, and each Affiliated Group have filed
all Tax Returns which they are required to file under applicable laws
and regulations; all such Tax Returns are complete and correct in all
material respects and have been prepared in compliance with all
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applicable laws and regulations in all material respects; the Company
and each Affiliated Group in all material respects have paid all Taxes
due and owing by them (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the
appropriate taxing authority all Taxes which they are required to
withhold from amounts paid or owing to any employee, stockholder,
creditor or other third party; neither the Company nor any Affiliated
Group has waived any statute of limitations with respect to any
material Taxes or agreed to any extension of time with respect to any
material Tax assessment or deficiency; the accrual for Taxes on the
Latest Balance Sheet would be adequate to pay all Tax liabilities of
the Company if its current tax year were treated as ending on the date
of the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income);
since the date of the Latest Balance Sheet, the Company has not
incurred any liability for Taxes other than in the ordinary course of
business; the assessment of any additional Taxes for periods for which
Tax Returns have been filed by the Company and each Affiliated Group
shall not exceed the recorded liability therefor on the Latest Balance
Sheet (excluding any amount recorded which is attributable solely to
timing differences between book and Tax income); no foreign, federal,
state or local tax audits or administrative or judicial proceedings are
pending or being conducted with respect to the Company or any
Affiliated Group, no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and
no written notice indicating an intent to open an audit or other review
has been received by the Company from any foreign, federal, state or
local taxing authority; and there are no material unresolved questions
or claims concerning the Company's or any Affiliated Group Tax
liability.
(ii) The Company has not made an election under IRC
ss. 341(f). The Company is not liable for the Taxes of another Person
in a material amount under (a) Treas. Reg. ss. 1.1502-6 (or comparable
provisions of state, local or foreign law), (b) as a transferee or
successor, (c) by contract or indemnity or (d) otherwise. The Company
is not a party to any tax sharing agreement. The Company and each
Affiliated Group have disclosed on their federal income Tax Returns any
position taken for which substantial authority (within the meaning of
IRC ss. 6662(d)(2)(B)(i)) did not exist at the time the return was
filed. Except as set forth on the attached Schedule of Exceptions, the
Company has not made any payments, is not obligated to make payments or
is not a party to an agreement that could obligate it to make any
payments that would not be deductible under IRC ss. 280G.
(iii) The Company is not a "United States real
property holding corporation", as defined in IRC ss. 897 and in
applicable regulations thereunder.
4.11 CONTRACTS AND COMMITMENTS.
(i) Except for this Agreement and the Ancillary
Agreements or as set forth on the attached Schedule of Exceptions, the
Company is not a party to or bound by any written or oral:
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(a) pension, profit sharing, stock option,
employee stock purchase or other plan or arrangement providing
for deferred or other compensation to employees or any other
employee benefit plan or arrangement, or any collective
bargaining agreement or any other contract with any labor
union, or any severance agreement, program, policy or
arrangement;
(b) contract for the employment of any
officer, individual employee or other Person on a full-time,
part-time, consulting or other basis providing annual
compensation in excess of $50,000 or contract relating to
loans to officers, directors or Affiliates;
(c) contract under which the Company has
advanced or loaned any other Person amounts in the aggregate
exceeding $50,000 or made any other Investment in any other
Person;
(d) agreement or indenture relating to
Indebtedness or the mortgaging, pledging or otherwise placing
a Lien on any material asset or material group of assets of
the Company;
(e) guarantee of any obligation for an
amount individually or in the aggregate in excess of $50,000;
(f) lease or agreement under which the
Company is lessee of or holds or operates any property, real
or personal, owned by any other party, except for any lease of
real or personal property under which the aggregate annual
rental payments do not exceed $100,000;
(g) lease or agreement under which the
Company is lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by
the Company;
(h) contract or group of related contracts
with the same party or group of affiliated parties the
performance of which involves consideration in excess of
$100,000, provided that sales invoices are not required to be
listed;
(i) assignment, license, indemnification or
agreement with respect to any intangible property material to
the operation of the Company's business (including, without
limitation, any Intellectual Property Right);
(j) agreement with any federal, state or
local government or subdivision, agency or authority thereof;
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(k) agreement under which it has granted any
Person any registration rights (including, without limitation,
demand and piggyback registration rights);
(l) sales, distribution or franchise
agreement, or other agreements material to the operation of
the Company's business with a term of more than six months
which is not terminable by the Company upon less than 90 days
notice without penalty;
(m) contract or agreement prohibiting it
from freely engaging in any business or competing anywhere in
the world; or
(n) any other agreement which is material to
its operations and business prospects or involves a
consideration in excess of $100,000 annually.
(ii) All of the contracts, agreements and instruments
set forth or required to be set forth on the Schedule of Exceptions are
valid, binding and enforceable in accordance with their respective
terms. The Company has performed all material obligations required to
be performed by it and is not in default under or in breach of nor in
receipt of any claim of default or breach under any contract, agreement
or instrument to which the Company is subject; no event has occurred
which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by the Company
under any contract, agreement or instrument to which the Company is
subject; the Company has no present expectation or intention of not
fully performing all such obligations; the Company has no knowledge of
any breach or anticipated breach by the other parties to any contract,
agreement, instrument or commitment to which it is a party; and the
Company is not a party to any materially adverse contract or
commitment.
(iii) Upon request, the Company will supply promptly
to the Purchasers a true and correct copy of any of the written
instruments, plans, contracts and agreements and an accurate
description of any of the oral arrangements, contracts and agreements
which are referred to on the Schedule of Exceptions, together with all
amendments, waivers or other changes thereto; provided that neither a
list of nor copies of individual option agreements under the Company's
stock option plans will be required to be supplied to the Purchasers.
4.12 INTELLECTUAL PROPERTY RIGHTS.
(i) The attached Schedule of Exceptions contains a
complete and accurate list of all (a) registered Intellectual Property
Rights owned or used by the Company, (b) pending applications for
registrations of Intellectual Property Rights filed by the Company, (c)
material unregistered trade names and corporate names owned or used by
the Company and (d) material unregistered trademarks, service marks,
copyrights, mask works and computer software owned or used by the
Company. The Schedule of Exceptions also contains a complete and
accurate list of all licenses and other rights granted by the Company
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to any third party with respect to any Intellectual Property Rights and
all licenses and other rights granted by any third party to the Company
with respect to any Intellectual Property Rights, in each case
identifying the subject Intellectual Property Rights. The Company owns
all right, title and interest to, or has the right to use pursuant to a
valid license, all Intellectual Property Rights necessary for the
operation of the businesses of the Company as presently conducted and
as presently proposed to be conducted, free and clear of all Liens. No
loss or expiration of any Intellectual Property Right or related group
of Intellectual Property Rights owned or used by the Company or any
which would reasonably be expected to have a material adverse effect on
the conduct of the Company's business is, to the best of the Company's
knowledge, threatened, pending or reasonably foreseeable. The Company
has taken all reasonably necessary actions to maintain and protect the
Intellectual Property Rights which it owns. To the best of the
Company's knowledge, the owners of any Intellectual Property Rights
licensed to the Company have taken all reasonably necessary actions to
maintain and protect the Intellectual Property Rights which are subject
to such licenses.
(ii) Except as set forth in the Schedule of
Exceptions, (a) the Company owns all right, title and interest in and
to all of the Intellectual Property Rights listed on such schedule,
free and clear of all Liens, (b) there have been no claims made against
the Company asserting the invalidity, misuse or unenforceability of any
of such Intellectual Property Rights, and, to the best of the Company's
knowledge, there are no grounds for the same, (c) the Company has not
received any notices of, or is aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or conflict
with, any third party with respect to such Intellectual Property Rights
(including, without limitation, any demand or request that the Company
license any rights from a third party), (d) the conduct of the
Company's business has not infringed, misappropriated or conflicted
with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, nor would any future
conduct as presently contemplated infringe, misappropriate or conflict
with any Intellectual Property Rights of other Persons, and (e) to the
best of the Company's knowledge, the Intellectual Property Rights owned
by or licensed to the Company has not been infringed or misappropriated
by other Persons. The transactions contemplated by this Agreement shall
not have a material adverse effect on the Company's right, title and
interest in and to the Intellectual Property Rights listed on the
Schedule of Exceptions.
4.13 LITIGATION, ETC. Except as set forth in the Schedule of
Exceptions, there are no actions, suits, proceedings, orders, investigations or
claims pending or, to the best of the Company's knowledge, threatened against or
affecting the Company (or to the best of the Company's knowledge, pending or
threatened against or affecting any of the officers, directors or employees of
the Company with respect to its business or proposed business activities), or
pending or threatened by the Company against any third party, at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation, any actions, suits,
proceedings or investigations with respect to the transactions contemplated by
this Agreement); the Company is not subject to any arbitration proceedings under
collective bargaining agreements or otherwise or, to the best of the Company's
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knowledge, any governmental investigations or inquiries (including, without
limitation, inquiries as to the qualification to hold or receive any license or
permit). The Company is not subject to any judgment, order or decree of any
court or other governmental agency.
4.14 BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company, except pursuant to an engagement letter with BT Alex. Brown
dated October 28, 1998.
4.15 CONSENTS. Except as set forth in the Schedule of
Exceptions, no permit, consent, approval or authorization of, or declaration to
or filing with, any governmental authority ("Governmental Authority") or any
other Person is required in connection with the execution, delivery and
performance by the Company of this Agreement or the other agreements
contemplated hereby, or the consummation by the Company of any other
transactions contemplated hereby or thereby.
4.16 INSURANCE. The Company is not in default with respect to
its obligations under any insurance policy maintained by it, and the Company has
not been denied insurance coverage. The insurance coverage of the Company is
customary for corporations of similar size engaged in similar lines of business.
The Company does not have any self-insurance or co-insurance programs.
4.17 EMPLOYEES. The Company is not aware that any executive or
key employee of the Company or any group of employees of the Company has any
plans to terminate employment with the Company. The Company has complied in all
material respects with all laws relating to the employment of labor (including,
without limitation, provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes), and the Company is not aware that it has any material labor relations
problems (including, without limitation, any union organization activities,
threatened or actual strikes or work stoppages or material grievances). To the
best of the Company's knowledge, none of the Company's employees is subject to
any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company, except for agreements between the
Company and its present and former employees.
4.18 ERISA. Except as set forth in the Schedule of
Exceptions:
(i) MULTIEMPLOYER PLANS. The Company does not have
any obligation to contribute to (or any other liability, including
current or potential withdrawal liability, with respect to) any
"multiemployer plan" (as defined in Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")).
(ii) RETIREE WELFARE PLANS. The Company does not
maintain or have any obligation to contribute to (or any other
liability with respect to) any plan or arrangement whether or not
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terminated, which provides medical, health, life insurance or other
welfare-type benefits for current or future retired or terminated
employees (except for limited continued medical benefit coverage
required to be provided under Section 4980B of the IRC or as required
under applicable state law).
(iii) DEFINED BENEFIT PLANS. The Company does not
maintain, contribute to or have any liability under (or with respect
to) any employee plan which is a tax-qualified "defined benefit plan"
(as defined in Section 3(35) of ERISA), whether or not terminated.
(iv) DEFINED CONTRIBUTION PLANS. The Company does not
maintain, contribute to or have any liability under (or with respect
to) any employee plan which is a tax-qualified "defined contribution
plan" (as defined in Section 3(34) of ERISA), whether or not
terminated.
(v) OTHER PLANS. The Company does not maintain,
contribute to or have any liability under (or with respect to) any plan
or arrangement providing benefits to current or former employees,
including any bonus plan, plan for deferred compensation, employee
health or other welfare benefit plan or other arrangement, whether or
not terminated.
(vi) THE COMPANY. For purposes of this Section 4.18,
the term "Company" includes all organizations under common control with
the Company pursuant to Section 4.14(b) or (c) of the IRC.
4.19 COMPLIANCE WITH LAWS. The Company has not violated any
law or any governmental regulation or requirement which violation has had or
would reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets, operations or business prospects
of the Company, and the Company has not received notice of any such violation.
4.20 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth in
the Schedule of Exceptions:
(i) The Company has obtained the Environmental
Permits.
(ii) The Company is in material compliance with the
terms and conditions of all such Environmental Permits and is in
material compliance with all Environmental and Safety Laws.
(iii) With respect to the Company, no notice,
notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, and no penalty has
been assessed or, to the Company's best knowledge, no investigation,
notice, notification, demand, request for information, citation,
summons or order is pending or threatened by any Person with respect to
any alleged failure to obtain any material Environmental Permits or any
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material violation of any Environmental and Safety Laws, or with
respect to the generation, treatment, storage, recycling,
transportation, discharge or disposal, or any Release or threatened
Release, of any Hazardous Materials (except in the ordinary course of
business in material compliance with all Environmental and Safety
Laws).
(iv) No property or facility now or previously owned
or operated by the Company has been or is presently operated (during
the period owned or used by the Company) in a manner which requires
permitting as a hazardous waste treatment, storage or disposal facility
for purposes of RCRA or any analogous state law.
(v) To the best of the Company's knowledge, none of
the following is present at any property or facility now owned or
operated by the Company (except to the extent such presence could not
reasonably result in a material liability): (i) polychlorinated
biphenyls contained in electrical or other equipment; (ii)
asbestos-containing insulation or building material; or (iii) active or
inactive underground storage tanks.
(vi) The Company has not transported or arranged for
the transportation of any Hazardous Material to any location which is
on the CERCLA National Priorities List (or proposed for such listing),
the CERCLIS List or any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations
which could be expected to lead to claims against the Company under any
Environmental and Safety Laws.
(vii) There has been no Release of Hazardous
Materials into the environment at or from any property or facility now
or, to the best knowledge of the Company, previously owned or operated
by the Company so as to give rise to any material present or future
liability or obligation under any Environmental and Safety Laws.
(viii) No Liens have arisen under or pursuant to any
Environmental and Safety Laws on any property or facility now or
previously owned or operated by the Company, and to the best knowledge
of the Company, no governmental actions have been taken or are in
process which could subject any such properties or facilities to such
Liens, and the Company would not be required to place any notice or
restriction relating to the presence of Hazardous Materials in any deed
to such property or facility.
(ix) The Company has not, either expressly or by
operation of law, assumed or undertaken any material liability or
corrective or remedial obligation of any other Person relating to
Environmental and Safety Laws.
(x) Without limiting the generality of the foregoing,
there are no other facts, events or conditions relating to the past
(during the period owned or used by the Company) or present operations,
properties or facilities of the Company which could reasonably be
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expected to give rise to any material liability or investigatory,
corrective or remedial obligation under any Environmental and Safety
Laws.
4.21 AFFILIATED TRANSACTIONS. Except as set forth in the
Schedule of Exceptions, no officer, director, stockholder or Affiliate of the
Company or any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is a party to any agreement, contract, commitment or
transaction with the Company or has any material interest in any material
property used by the Company.
4.22 DISCLOSURE. Neither this Agreement nor any of the
exhibits, schedules, attachments, written statements, documents, certificates or
other items supplied to the Purchasers by or on behalf of the Company with
respect to the transactions contemplated hereby contain any untrue statement of
a material fact or omit a material fact necessary to make each statement
contained herein or therein, under the circumstances in which they are made, not
misleading. There is no fact which the Company has not disclosed to the
Purchasers and of which any of its officers, directors or executive employees is
aware and which has had or would reasonably be expected to have a material
adverse effect upon the existing or expected financial condition, operating
results, assets, customer or supplier relations, employee relations or business
prospects of the Company.
4.23 INVESTMENT COMPANY. The Company is not an "investment
company" as defined under the Investment Company Act of 1940.
4.24 PROJECTIONS. All projections previously provided to the
Purchasers by authorized representatives of the Company, including the
projections of the consolidated income and cash flows of the Company for the
fiscal years ending December 31, 1999, December 31, 2000, December 31, 2001,
December 31, 2002 and December 31, 2003, were prepared in good faith and are
based on underlying assumptions of the Company which provide a reasonable basis
for the projections contained therein. Such projections have been prepared on
the basis of the assumptions set forth therein, which the Company reasonably
believes are fair and reasonable in light of the historical financial
performance of the Company. The Company does not, however, make any guaranty
that any such projections can be achieved.
4.25 SEC FILINGS. None of the Company's (1) annual report on
Form 10-K, as amended, for the fiscal year ended December 31, 1997, (2)
quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998, and (3) proxy statement for the Company's
annual meeting of shareholders held on April 21, 1998 (the "Company's SEC
Documents") contained, at the time they were filed, any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements made therein in light of the
circumstances under which they were made, not misleading. Except for certain
filings required to be filed by persons subject and pursuant to Section 16 of
the Securities Exchange Act, for the preceding 12 months the Company has timely
filed all forms, reports and exhibits thereto required under the Securities Act
and the Securities Exchange Act with the Securities and Exchange Commission.
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5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser, severally and not jointly and only with regard to
itself, hereby represents and warrants to the Company as follows:
5.1 AUTHORITY OF PURCHASERS. Such Purchaser that is an entity
(a) is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its formation; (b) has all requisite legal and corporate or
partnership power (as applicable) to enter into this Agreement and the Ancillary
Agreements, to purchase the Shares and to perform its obligations under the
terms of this Agreement and the Ancillary Agreements; and (c) has taken or will
have taken prior to the Closing Date all partnership or corporate action (as
applicable) necessary for the purchase of the Shares and the performance of the
Purchaser's obligations under this Agreement. This Agreement and the Ancillary
Agreements when executed and delivered by the Purchaser will constitute valid
and legally binding obligations of such Purchaser, enforceable in accordance
with their terms, except as enforcement may be limited by applicable bankruptcy
laws or other similar laws affecting creditors' rights generally, and except
insofar as the availability of equitable remedies may be limited by applicable
law from time to time.
5.2 INVESTMENT REPRESENTATIONS.
(a) The Shares purchased hereunder and the shares of
Common Stock issuable upon conversion of the Shares (the "Securities")
will be acquired for the Purchaser's own account, not as a nominee or
agent, and not with a view to the distribution of any part thereof.
(b) The Purchaser understands that the purchase of
the Securities represents a speculative investment, and is aware of and
has investigated the Company's business, management and financial
condition, and has had access to such other information about the
Company as such Purchaser has deemed necessary or desirable to reach an
informed and knowledgeable decision to acquire the Securities.
(c) The Purchaser understands that the Securities
have not been registered under the Securities Act or under similar
securities laws of any other jurisdiction by reason of reliance upon
certain exemptions therefrom, and that the reliance of the Company on
such exemptions is predicated upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein.
(d) The Purchaser is experienced in evaluating and
investing in securities of companies in stages of development similar
to the Company. The Purchaser is knowledgeable in business and
financial matters and is capable of evaluating the merits and risks of
an investment in the Company. The Purchaser acknowledges that it has
the ability to bear the economic risk of its investment pursuant to
this Agreement. Purchaser is an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
(e) The Purchaser has not been organized or
materially reorganized for the purpose of investing in the Securities.
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(f) The Purchaser understands that the Securities
being purchased hereunder are restricted securities within the meaning
of Rule 144 under the Securities Act and that the Securities are not
registered and must be held indefinitely unless they are subsequently
registered or an exemption from such registration is available.
(g) The Purchaser represents and agrees that the sale
of the Shares was not accomplished by the publication of any
advertisement or by any general solicitation.
5.3 LEGENDS. Each certificate representing the Securities may
be endorsed with the following legends (or substantial equivalents):
(a) Federal Legend. THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS DEFINED
IN RULE 144 PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD
OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (i) IN CONJUNCTION
WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT
OR (ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF
COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH REGISTRATION OR
COMPLIANCE IS NOT REQUIRED AS TO SUCH SALE, OFFER OR DISTRIBUTION.
(b) Other Legends Any other legends required by
applicable state blue sky laws.
5.4 REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS. Any legend
endorsed on a certificate pursuant to subsection 4.3(a) and any stop transfer
instructions with respect to such legended Securities shall be removed, and the
Company shall issue a certificate without such legend to the holder of such
Securities if such Securities are registered and sold under the Securities Act
and a prospectus meeting the requirements of Section 10 of the Securities Act is
available or if such holder proposes to sell such Securities in compliance with
the requirements of Rule 144 and, where reasonably deemed necessary by the
Company, provides the Company with an opinion of counsel for such holder of the
Securities, reasonably satisfactory to the Company, to the effect that (i) such
proposed sale meets the requirements of Rule 144 or (ii) a public sale, transfer
or assignment of such Securities may be made without registration pursuant to
Rule 144(k).
5.5 CONFIDENTIALITY. With respect to the information and other
material furnished under or in connection with this Agreement or any Ancillary
Agreement (whether furnished before, on or after the date hereof) which
constitutes or contains non-public business, financial or other information of
the Company ("Non-Public Information"), each Purchaser covenants that it will
use due care to prevent its officers, directors, employees, counsel, accountants
and other representatives from (x) disclosing any Non-Public Information to
Persons other than Purchaser's authorized employees, counsel, accountants,
financial advisors, shareholders, members, partners and limited partners, (y)
using Non-Public Information in any manner that would constitute a violation of
federal or state securities laws; PROVIDED, however, that the Purchaser may
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disclose or deliver any Non-Public Information if the Purchaser is advised by
its counsel that such disclosure or delivery is required by law, regulation or
judicial or administrative order. The Company shall notify the Purchasers of any
restricted trading periods under the Company's insider trading policy in effect
from time to time. For purposes of this Section 5.5, "due care" means at least
the same level of care that the Purchaser would use to protect the
confidentiality of its own sensitive or proprietary information, and this
obligation shall survive termination of this Agreement. A Purchaser shall not be
prohibited from transferring its beneficial interest in the Shares and, after
reasonable notice to the Company, disclosing any Non-Public Information to any
Person who agrees to be bound by the provisions of this Section 5.5.
6. PRE-CLOSING COVENANTS. From the date of this Agreement up to and
including the Closing Date:
6.1 CONDUCT OF BUSINESS. The Company shall conduct its
business and operations only in the ordinary course and in a manner that is
consistent with past practice, including, without limitation: (a) performing all
of its obligations under contracts, agreements and instruments by which it and
its properties are bound; (b) using all reasonable efforts in maintaining (i)
its business organization intact, (ii) all of its properties, equipment and
other assets in good repair, working order and condition, (iii) its present
workforce, including all officers of the Company, and (iv) its current
relationships with its suppliers and customers; and (c) keeping in full force
and effect the insurance currently maintained by it.
6.2 COOPERATION. The Company shall use its reasonable efforts
to cause the transactions contemplated by this Agreement to be consummated,
including, without limitation, (a) obtaining all approvals and consents of,
making all filings with and giving all notices to, all such Governmental
Authorities and other persons as may be necessary or reasonably requested by the
Purchasers in order to consummate the transactions contemplated by this
Agreement, and all Contracts, other agreements or leases with respect to which
the obtaining of an approval or consent is necessary or advisable, and (b)
giving prompt notice to the Purchasers of any event, notice or other
communication which causes or in the reasonable judgment of the Company could
cause a material adverse effect on the Company, its assets, properties or
business, as it is presently conducted or presently proposed to be conducted.
6.3 NO SOLICITATION OF TRANSACTION. The Company shall not,
directly or indirectly, initiate, solicit or encourage any discussions or
negotiations, or enter into any agreements, with any Person other than the
Purchasers with respect to the sale of any of its capital stock or the sale of
all or any material portion of its assets or the merger or consolidation of the
Company with any other Person. The Company shall, promptly after receipt thereof
by the Company, notify the Purchasers of any offer by any Person to make any
such purchase, merger or consolidation or enter into any such agreement.
6.4 ACCESS TO THE COMPANY. The Company shall afford the
Purchasers and their representatives reasonable access, upon reasonable prior
notice and at such scheduled times and places during normal business hours as
shall be reasonably approved by the Company (but without any interference with
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the business operations of the Company), to the books, records, properties and
facilities of the Company.
6.5 NOTIFICATION OF BREACH OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. Company shall promptly give written notice to the Purchasers upon
becoming aware of the occurrence or impending or threatened occurrence of any
event which would cause or constitute a breach of any of the representations,
warranties or covenants of the Company contained or referred to in this
Agreement and shall use its best efforts to prevent the same or remedy the same
promptly.
6.6 CHANGES IN CAPITAL STOCK. At or after the date hereof and
at or prior to the Closing Date, except as contemplated by this Agreement or
with the prior written consent of the Purchasers, the Company shall not amend
its charter documents or bylaws; make any change in its authorized, issued or
outstanding capital stock or any other Equity Security; issue, sell, pledge,
assign or otherwise encumber or dispose of, or purchase, redeem or otherwise
acquire, any of its shares of capital stock or other Equity Securities or enter
into any agreement, call or commitment of any character so to do; grant or issue
any stock option relating to, right to acquire, or security convertible into,
shares of its capital stock or other Equity Security; purchase, redeem, retire
or otherwise acquire (other than in a fiduciary capacity) any shares of, or any
security convertible into, its capital stock or other Equity Securities , or
agree to do any of the foregoing.
6.7 LITIGATION DEVELOPMENTS. The Company agrees to promptly
advise the Purchasers with respect to any and all material legal actions or
other proceedings or investigations and to promptly advise the Purchasers with
respect to any significant developments arising in connection with said actions,
proceedings or investigations.
6.8 NO SHOPPING. Until the Closing or termination of this
Agreement, the Company shall not, directly or indirectly, through any officer,
director, stockholder, agent, affiliate, employee or otherwise, solicit,
initiate or encourage submission of any proposal or offer from any person, group
or entity relating to any acquisition of the assets, business or capital stock
of the Company, or other similar transaction or business combination involving
the business of the Company; shall not participate in any negotiations or
discussions regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage any effort or attempt by any other person or entity to
do or seek such acquisition or other transaction; and shall inform the
Purchasers of any such inquiry.
7. CONDITIONS TO CLOSING.
7.1 CONDITIONS TO PURCHASERS' OBLIGATIONS. The obligation of
the Purchasers to purchase the Shares at the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT;
PERFORMANCE OF OBLIGATIONS. The representations and warranties made by
the Company in Section 4 shall be true and correct in all respects when
made, and shall be true and correct on the Closing Date with the same
force and effect as if they had been made on and as of said date; and
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the Company shall have performed all obligations and conditions herein
required to be performed by them on or prior to the Closing Date.
(b) AUTHORIZATIONS. All authorizations, approvals or
permits of any Governmental Authority that are required in connection
with the lawful issuance and sale of the Shares, the conversion of the
Shares into Common Stock and the issuance of such Common Stock upon
conversion shall have been duly obtained and shall be effective on and
as of the Closing Date, including, without limitation, the filing of
Articles of Amendment in the form set forth in Exhibit D with the
Secretary of State of the State of Oregon, as well as the qualification
of the Shares under any applicable state securities laws.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been
no material adverse change in the financial condition, operating
results, assets, operations, business prospects, or employee, customer,
provider or supplier relationships of the Company since the date of
this Agreement as determined in the discretion of Rosewood Capital III,
L.P. and Farallon Capital Management LLC, acting together.
(d) OPINION OF COMPANY'S COUNSEL. The Purchasers
shall have received from counsel to the Company, an opinion addressed
to the Purchasers, dated the Closing Date, substantially in the form of
Exhibit F attached hereto.
(e) INVESTOR RIGHTS AGREEMENT. The Company shall have
entered into the Investor Rights Agreement, substantially in the form
attached hereto as Exhibit E.
(f) CERTIFICATES. The Company shall have delivered to
the Purchasers the certificates representing the Shares to be purchased
by the Purchasers which shall be issued in each Purchaser's name.
(g) BOARD OF DIRECTORS. Kyle A. Anderson and Jason
Fish shall have been appointed as members of the Company's Board of
Directors as the director designees of the Series A Stock effective as
of the Closing Date and the Company and Messrs. Anderson and Fish shall
have entered into the Indemnification Agreement in the form attached
hereto as Exhibit G. Rosewood Capital III, L.P. shall have received
irrevocable proxies from Purchasers holding a number of shares of
Series A Stock which together with the shares of Series A Stock held by
it constitute 75% of such shares, to vote such shares for the election
of the director designee of the Series A Stock.
(h) COMPLIANCE CERTIFICATE. The Company shall have
delivered to the Purchasers a certificate, executed by the President of
the Company, dated the Closing Date, certifying to the fulfillment of
the conditions specified in subparagraphs (a), (b) and (c) of this
Section 7.1.
(i) SUBSCRIPTIONS. The Company shall have received an
aggregate gross proceeds of not less than Thirty Two Million Dollars
($32,000,000) for the purchase of the Shares.
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(j) PROCEEDINGS AND DOCUMENTS. All corporate and
other proceedings in connection with the transactions contemplated
hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in form and substance to the
Purchasers and its counsel.
(k) CONSENTS. The Company shall have received, or the
Purchasers shall have been satisfied that the Company will receive, all
consents of other parties to the issuance and sale of the Shares
required by material mortgages, notes, leases, franchises, agreements,
licenses and permits applicable to the Company, including but not
limited to the Notes, in each case in form and substance reasonably
satisfactory to the Purchasers, and no such consent or license or
permit shall have been withdrawn or suspended.
(l) RENEWAL OF CREDIT FACILITY. On or prior to the
Closing Date, the term of the Company's credit facility with Bank of
America NT&SA with an aggregate maximum borrowing limit of at least
$19.5 million shall be extended to a date at least one year from the
Closing Date.
(m) WAIVERS OF EVENTS OF DEFAULT. The Company shall
have received waivers of all events of default that exist as of the
Closing Date and agreements to forebear from exercising any rights or
remedies resulting from future events of defaults until December 31,
1999 (other than those arising from a failure to make an agreed
payment) all in a form satisfactory to the Purchasers from (a) Bank of
America NT & SA with respect to the Business Loan Agreement dated June
26, 1997, as amended, by and between the Company and Bank of America NT
& SA; (b) Dresdner Kleinwort Benson Private Equity Partners LP with
respect to the Note Purchase Agreement dated March 27, 1998, and the
related Notes; and (c) Lease Agreements dated as of December 17, 1997
and May 28, 1998 by and between the Company and BA Leasing & Capital
Corporation.
(n) RIGHTS AGREEMENT. The Company will have amended
the Rights Agreement date as of April 25, 1996 between the Company and
First Chicago Trust Company of New York, as amended, to include under
the term "Exempt Person" under Section 1.1 of such Rights Agreement the
Purchasers and their affiliates.
7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to sell and issue the Shares at the Closing is subject to the
fulfillment on or prior to the Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT;
PERFORMANCE OF OBLIGATIONS. The representations and warranties of the
Purchasers in Section 5 hereof shall be true and correct when made, and
shall be true and correct on the Closing Date with the same force and
effect as if they had been made on and as of said date, subject to the
changes contemplated by this Agreement and the Related Documents; and
the Purchasers shall have performed all obligations and conditions
herein required to be performed by them on or prior to the Closing
Date.
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(b) AUTHORIZATIONS. All authorizations, approvals or
permits of any other Governmental Authority that are required in
connection with the lawful issuance and sale of the Shares shall have
been duly obtained and shall be effective on and as of the Closing
Date.
(c) PAYMENT OF PURCHASE PRICE. The Purchasers shall
have delivered the purchase price specified in Section 2.2 to the
Company.
(d) INVESTOR RIGHTS AGREEMENT. The Purchasers shall
have entered into the Investor Rights Agreement.
8. TERMINATION.
8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of the Company and
a majority of the Purchasers;
(b) as to any Single Purchaser, by such Purchaser
with the written consent of the Company and all of the other
Purchasers;
(c) by either any Purchaser or the Company, upon
prior written notice, if there shall have been a breach by the other
party of any of the terms or provisions of this Agreement which shall
not have been waived in writing by the non-breaching party and such
breach cannot be cured by April 30, 1999; provided that the breach by
any Purchaser, shall not give rise to the right of the Company to
terminate this Agreement as to the other Purchasers;
(d) by either a majority of the Purchasers or the
Company, upon written notice, if the Closing shall not have occurred on
or before April 30, 1999 for any reason other than the failure or
refusal of the party seeking to terminate to perform any of its
obligations hereunder; or
(e) by either any of the Purchasers or the Company if
any court having competent jurisdiction or other Governmental Authority
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable.
(f) by any Purchaser if any Person, except for Paul
F. Wenner, shall have acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Securities Exchange Act and the
regulations promulgated thereunder) shall have been formed which
beneficially owns, or has the right to acquire beneficial ownership of,
twenty percent (20%) or more of the then outstanding shares of the
Company's capital stock.
8.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 8.1 hereof, such termination shall be the
sole remedy, and, except with respect to Sections 5.5 (Confidentiality), 9.6
(Expenses), 9.9 (Finder's Fees) and 9.13 (Public Announcement) hereof, (a) this
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<PAGE>
Agreement shall forthwith become void, and (b) there shall be no liability on
the part of the Company or any Purchaser; provided, however, that if such
termination shall result from the breach by a party hereto of any of its
obligations under this Agreement, such party shall be fully liable for any and
all damages sustained or incurred by the other party hereto, its Affiliates or
any of the representatives of any of them as a result of or arising from such
breach and such other party shall be entitled to seek any remedies available to
it at law or in equity. No Purchaser shall be liable for any damages resulting
from the breach of any other Purchaser of its obligations hereunder.
9. MISCELLANEOUS.
9.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Oregon without application of principles of
conflicts of law.
9.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchasers
and the closing of the transactions contemplated hereby.
9.3 SUCCESSORS AND ASSIGNS. Each Purchaser may assign its
interest in this Agreement in connection with the transfer of its Shares as long
as such Shares are Registrable Securities as provided under the Investor Rights
Agreement. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto.
9.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the
Ancillary Agreement to be delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. Except as provided in Section 8 hereof, any term of
this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and a majority of the Purchasers.
9.5 NOTICES. All notices, requests, demands and other
communications required to or permitted to be given under this Agreement shall
be in writing and shall be conclusively deemed to have been duly given when hand
delivered to the other party; when received when sent by facsimile; PROVIDED,
HOWEVER, that notices given by facsimile shall not be effective unless either a
duplicate copy of such facsimile notice is promptly given by depositing same in
a United States post office with first-class postage prepaid, or the receiving
party delivers a written confirmation of receipt for such notice either by
facsimile or any other method permitted under this paragraph; ADDITIONALLY, any
notice given by facsimile shall be deemed received on the next business day if
such notice is received after 5:00 p.m. (recipient's time) or on a non-business
day; three (3) business days after the same has been deposited in a United
States post office with first class or certified mail return receipt requested
postage prepaid; or the next business day after same has been deposited with a
national overnight delivery service, postage prepaid with next-business-day
delivery guaranteed; PROVIDED that the sending party receives a confirmation of
delivery from the delivery service provider. If notice is to be given to the
Purchasers, such notice will be given, delivered or sent to the address
-25-
<PAGE>
appearing on EXHIBIT A, and if notice is to be given to the Company, such notice
will be given to Gardenburger, Inc., 1411 S.W. Morrison, Suite 400, Portland,
Oregon 97205, telephone number: (503) 205-1515, facsimile number: (503)
205-1650, Attention:
President.
Each party shall make an ordinary, good faith effort to ensure that it
will accept or receive notices that are given in accordance with this Section
and that any person to be given notice actually receives such notice. A party
may change or supplement its address for notice, or designate additional
addresses, for purposes of this Section by giving the other party written notice
of the new address in the manner set forth above.
9.6 EXPENSES.
(a) Each party shall bear its own expenses incurred
in connection with the transactions contemplated by the Agreement,
except that at the Closing the Company will reimburse the Purchasers
their reasonable and actual expenses and disbursements, including,
without limitation, the legal fees of Rosewood Capital III, L.P. and
Farallon Capital Management LLC, up to a maximum of Seventy-Five
Thousand Dollars ($75,000).
(b) If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, at trial and on appeal, in addition to any other relief
to which each party may be entitled.
9.7 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach or default of
another party under this Agreement, shall impair any such right, power or remedy
of such non-breaching party, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, of any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party under this Agreement, or any waiver on the
part of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies either under this Agreement, or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
9.8 SEVERABILITY OF THIS AGREEMENT. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
9.9 FINDER'S FEES.
(a) The Company agrees to indemnify and to hold the
Purchasers harmless against and from any liability for commission or
compensation in the nature of a finder's fee to any broker or other
person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which the Company, or any of its
employees or representatives, is responsible, including any owed to BT
Alex. Brown ( the "BT Fee").
-26-
<PAGE>
(b) The Purchasers hereby agree to indemnify and to
hold the Company harmless against and from any liability for any
commission or compensation in the nature of a finder's fee to any
broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which the Purchasers,
or any of their employees or representatives, are responsible. The
parties hereto acknowledge that the Purchasers bear no responsibility
for the BT Fee.
9.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
9.12 GENDER. The use of the neuter gender herein shall be
deemed to include the masculine and feminine gender, if the context so requires.
9.13 PUBLIC ANNOUNCEMENT. The Company shall not disclose any
Purchaser's name or identity as an investor in the Company in any press release
or other public announcement or in any document or material filed with any
governmental entity, without the prior written consent of the Purchaser, unless
such disclosure is required by applicable law or governmental regulations or by
order of a court of competent jurisdiction, in which case prior to making such
disclosure the Company shall give written notice to the Purchaser describing in
reasonable detail the proposed content of such disclosure and shall permit the
Purchaser to review and comment upon the form and substance of such disclosure.
Notwithstanding the foregoing, the Purchasers hereby acknowledge that, after the
date hereof, the Company may attach this Agreement and any of the Ancillary
Agreements as an exhibit to reports filed by the Company with the Securities and
Exchange Commission.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year set forth in the heading hereof.
"THE COMPANY"
GARDENBURGER, INC.
By /s/ Richard C. Dietz
--------------------------------------------
Richard C. Dietz, Executive Vice
President and Chief Financial Officer
"INVESTORS"
ROSEWOOD CAPITAL III, L.P.
By: Rosewood Capital Associates, LLC, General
Partner
By /s/ Kyle A. Anderson
----------------------------------------
Kyle A. Anderson, Principal
FARALLON CAPITAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P.
TINICUM PARTNERS, L.P.
FARALLON CAPITAL (CP) INVESTORS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason M. Fish
--------------------------------------
Managing Member
Signature Page for Stock Purchase Agreement
<PAGE>
FARALLON CAPITAL OFFSHORE INVESTORS, INC.
THE COMMON FUND
By: Farallon Capital Management, L.L.C., its
Agent and Attorney-in-Fact
By: /s/ Jason M. Fish
----------------------------------
Managing Member
U.S. Development Capital Investment Company
By: /s/ Ray Moss
------------------------------------------
Ray Moss, Secretary
Gruber & McBaine Capital Management, L.L.C.
By: /s/ J. Patrick McBaine
------------------------------------------
Pat McBaine, Manager Member
BT Capital Investors, L.P.
By: /s/ Edward F. Dardani
------------------------------------------
Edward V. Dardani, Jr., Principal
/s/ Arvin H. Kash
------------------------------------------
Arvin H. Kash
/s/ William D. Smithberg
------------------------------------------
William D. Smithberg
Signature Page for Stock Purchase Agreement
(continued)
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
PURCHASER NAME, NO. OF SHARES NO. OF SHARES
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK
- ------------------------------ ----------------- -----------------
Rosewood Capital III, L.P. 850,000 150,000
One Maritime Plaza, Suite 1330
San Francisco, CA 94111
(415) 362-1192
Farallon Capital Partners, L.P* 238,000 42,000
Farallon Capital Institutional
Partners, L.P.* 255,000 45,000
Farallon Capital Institutional
Partners II, L.P.* 42,500 7,500
Farallon Capital Offshore Investors, Inc.* 212,500 37,500
The Common Fund* 8,500 1,500
Farallon Capital (CP) Investors, L.P.* 25,500 4,500
Farallon Capital Institutional
Partners III, L.P.* 51,000 9,000
Tinicum Partners, L.P.* 17,000 3,000
BT Capital Investors, L.P. 552,500 97,500
Attn: Edward V. Dardani, Jr.
130 Liberty Street, Mailstop 2255
New York, NY 10006
Ph: 212-250-3402
Fax: 212-250-8375
U.S. Development Capital Investment Company 127,500 22,500
Attn: Ray Moss, Secretary
400 Northpark Town Center, Suite 310
1000 Abernathy Road, N.E.
Atlanta, GA 30328
Ph: 770-481-7200
Fax: 770-481-7210
- ------------------------------
* *c/o Farallon Capital Management LLC, One Maritime Plaza, Suite 1325, San
Francisco, California 94111, Attn: Jason Fish and Susan Rubin, Facsimile: (415)
421-2133.
A-1
<PAGE>
PURCHASER NAME, NO. OF SHARES NO. OF SHARES
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK
- ------------------------------ ----------------- -----------------
Gruber & McBaine Capital Management 340,000 60,000
Attn: J. Patterson McBaine, Member Manager
50 Osgood Place, Penthouse
San Francisco, CA 94133
Ph: 415-981-2101
Fax: 415-956-8769
Arvin H. Kash 21,250 3,750
77 West Wacker Drive, 47th Floor
Chicago, IL 60601
Ph: 312- 425-3600
Fax: 312-425-3601
William D. Smithberg 21,250 3,750
676 N. Michigan Avenue
Suite 3860
Chicago, IL 60611
Ph: 312- 867-5411
Fax: 312- 867-5415
Total 2,762,500 487,500
A-2
<PAGE>
EXHIBIT B
TERMS OF SERIES A STOCK AND SERIES B STOCK
B-1
<PAGE>
EXHIBIT C
SCHEDULE OF EXCEPTIONS
C-1
<PAGE>
EXHIBIT D
RESTATED ARTICLES OF INCORPORATION, AS AMENDED,
OF GARDENBURGER, INC.
AS OF MARCH 29, 1999
D-1
<PAGE>
EXHIBIT E
FORM OF INVESTOR RIGHTS AGREEMENT
E-1
<PAGE>
EXHIBIT F
FORM OF OPINION OF COMPANY'S COUNSEL
F-1
<PAGE>
EXHIBIT G
INDEMNIFICATION AGREEMENT
G-1
EXHIBIT 10.3
April 14, 1999
Richard C. Dietz
Executive Vice President and
Chief Financial Officer
Gardenburger, Inc.
1411 S.W. Morrison, Suite 400
Portland, OR 97205
RE: AMENDMENT AND WAIVER OF STOCK PURCHASE AGREEMENT
Dear Mr. Dietz:
Pursuant to Section 9.4 of the Stock Purchase Agreement by and among
Gardenburger, Inc. (the "Company") and the Purchasers (as defined therein) dated
as of March 29, 1999 (the "Agreement"), this amends and waives provisions of the
Agreement as specifically set forth herein. Capitalized terms not defined herein
have the meanings assigned to them in the Agreement.
SECTION 7.1(M). The Purchasers waive the Company's obligation under
Section 7.1(m) of the Agreement solely with respect to the requirement to obtain
"agreements to forebear from exercising any rights or remedies resulting from
future events of defaults until December 31, 1999 (other than those arising from
a failure to make an agreed payment)" from (a) Bank of America NT & SA with
respect to the Business Loan Agreement dated April 28, 1998, as amended, by and
between the Company and Bank of America NT & SA or any agreement between the
Company and Bank of America NT & SA intended to replace such agreement (the
"Business Loan Agreement"); (b) Dresdner Kleinwort Benson Private Equity
Partners LP with respect to the Note Purchase Agreement dated March 27, 1998,
and the related Notes (collectively, the "Dresdner Notes"); and (c) Lease
Agreements dated as of December 17, 1997 and May 28, 1998 by and between the
Company and BA Leasing & Capital Corporation (collectively, the "Lease
Agreements").
In lieu of the obligation specified above, Section 7.1(m) of the
Agreement is amended to provide that the Company shall deliver a certificate
executed by its Chief Financial Officer certifying that, based on the Company's
1999 operating plan and assuming the receipt of at least $32.0 million in gross
proceeds from the sale of the Shares, a default or event of default will not
occur during the period beginning on the Closing Date and ending on December 31,
1999 as a result of the failure of the Company to satisfy the financial
covenants specified in the Business Loan Agreement, the Dresdner Notes or the
Lease Agreements.
The Company's obligation under Section 7.1(m) to obtain waivers of all
events of default that exist as of the Closing Date under the Business Loan
Agreement, the Dresdner Notes and the Lease Agreements is not modified in any
way by this amendment and waiver.
<PAGE>
SECTION 7.1(G). The Purchasers waive the condition under Section 7.1(g)
requiring the delivery of irrevocable proxies to Rosewood Capital III, L.P. from
holders of Series A Preferred and Section 7.1(g) of the Agreement is amended to
delete the second sentence only.
EXHIBIT A. Exhibit A (Schedule of Purchasers) of the Agreement is
superseded and replaced by the Exhibit A (Schedule of Purchasers) attached
hereto whereby Gruber & McBaine Capital Management, L.L.C. is no longer a
Purchaser and the persons listed on the Exhibit A attached hereto are deemed to
be Purchasers and are hereby made parties to the Agreement and to this amendment
and waiver.
EXHIBIT B. Exhibit B (Determination of Terms of Series A Stock and
Series B Stock) of the Agreement is superseded and replaced in its entirety by
the Exhibit B (Determination of Terms of Series A Stock and Series B Stock)
attached hereto.
This amendment and waiver agreement will only be effective upon its
execution and delivery by the Company and all of the Purchasers. Except as
provided herein, the Agreement shall remain in full force and effect. This
amendment and waiver may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
If you agree to the foregoing, please execute this amendment and waiver
where indicated below.
[Signatures follow]
<PAGE>
FARALLON CAPITAL PARTNERS, L.P. FARALLON CAPITAL OFFSHORE
FARALLON CAPITAL INSTITUTIONAL INVESTORS, INC.
PARTNERS, L.P. THE COMMON FUND
FARALLON CAPITAL INSTITUTIONAL
PARTNERS II, L.P.
FARALLON CAPITAL INSTITUTIONAL
PARTNERS III, L.P. By: Farallon Capital Management,
TINICUM PARTNERS, L.P. L.L.C., its Agent and
FARALLON CAPITAL (CP) INVESTORS, Attorney-in-Fact
L.P.
By: Farallon Partners, L.L.C., By: /s/ Jason M. Fish
its General Partner ---------------------------
Managing Member
BT Capital Investors, L.P.
By: /s/ Jason M. Fish
---------------------------
Managing Member
By: /s/ Michael J. Batal
-------------------------------
Michael J. Batal, III, Partner
BT Investment Partners, Inc.
By: /s/ Michael J. Batal
-------------------------------
Michael J. Batal, III, Partner
U.S. Development Capital Investment
Company
By: /s/ Ray Moss /s/ Arvin H. Kash
------------------------------- -----------------------------------
Ray Moss, Secretary Arvin H. Kash
GARDENBURGER, INC.
By /s/ Richard C. Dietz /s/ William D. Smithburg
------------------------------- -----------------------------------
Richard C. Dietz, Executive Vice William D. Smithburg
President and Chief Financial Officer
<PAGE>
Lagunitas Partners, L.P.
Gruber & McBaine International
Lockheed Martin
Hamilton College
By: /s/ Patrick McBaine
------------------------------
J. Patterson McBaine,
Gruber & McBaine Capital Management LLC,
Member Manager
Lagunitas Partners, L.P. - General Partner
Gruber & McBaine International - Attorney in
Fact
Lockheed Martin - Attorney in Fact
Hamilton College - Attorney in Fact
<PAGE>
ROSEWOOD CAPITAL III, L.P.
By: Rosewood Capital Associates, LLC,
General Partner
By /s/ Kyle A. Anderson
-----------------------------
Kyle A. Anderson, Principal
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
TOTAL
PURCHASER NAME, NO. OF SHARES NO. OF SHARES PURCHASE
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK AMOUNT
- ------------------------------------------------- ----------------- ----------------- -----------
<S> <C> <C> <C>
Rosewood Capital III, L.P. 850,000 150,000 $10,000,000
One Maritime Plaza, Suite 1330
San Francisco, CA 94111
(415) 362-1192
Farallon Capital Partners, L.P* 238,000 42,000 $2,800,000
Farallon Capital Institutional Partners, L.P.* 255,000 45,000 $3,000,000
Farallon Capital Institutional Partners II, L.P.* 42,500 7,500 $500,000
Farallon Capital Offshore Investors, Inc.* 212,500 37,500 $2,500,000
The Common Fund* 8,500 1,500 $100,000
Farallon Capital (CP) Investors, L.P.* 25,500 4,500 $300,000
Farallon Capital Institutional Partners III, L.P.* 51,000 9,000 $600,000
Tinicum Partners, L.P.* 17,000 3,000 $200,000
BT Capital Investors, L.P. 425,000 75,000 $5,000,000
Attn: Michael J. Batal III
130 Liberty Street, Mailstop 2255
New York, NY 10006
Ph: 212-250-3402
Fax: 212-250-8375
BT Investment Partners, Inc. 127,500 22,500 $1,500,000
U.S. Development Capital Investment Company 127,500 22,500 $1,500,000
Attn: Ray Moss, Secretary
400 Northpark Town Center, Suite 310
1000 Abernathy Road, N.E.
Atlanta, GA 30328
Ph: 770-481-7200
Fax: 770-481-7210
</TABLE>
- --------
* *c/o Farallon Capital Management LLC, One Maritime Plaza, Suite 1325, San
Francisco, California 94111, Attn: Jason Fish and Susan Rubin, Facsimile: (415)
421-2133.
A-1
<PAGE>
<TABLE>
<CAPTION>
TOTAL
PURCHASER NAME, NO. OF SHARES NO. OF SHARES PURCHASE
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK AMOUNT
- ------------------------------------------------- ----------------- ----------------- -----------
<S> <C> <C> <C>
Lagunitas Partners, L.P. 191,250 33,750 $2,250,000
Attn: J. Patterson McBaine, Member Manager
50 Osgood Place, Penthouse
San Francisco, CA 94133
Ph: 415-981-2101
Fax: 415-956-8769
Gruber & McBaine International 63,750 11,250 $750,000
Lockheed Martin 59,500 10,500 $700,000
Hamilton College 25,500 4,500 $300,000
Arvin H. Kash 21,250 3,750 $250,000
77 West Wacker Drive, 47th Floor
Chicago, IL 60601
Ph: 312-425-3600
Fax: 312-425-3601
William D. Smithburg 21,250 3,750 $250,000
676 N. Michigan Avenue
Suite 3860
Chicago, IL 60611
Ph: 312-867-5411
Fax: 312-867-5415
Total 2,762,500 487,500 $32,500,000
</TABLE>
A-2
EXHIBIT 10.4
GARDENBURGER, INC.
INVESTOR RIGHTS AGREEMENT
April 14, 1999
------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Definitions and Accounting Terms........................................1
1.1 Certain Defined Terms..........................................1
1.2 Accounting Terms...............................................4
2. Covenants of the Company................................................4
2.1 Affirmative Covenants of the Company Other
Than Reporting Requirements..................................4
2.2 Reporting Requirements of the Company..........................5
2.3 Inspection of Property.........................................6
2.4 Confidentiality................................................6
3. Registration............................................................7
3.1 Mandatory Registration.........................................7
3.2 Conversion by the Company......................................8
3.3 Piggyback Registration.........................................8
3.4 Expenses of Registration.......................................9
3.5 Further Obligations of the Company.............................9
3.6 Further Information Furnished by Holders......................11
3.7 Indemnification...............................................11
3.8 Rule 144 Reporting............................................13
3.9 Transfer of Registration Rights...............................14
3.10 Subsequent Registration Rights................................14
3.11 `Market Stand-off'Agreement...................................14
3.12 Delay of Registration.........................................14
4. Miscellaneous..........................................................15
4.1 Governing Law.................................................15
4.2 Survival......................................................15
4.3 Successors and Assigns........................................15
4.4 Entire Agreement..............................................15
4.5 Amendments; Waivers...........................................15
4.6 Notices.......................................................15
4.7 Attorneys'Fees................................................16
4.8 Delays or Omissions...........................................16
4.9 Severability of this Agreement................................16
4.10 Titles and Subtitles..........................................16
4.11 Counterparts..................................................16
4.12 Gender........................................................16
-i-
<PAGE>
EXHIBITS
INITIAL EXHIBIT
------- -------
A Schedule of Investors
-ii-
<PAGE>
GARDENBURGER, INC.
INVESTOR RIGHTS AGREEMENT
-------------------------
THIS INVESTOR RIGHTS AGREEMENT ("Agreement") is made as of the ____ day
of April, 1999, by and among GARDENBURGER, INC., an Oregon corporation (the
"Company"), and the investors identified on Exhibit A attached hereto
(collectively, the "Investors").
R E C I T A L S:
- - - - - - - -
A. The Company and the Investors have entered into the Stock Purchase
Agreement dated March 29, 1999 (the "Stock Purchase Agreement"), pursuant to
which the Investors have purchased an aggregate of two million seven hundred
sixty two thousand five hundred (2,762,500) shares of Series A Convertible
Preferred Stock of the Company and four hundred eighty seven thousand five
hundred (487,500) shares of Series B Convertible Preferred Stock of the Company.
B. As a condition to the Investors' obligations under the Stock
Purchase Agreement, the Company desires to grant the Investors certain rights as
set forth herein.
A G R E E M E N T:
- - - - - - - - -
Now, therefore, in consideration of the foregoing premises and the
mutual covenants set forth herein, the parties agree as follows:
1. DEFINITIONS AND ACCOUNTING TERMS.
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Agreement" means this Investor Rights Agreement as from time
to time amended and in effect between the parties.
"Board" or "Board of Directors" means the board of directors
of the Company as constituted from time to time.
"Common Stock" includes (a) the Company's Common Stock, and
(b) any other securities into which or for which any of the Company's Common
Stock may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
"Directors" means the members from time to time of the Board
of Directors.
"Holder" shall mean any person who holds Registrable
Securities or the rights to hold Registrable Securities which have not been sold
<PAGE>
to the public, or any Person to whom any Holder shall sell or transfer pursuant
to Section 3.9 of this Agreement its Registrable Securities and expressly
transfer its rights hereunder.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Potential Material Event" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (b) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
"Preferred Holder" means the Investors and any Person to whom
an Investor shall sell or transfer its Shares pursuant to the terms of this
Agreement and expressly transfer its rights hereunder whether or not Shares are
converted.
"Preferred Holders Designees" means the two members of the
Board of Directors of the Company elected by the Preferred Holders, in
accordance with the Company's Restated Articles.
"Preferred Stock" means the Shares.
"Registrable Securities" shall mean and include all shares of
Common Stock issued or issuable upon conversion of the Preferred Stock or any
security issued in exchange or replacement for the Preferred Stock; PROVIDED,
HOWEVER, that (a) Registrable Securities shall cease to be Registrable
Securities upon the consummation of any sale of such securities pursuant to a
registration statement or Rule 144 under the Securities Act and (b) shall cease
to be Registrable Securities if sold in a transaction in which rights under
Article 3 of this Agreement are not assigned.
"Register", "registered" and "registration" refer to a
registration effected through the preparation and filing of a registration
statement or similar document in compliance with the Securities Act and the
declaration or ordering of effectiveness of such registration statement or
document.
"Registration Expenses" shall mean all expenses incurred by
the Company in effecting any registration pursuant to this Agreement, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, the expense of any special audits incident to or required
-2-
<PAGE>
by any such registration and the reasonable fees and disbursements of one
special legal counsel to represent all of the Holders together (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
"Registration Statement" means a registration statement on
Form S-3 (if prepared pursuant to Section 3.1) or any other appropriate form (if
prepared pursuant to Section 3.3) prepared and filed with the Securities and
Exchange Commission by the Company pursuant to Section 3 of this Agreement.
"Restated Articles" means the Company's Restated Articles of
Incorporation, as amended, as of the Closing Date as defined in the Stock
Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect at the
time.
"Securities and Exchange Commission" means the United States
Securities and Exchange Commission including any governmental body or agency
succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the rules and regulations
of the Securities and Exchange Commission thereunder, all as the same shall be
in effect at the time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the Registrable
Securities.
"Series A Stock" means the Series A Convertible Preferred
Stock of the Company.
"Series B Stock" means the Series B Convertible Preferred
Stock of the Company.
"Shares" means the two million seven hundred sixty two
thousand five hundred (2,762,500) shares of Series A Stock and four hundred
eighty seven thousand five hundred (487,500) shares of Series B Stock purchased
by the Investors pursuant to the Stock Purchase Agreement and any securities of
the Company which the Investors or Preferred Holders shall be entitled to
receive, or shall have received, because of the Investors' ownership of such
securities, such as additional securities received upon stock dividends, stock
splits, recapitalizations and the like.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
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or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity. Where not otherwise indicated, the term "Subsidiary" refers to a
Subsidiary of the Company.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistently applied, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles.
2. COVENANTS OF THE COMPANY.
2.1 AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Except to the extent the following covenants and provisions of
this Section 2.1 are waived in any instance by a majority of the Preferred
Holders, the Company covenants and agrees that so long as not less than three
hundred fifty thousand (350,000) shares of the Preferred Stock outstanding as of
the date hereof remain outstanding, it will perform and observe the following
covenants and provisions:
(a) MEETING OF DIRECTORS AND COMMITTEES. The
Company's Board of Directors shall hold meetings at least quarterly.
(b) INDEMNIFICATION. The Company shall at all times
maintain provisions in its Bylaws or Articles exculpating and indemnifying all
Directors from and against liability to the maximum extent permitted under the
laws of the state of its incorporation.
(c) EXPENSES OF DIRECTORS. The Company shall promptly
reimburse in full the Preferred Holders Designees for all of his reasonable
out-of-pocket expenses incurred in attending each meeting of the Board of
Directors of the Company or any committee thereof.
(d) SHAREHOLDER APPROVAL. The Company shall promptly
seek shareholder approval for any adjustment to the conversion price of the
Series A Stock or Series B Stock required under the terms of the Restated
Articles, including, but not limited to, the preparation of any proxy statement
which shall include, subject to the exercise of fiduciary obligations, a
unanimous recommendation by the Board to approve any such adjustments.
(e) AVAILABLE SHARES. The Company shall have at all
times authorized and reserved for issuance, free from preemptive rights, shares
of Common Stock sufficient to yield the number of shares of Common Stock
issuable at conversion as may be required to satisfy the conversion rights of
the Investors pursuant to the terms and conditions of the Preferred Stock,
including the maximum conversion of Series B Stock under the Restated Articles.
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2.2 REPORTING REQUIREMENTS OF THE COMPANY. Until less than
three hundred fifty thousand (350,000) shares of Preferred Stock is outstanding,
the Company will furnish the following to Rosewood Capital III, L.P. and
Farallon Capital Management LLC, so long as such Investor (or their affiliates)
continues to own shares of Preferred Stock:
(a) MONTHLY REPORTS. As soon as available but in any
event within 30 days after the end of each monthly accounting period in each
fiscal year, unaudited consolidating and consolidated statements of income of
the Company and its Subsidiaries for such monthly period and for the period from
the beginning of the fiscal year to the end of such month, and unaudited
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such monthly period, setting forth in each case
comparisons to the Company's annual budget and to the corresponding period in
the preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently applied,
subject to the absence of footnote disclosures and to normal year-end
adjustments, and shall be certified by the Company's chief financial officer.
(b) NO DEFAULT. Accompanying the financial statements
referred to in subsection 2.2(a) is an officer's certificate stating that there
is no event of default in existence and that neither the Company nor any of its
Subsidiaries is in default under any of its other material agreements or, if any
event of default or any such default exists, specifying the nature and period of
existence thereof and what actions the Company and its Subsidiaries have taken
and propose to take with respect thereto.
(c) ANNUAL REPORTS. Within 90 days after the end of
each fiscal year, consolidating and consolidated statements of income and cash
flows of the Company and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, all prepared in accordance with
generally accepted accounting principles, consistently applied, setting forth in
each case comparisons to the Company's annual budget and to the preceding fiscal
year, and accompanied by (a) with respect to the consolidated portions of such
statements, an opinion of an independent accounting firm of recognized national
standing, (b) a certificate from such accounting firm, addressed to the
Company's board of directors, stating that in the course of its examination
nothing came to its attention that caused it to believe that there was an event
of default in existence or that there was any other default by the Company or
any Subsidiary under any material agreement to which the Company or any
Subsidiary is a party or, if such accountants have reason to believe any event
of default or other default by the Company or any Subsidiary exists, a
certificate specifying the nature and period of existence thereof, and (c) a
copy of such firm's annual management letter to the board of directors.
(d) AUDITOR REPORTS. Promptly upon receipt thereof,
any additional reports, management letters or other detailed information
concerning significant aspects of the Company's or any Subsidiary's operations
or financial affairs given to the Company or any Subsidiary by its independent
accountants (and not otherwise contained in other materials provided hereunder).
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(e) ANNUAL BUDGET. At least 30 days but not more than
90 days prior to the beginning of each fiscal year, an annual budget prepared on
a monthly basis for the Company and its Subsidiaries for such fiscal year
(displaying anticipated statements of income and cash flows and balance sheets),
and promptly upon preparation thereof any other significant budgets prepared by
the Company or any Subsidiary and any revisions of such annual or other budgets,
and within 30 days after any monthly period in which there is a material adverse
deviation from the annual budget, an officer's certificate explaining the
deviation and what actions the Company and its Subsidiaries have taken and
propose to take with respect thereto.
(f) DEFAULT NOTICE. Promptly (but in any event within
five business days) after the discovery or receipt of notice of any event of
default or any default under any material agreement to which the Company or any
of its Subsidiaries is a party or any other material adverse change, event or
circumstance affecting the Company or any Subsidiary, an officer's certificate
specifying the nature and period of existence thereof and what actions the
Company and its Subsidiaries have taken and propose to take with respect
thereto.
(g) STOCKHOLDER INFORMATION. Within two days after
transmission thereof, copies of all financial statements, proxy statements,
reports and any other general written communications which the Company sends to
its stockholders and copies of all registration statements and all regular,
special or periodic reports which it files, or any of its officers or directors
file with respect to the Company, with the Securities and Exchange Commission or
with any securities exchange on which any of its securities are then listed, and
copies of all press releases and other statements made available generally by
the Company to the public concerning material developments in the Company's and
its Subsidiaries' businesses.
(h) OTHER INFORMATION. With reasonable promptness,
such other information and financial data concerning the Company and its
Subsidiaries as any Investor may reasonably request. Any financial statements
provided in accordance with Section 2.2 shall be true and correct in all
material respects as of the dates and for the periods stated therein, subject in
the case of the unaudited financial statements to changes resulting from normal
year-end adjustments.
2.3. INSPECTION OF PROPERTY. The Company shall permit any
representatives designated by any Preferred Holder of at least 25% of the
Preferred Stock originally issued, upon reasonable notice and during normal
business hours and at such other times as any such holder(s) may reasonably
request, to (i) visit and inspect any of the properties of the Company and its
Subsidiaries, (ii) examine the corporate and financial records of the Company
and its Subsidiaries and make copies thereof or extracts therefrom and (iii)
discuss the affairs, finances and accounts of the Company with its directors,
officers, and, upon notice to the Company, its independent accountants.
2.4 CONFIDENTIALITY. With respect to the information and other
material furnished under or in connection with this Agreement or any Ancillary
Agreement (whether furnished before, on or after the date hereof) which
constitutes or contains non-public business, financial or other information of
the Company ("Non-Public Information"), each Purchaser covenants that it will
use due care to prevent its officers, directors, employees, counsel, accountants
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and other representatives from (x) disclosing any Non-Public Information to
Persons other than Purchaser's authorized employees, counsel, accountants,
financial advisors, shareholders, members, partners and limited partners or (y)
using Non-Public Information in any manner that would constitute a violation of
federal or state securities laws; provided, however, that the Purchaser may
disclose or deliver any Non-Public Information if the Purchaser is advised by
its counsel that such disclosure or delivery is required by law, regulation or
judicial or administrative order. The Company shall notify the Purchasers of any
restricted trading periods under the Company's insider trading policy in effect
from time to time. For purposes of this Section 2.4, "due care" means at least
the same level of care that the Purchaser would use to protect the
confidentiality of its own sensitive or proprietary information, and this
obligation shall survive termination of this Agreement. A Purchaser shall not be
prohibited from transferring its beneficial interest in the Shares and after
reasonable notice to the Company, disclosing any Non-Public Information to any
Person who agrees to be bound by the provisions of this Section 2.4.
3. REGISTRATION.
3.1 MANDATORY REGISTRATION. The Company shall prepare and file
with the Securities and Exchange Commission, no later than May 31, 1999, a
Registration Statement registering for resale by the Holders a sufficient number
of shares of Common Stock for the Preferred Holders to sell the Registrable
Securities into which the Preferred Stock would be convertible at the time of
filing of such Registration Statement (assuming for such purposes that all
shares of Preferred Stock had been converted into Common Stock in accordance
with their terms, including, with respect to the Series B Stock, that the
Company did not achieve the performance targets set forth in the Designation of
Terms of the Series B Stock attached to the Company's Restated Articles). The
Registration Statement (i) shall include only the Registrable Securities and
(ii) shall also state that, in accordance with Rule 416 under the Securities
Act, it also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock resulting
from adjustment in the conversion price or to prevent dilution resulting from
stock splits or stock dividends. The Company will use its reasonable best
efforts to cause such Registration Statement to be declared effective no later
than the earlier of (x) five (5) days after notice by the Securities and
Exchange Commission that it may be declared effective or (y) one hundred twenty
(120) days after the Closing Date as defined in the Stock Purchase Agreement
(the "Required Effective Date"). If at any time the number of shares of Common
Stock into which the Preferred Stock may be converted exceeds the aggregate
number of shares of Common Stock then registered, the Company shall either (i)
amend the Registration Statement filed by the Company pursuant to the preceding
provisions of this Section 3.1, if such Registration Statement has not been
declared effective by the Securities and Exchange Commission at that time, to
register all shares of Common Stock into which the Preferred Stock may currently
or in the future be converted, or (ii) if such Registration Statement has been
declared effective by the Securities and Exchange Commission at that time, file
with the Securities and Exchange Commission an amendment to or an additional
Registration Statement to register the shares of Common Stock into which the
Preferred Stock may currently or in the future be converted that exceed the
aggregate number of shares of Common Stock already registered.
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3.2 CONVERSION BY THE COMPANY. The Company's Restated Articles
shall provide that if the Registration Statement covering the Registrable
Securities is not effective by the Required Effective Date, then the conversion
price of the Preferred Stock shall be reduced five percent (5%) for each ninety
(90) day period or portion thereof after the Required Effective Date that the
Registration Statement is not effective; provided, that this provision in the
Restated Articles shall expire if the Registration Statement covering the
Registrable Securities is effective by the Required Effective Date.
3.3 PIGGYBACK REGISTRATION.
(a) NOTICE OF REGISTRATION. If, at any time or from
time to time the Company shall determine to register any of its securities for
its own account or for the account of any person or shareholder in connection
with an offering of its securities to the general public for cash on a form
which would permit the registration of Registrable Securities, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within twenty (20) days after mailing or
personal delivery of such written notice from the Company, by any Holders,
except as set forth in Section 3.3(b).
(b) UNDERWRITING. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 3.3(a)(i). In such event, the right of any
Holder to registration pursuant to this Section 3.3 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities through
such underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company. Notwithstanding any other provision of this
Section 3.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the Company shall so
advise all Holders whose securities would otherwise be registered and
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting determined pursuant to
the following priority: (i) shares to be offered by the holders of the 7%
Convertible Senior Subordinated Notes dated March 27, 1998 (the "Dresdner
Notes"), (ii) shares to be offered by the holders of Series A Preferred and
Series B Preferred, on a pro rata basis in proportion to the relative number of
shares requested to be included by them and (iii) shares of Common Stock to be
offered by holders other than the holders of the Dresdner Notes and/or the
Series A Preferred and Series B Preferred; or, if so determined by the
underwriter, all Registrable Securities shall be excluded from each registration
and underwriting. If any Holder disapproves of the terms of any such
underwriting, the Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter. Any Registrable Securities excluded or
withdrawn from such underwriting shall not be transferred in a public
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distribution prior to ninety (90) days after the effective date of such
registration statement.
3.4 EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, filing, qualification or
compliance pursuant to Sections 3.1 or 3.3 shall be borne by the Company. Unless
otherwise stated, all Selling Expenses relating to securities registered by the
Holders shall be borne by the holders of such securities pro rata on the basis
of the number of shares so registered.
3.5 FURTHER OBLIGATIONS OF THE COMPANY. For purposes of
Sections 3.5(a) and (b), the term "Registration Statement" specifically refers
to the Registration Statement required by Section 3.1. For purposes of Sections
3.5(c) and (d), the term "Registration Statement" specifically refers to the
Registration Statement required by Section 3.3. For all other subsections in
this Section 3.5, the term "Registration Statement" refers to the Registration
Statement required by either Sections 3.1 or 3.3, as the case may be. Whenever
required under this Section 3 to effect the registration of any Registrable
Securities, the Company shall, as expeditiously and as reasonably possible:
(a) Use its reasonable efforts to keep the
Registration Statement effective at all times until the date the Holders no
longer own any of the Registrable Securities (the "Registration Period"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(b) Prepare and file with the Securities and
Exchange Commission such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration
Statement effective at all times during the Registration Period, and, during the
Registration Period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement.
(c) Prepare and file with the Securities and
Exchange Commission a Registration Statement with respect to such Registrable
Securities and use its best efforts to cause such Registration Statement to
become effective and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such Registration Statement
effective for up to one hundred twenty (120) days or until the Holder or Holders
have completed the distribution described in the Registration Statement,
whichever first occurs.
(d) Prepare and file with the Securities and
Exchange Commission such amendments and supplements to such Registration
Statement and the prospectus used in connection with such Registration Statement
as may be necessary to comply with the provisions of the Securities Act with
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respect to the disposition of all securities covered by such Registration
Statement.
(e) The Company shall permit one or more counsel
designated by the Investors to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time (but not less
than three (3) business days) prior to their filing with the Securities and
Exchange Commission, and not file any document in a form to which such counsel
reasonably objects.
(f) Furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel
identified to the Company, (i) promptly after the same is prepared and publicly
distributed, filed with the Securities and Exchange Commission, or received by
the Company, one (1) copy of the Registration Statement, each preliminary
prospectus and prospectus, and each amendment or supplement thereto, and (ii)
such number of copies of a prospectus, and all amendments and supplements
thereto and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor.
(g) As promptly as practicable after becoming aware
thereof, notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
Securities and Exchange Commission to correct such untrue statement or omission,
and deliver a number of copies of such supplement or amendment to each Investor
as such Investor may reasonably request.
(h) As promptly as practicable after becoming aware
thereof, notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Securities and Exchange Commission of any notice of
effectiveness or any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time.
(i) Notwithstanding the foregoing, if at any time or
from time to time after the date of effectiveness of the Registration Statement,
the Company notifies the Investors of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
for more than two thirty (30) day periods in the aggregate during any 12-month
period with at least a ten (10) business day interval between such periods,
during the periods the Registration Statement is required to be in effect.
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(j) Use its reasonable efforts to obtain and
maintain designation of all the Registrable Securities covered by the
Registration Statement on the "National Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of
Rule 11Aa2-1 of the Securities and Exchange Commission under the Securities
Exchange Act, and the quotation of the Registrable Securities on The NASDAQ
National Market; or if, despite the Company's reasonable efforts to satisfy the
preceding clause, the Company is unsuccessful in doing so, to secure NASDAQ/OTC
Bulletin Board authorization and quotation for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. as such with respect to such Registrable Securities.
(k) Provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
(l) Cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the Securities and Exchange Commission, the Company shall deliver,
and shall cause legal counsel selected by the Company to deliver, to the
transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement) an
appropriate instruction and opinion of such counsel.
(m) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform his or its obligations under such agreement.
(n) Take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of the Registrable
Securities pursuant to the Registration Statement.
3.6 FURTHER INFORMATION FURNISHED BY HOLDERS. It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Section 3 that the Holders shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them, and
the intended method of disposition of such securities as shall be required to
effect the registration of their Registrable Securities.
3.7 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 3:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, each of the officers, directors,
partners, legal counsel and other agents of each Holder, any underwriter (as
defined in the Securities Act) for such Holder and each person, if any, who
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controls such Holder or underwriter within the meaning of the Securities Act or
Securities Exchange Act, against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Securities Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading; or (iii) any violation or alleged
violation by the Company of the Securities Act, the Securities Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Securities Exchange Act or any state securities law; and the Company
will reimburse each such Holder, officer, director, partner or agent,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity
agreement contained in this Section 3.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each Holder
will, if Registrable Securities held by such person are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify and hold harmless the Company, each of its directors and
officers, each legal counsel and independent accountant of the Company, each
person, if any, who controls the Company within the meaning of the Securities
Act, each underwriter (within the meaning of the Securities Act) of the
Company's securities covered by such a registration statement, any person who
controls such underwriter, and any other Holder selling securities in such
registration statement and each of its directors, officers, partners or agents
or any person who controls such Holder, against any losses, claims, damages, or
liabilities (joint or several) to which the Company or any such underwriter,
other Holder, director, officer, partner or agent or controlling person may
become subject under the Securities Act, the Securities Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration, and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such underwriter, other Holder, officer, director, partner or
agent or controlling person in connection with investigating or defending any
such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 3.7(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder which consent shall not
be unreasonably withheld, and PROVIDED, FURTHER, that the liability of any
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Holder for indemnification pursuant to this Section 3.7(b) shall not exceed the
net cash proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 3.7 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 3.7,
notify the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure of any
indemnified party to notify an indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of liability to the
indemnified party under this Section 3.7 only to the extent that such failure to
give notice shall materially prejudice the indemnifying party in the defense of
any such claim or any such litigation, but the omission so to notify the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 3.7.
(d) Notwithstanding the conditions provided in this
Section 3, the Holders shall not be required to enter into an underwriting
agreement that contains indemnification and contribution provisions which, in
the sole discretion of the Holder, materially differ from those contained in
this Section 3.7.
3.8 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Securities and Exchange Commission that may at
any time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available as
those terms are understood and defined in the Securities and Exchange Commission
Rule 144;
(b) use its best efforts to take such action,
including the voluntary registration of its Common Stock under Section 12 of the
Securities Exchange Act, as is necessary to enable the Holders to utilize Form
S-3 for the sale of their Registrable Securities;
(c) use its best efforts to file with the Securities
and Exchange Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Securities Exchange Act
(at any time after it has become subject to such reporting requirements); and
13-
<PAGE>
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Securities and
Exchange Commission Rule 144 (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company), the
Securities Act and the Securities Exchange Act (at any time after it has become
subject to such reporting requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the Securities and Exchange Commission which permits
the selling of any such securities without registration or pursuant to such
form.
3.9 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or assignee of such Holder's Registrable
Securities, provided that the Company is, prior to such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
PROVIDED, HOWEVER, that the transferee or assignee becomes a party to this
Agreement.
3.10 SUBSEQUENT REGISTRATION RIGHTS. From and after the date
of this Agreement and so long as at least 20% of the Shares (including the
Registrable Securities) originally issued remain outstanding, the Company may
not, without the prior written consent of the Holders of a majority of the
outstanding Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company which provides such holder
or prospective holder of securities of the Company comparable information and
registration rights granted to the Holders hereby.
3.11 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees
that it will not, to the extent requested by the Company and an underwriter of
Common Stock (or other securities) of the Company sell or otherwise transfer or
dispose of any Registrable Securities to the public, except Common Stock
included in such registration, during the ninety (90) day period following the
effective date of a registration statement of the Company filed under the
Securities Act; PROVIDED, HOWEVER, that all other Persons with registration
rights (whether or not pursuant to this Agreement) and all officers, directors
and holders of more than five percent (5%) of the then outstanding voting
capital stock of the Company enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such 90-day period.
3.12 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 3.
-14-
<PAGE>
4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Oregon without application of principles of
conflicts of law.
4.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchasers
and the closing of the transactions contemplated hereby.
4.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
4.4 ENTIRE AGREEMENT. This Agreement delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties.
4.5 AMENDMENTS; WAIVERS. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) by the written
consent provided (i) as to the Company, only by the Company, (ii) as to the
Preferred Holders, by persons holding more than fifty percent (50%) in interest
of the outstanding Preferred Stock (including any Common Stock issued upon
conversion thereof, and including shares transferred to any assignee of the
right or obligation to be amended or waived), PROVIDED, HOWEVER, that any
Preferred Holder may waive any of his or its rights hereunder without obtaining
the consent of any other Preferred Holder. Any amendment or waiver effected in
accordance with this Section 4.5 excluding the proviso in the previous sentence
shall be binding upon each holder of any of the Preferred Stock (including
shares of Common Stock issued upon conversion thereof), its successors and
assigns and the Company.
4.6 NOTICES. All notices, requests, demands and other
communications required to or permitted to be given under this Agreement shall
be in writing and shall be conclusively deemed to have been duly given when hand
delivered to the other party; when received when sent by facsimile; PROVIDED,
HOWEVER, that notices given by facsimile shall not be effective unless either a
duplicate copy of such facsimile notice is promptly given by depositing same in
a United States post office with first-class postage prepaid, or the receiving
party delivers a written confirmation of receipt for such notice either by
facsimile or any other method permitted under this paragraph; ADDITIONALLY, any
notice given by facsimile shall be deemed received on the next business day if
such notice is received after 5:00 p.m. (recipient's time) or on a non-business
day; three (3) business days after the same have been deposited in a United
States post office with first class or certified mail return receipt requested
postage prepaid; or the next business day after same have been deposited with a
national overnight delivery service, postage prepaid with next-business-day
delivery guaranteed; PROVIDED that the sending party receives a confirmation of
delivery from the delivery service provider. If notice is to be given to the
Investors, such notice will be given, delivered or sent to the address appearing
on Exhibit A, and if notice is to be given to the Company, such notice will be
given to Gardenburger, Inc., 1411 S.W. Morrison, Suite 400, Portland, Oregon
97205, telephone number: (503) 205-1515, facsimile number: (503) 205-1650,
Attention: President.
-15-
<PAGE>
Each party shall make an ordinary, good faith effort to ensure that it
will accept or receive notices that are given in accordance with this Section
and that any person to be given notice actually receives such notice. A party
may change or supplement its address for notice, or designate additional
addresses, for purposes of this Section by giving the other party written notice
of the new address in the manner set forth above.
4.7 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, at trial and on appeal, in addition to any other relief to which
each party may be entitled.
4.8 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach or default of
another party under this Agreement, shall impair any such right, power or remedy
of such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies either under this Agreement, or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
4.9 SEVERABILITY OF THIS AGREEMENT. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
4.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
4.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
4.12 GENDER. The use of the neuter gender herein shall be
deemed to include the masculine and feminine gender, if the context so requires.
-16-
<PAGE>
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this Agreement as of the
date first above written.
"THE COMPANY"
GARDENBURGER, INC.
By: /s/ Richard C. Dietz
-----------------------------------------------
Richard C. Dietz, Executive Vice
President and Chief Financial Officer
"INVESTORS"
ROSEWOOD CAPITAL III, L.P.
By: Rosewood Capital Associates, LLC, General
Partner
By: /s/ Kyle A. Anderson
------------------------------------------
Kyle A. Anderson, Principal
FARALLON CAPITAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P.
TINICUM PARTNERS, L.P.
FARALLON CAPITAL (CP) INVESTORS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason M. Fish
----------------------------------------
Managing Member
Investor Rights Agreement Signature Page
<PAGE>
FARALLON CAPITAL OFFSHORE INVESTORS, INC.
THE COMMON FUND
By: Farallon Capital Management, L.L.C., its
Agent and Attorney-in-Fact
By: /s/ Jason M. Fish
---------------------------------------
Managing Member
U.S. Development Capital Investment Company
By: /s/ Jason M. Fish
----------------------------------------------
Ray Moss, Secretary
BT Capital Investors, L.P.
By: /s/ Michael J. Batal
----------------------------------------------
Michael J. Batal, III, Partner
BT Investment Partners, Inc.
By: /s/ Michael J. Batal
----------------------------------------------
Michael J. Batal, III, Partner
/s/ Arvin H. Kash
-------------------------------------------------
Arvin H. Kash
/s/ William D. Smithburg
-------------------------------------------------
William D. Smithburg
<PAGE>
Lagunitas Partners, L.P.
Gruber & McBaine International
Lockheed Martin
Hamilton College
By: /s/ Patrick McBaine
----------------------------------------------
J. Patterson McBaine,
Gruber & McBaine Capital Management LLC,
Member Manager
Lagunitas Partners, L.P. - General Partner
Gruber & McBaine International - Attorney in
Fact
Lockheed Martin - Attorney in Fact
Hamilton College - Attorney in Fact
Investor Rights Agreement Signature Page
(continued)
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
TOTAL PURCHASE
PURCHASER NAME, NO. OF SHARES NO. OF SHARES AMOUNT
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK
- ------------------------------------------------- ----------------- ----------------- --------------
<S> <C> <C> <C>
Rosewood Capital III, L.P. 850,000 150,000 $10,000,000
One Maritime Plaza, Suite 1330
San Francisco, CA 94111
(415) 362-1192
Farallon Capital Partners, L.P* 238,000 42,000 $2,800,000
Farallon Capital Institutional Partners, L.P.* 255,000 45,000 $3,000,000
Farallon Capital Institutional Partners II, L.P.* 42,500 7,500 $500,000
Farallon Capital Offshore Investors, Inc.* 212,500 37,500 $2,500,000
The Common Fund* 8,500 1,500 $100,000
Farallon Capital (CP) Investors, L.P.* 25,500 4,500 $300,000
Farallon Capital Institutional Partners III, L.P.* 51,000 9,000 $600,000
Tinicum Partners, L.P.* 17,000 3,000 $200,000
BT Capital Investors, L.P. 425,000 75,000 $5,000,000
Attn: Michael J. Batal III
130 Liberty Street, Mailstop 2255
New York, NY 10006
Ph: 212-250-3402
Fax: 212-250-8375
BT Investment Partners, Inc. 127,500 22,500 $1,500,000
</TABLE>
- --------
**c/o Farallon Capital Management LLC, One Maritime Plaza, Suite 1325, San
Francisco, California 94111, Attn: Jason Fish and Susan Rubin,
Facsimile: (415) 421-2133.
A-1
<PAGE>
<TABLE>
<CAPTION>
TOTAL PURCHASE
PURCHASER NAME, NO. OF SHARES NO. OF SHARES AMOUNT
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK
- ------------------------------------------------- ----------------- ----------------- --------------
<S> <C> <C> <C>
U.S. Development Capital Investment Company 127,500 22,500 $1,500,000
Attn: Ray Moss, Secretary
400 Northpark Town Center, Suite 310
1000 Abernathy Road, N.E.
Atlanta, GA 30328
Ph: 770-481-7200
Fax: 770-481-7210
Lagunitas Partners, L.P. 191,250 33,750 $2,250,000
Attn: J. Patterson McBaine, Member Manager
50 Osgood Place, Penthouse
San Francisco, CA 94133
Ph: 415-981-2101
Fax: 415-956-8769
Gruber & McBaine International 63,750 11,250 $750,000
Lockheed Martin 59,500 10,500 $700,000
Hamilton College 25,500 4,500 $300,000
Arvin H. Kash 21,250 3,750 $250,000
77 West Wacker Drive, 47th Floor
Chicago, IL 60601
Ph: 312-425-3600
Fax: 312-425-3601
William D. Smithburg 21,250 3,750 $250,000
676 N. Michigan Avenue
Suite 3860
Chicago, IL 60611
Ph: 312-867-5411
Fax: 312-867-5415
Total 2,762,500 487,500 $32,500,000
</TABLE>
A-2
EXHIBIT 10.5
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
This Amendment No. 2 dated as of April 14, 1999 (the
"Amendment"), to the Rights Agreement dated as of April 25, 1996, as amended by
Amendment No. 1 dated as of March 26, 1998 (referred to herein, as amended by
Amendment No. 1, as the "Rights Agreement"), between Gardenburger, Inc. (f/k/a
Wholesome & Hearty Foods, Inc.), an Oregon corporation (the "Company"), and
First Chicago Trust Company of New York, a New York corporation (the "Rights
Agent"),
WITNESSETH:
WHEREAS, the Company and the Rights Agent have entered into
the Rights Agreement; and
WHEREAS, the Board of Directors of the Company, in accordance
with Section 26 of the Rights Agreement, has determined it desirable and in the
best interests of the Company and its shareholders to supplement and amend
certain provisions of the Rights Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. AMENDMENT TO SECTION 1.1. Section 1.1 of the Rights
Agreement is amended to read in its entirety as follows:
"1.1 "ACQUIRING PERSON" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
of the Company then outstanding, but shall not include: (i) the Company; (ii)
any Subsidiary of the Company; (iii) any employee benefit plan of the Company or
of any Subsidiary of the Company or any entity holding shares of capital stock
of the Company for or pursuant to the terms of any such plan, in its capacity as
an agent or trustee for any such plan; or (iv) any Exempt Person, unless such
Exempt Person becomes the Beneficial Owner of more than the Exempt Percentage of
the Common Shares of the Company then outstanding. "Exempt Person" shall mean
(x) Paul F. Wenner, together with all of his Affiliates and Associates,
including, without limitation, the Paul F. Wenner Charitable Foundation Trust
(collectively, "Wenner"); and (y) Dresdner Kleinwort Benson Private Equity
Partners LP, together with all of its Affiliates and Associates, or any one or
more of the Affiliates and Associates of Dresdner Kleinwort Benson Private
Equity Partners LP (collectively, "Dresdner"). "Exempt Percentage" shall mean,
with respect to Wenner, up to 25% of the Common Shares of the Company then
outstanding and, with respect to Dresdner, up to 22% of the Common Shares of the
Company then outstanding. Notwithstanding the foregoing, (a) no Person shall
become an "Acquiring Person" as the result of an acquisition of Common Shares by
the Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% (25% as
to Wenner and 22% as to Dresdner) or more of the Common Shares of the Company
then outstanding, PROVIDED that if a Person shall become the Beneficial Owner of
15% (25% as to Wenner and 22% as to Dresdner) or more of the Common Shares of
-1-
<PAGE>
the Company then outstanding solely by reason of share purchases by the Company
and shall, after such purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company, then such Person shall be deemed to
be an "Acquiring Person;" (b) if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this SECTION 1.1,
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an Acquiring Person, as defined pursuant to the foregoing provisions
of this SECTION 1.1, then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement (so long as such Person does not
become an Acquiring Person after such divestiture); and (c) none of the
Purchasers (as defined in that certain Stock Purchase Agreement dated as of
March 29, 1999, by and among the Company and the Purchasers, as amended by
letter agreement dated April 14, 1999), together with any one or more or all of
each Purchaser's Affiliates and Associates (collectively, the "Preferred
Investors"), shall become or be deemed to be an "Acquiring Person," either
singly or as a group, solely by reason of being or becoming the Beneficial Owner
of any number of the Company's shares of Series A Convertible Preferred Stock or
Series B Convertible Preferred Stock (together, the "Convertible Preferred
Shares"), or any of the Common Shares into which such Convertible Preferred
Shares are converted or may become convertible.
Section 2. AMENDMENT TO SECTION 1.11. Section 1.11 of the
Rights Agreement is amended to read in its entirety as follows:
"1.11 A "TRIGGER EVENT" shall be deemed to have occurred upon
any Person becoming an Acquiring Person. Notwithstanding the foregoing, a
Trigger Event shall not be deemed to have occurred if the event causing the
ownership thresholds set forth in Section 1.1 to be crossed is (x) an
acquisition of Common Shares made pursuant to a cash tender offer made pursuant
to the rules and regulations under the Exchange Act and filed with the
Securities and Exchange Commission on Schedule 14D-1 (or any successor form) for
all outstanding Common Shares not beneficially owned by the Person making such
offer (or by its Affiliates or Associates) so long as the Board of Directors of
the Company determines, after receiving advice from one or more investment
banking firms, that such offer is (i) at a price and on terms which are fair to
stockholders (taking into account all factors which such members of the Board
deem relevant, including without limitation, prices which could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value) and (ii) otherwise in the best interests of the Company
and its stockholders, or (y) an acquisition by a Person of Convertible Preferred
Shares and/or the Common Shares into which such Convertible Preferred Shares are
convertible from a Preferred Investor if the Board of Directors of the Company
determines in good faith that such acquisition by such Person is not contrary to
the best interests of the Company and its stockholders; PROVIDED, HOWEVER, that
there must be Continuing Directors then in office and any such determination
shall require the concurrence of a majority of such Continuing Directors. Any
Person acquiring Convertible Preferred Shares and/or Common Shares in an
acquisition approved by the Board of Directors in accordance with the preceding
sentence shall be deemed to be, together with all of such Person's Affiliates
and Associates, an Exempt Person within the meaning of Section 1.1, and such
Person's Exempt Percentage shall be the percentage of Common Shares that such
-2-
<PAGE>
Person, together with all of such Person's Affiliates and Associates,
beneficially owns upon completion of the approved acquisition."
Section 3. ADDITION OF SECTION 3.4. A new Section 3.4 to the
Rights Agreement shall be added to read in its entirety as follows:
"Section 3.4 CONVERTIBLE PREFERRED SHARES. The Convertible
Preferred Shares shall be entitled to the same rights and benefits (determined
on the basis of the number of Common Shares into which Convertible Preferred
Shares are convertible on the relevant Distribution Date) provided under this
Rights Agreement (as amended) or under any replacement or alternative rights
arrangements as are provided to the Common Shares. Each obligation of the
Company and the Rights Agent to the holders of Common Shares under this
Agreement shall apply equally (on such as-converted basis set forth in the prior
sentence) for the benefit of the holders of the Convertible Preferred Shares. As
soon as practicable after the Distribution Date, the Rights Agent will send, by
first-class, postage-prepaid mail, to each record holder of Convertible
Preferred Shares as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more Right
Certificates, evidencing one Right (subject to adjustment as provided herein)
for each Common Share into which the Convertible Preferred Shares held by such
holder are then convertible. Any such Rights so issued with respect to such
Convertible Preferred Shares shall be subject to rights, terms and conditions
identical to those of the Rights evidenced by Right Certificates issued pursuant
to Section 3.1 hereof and such holder of Convertible Preferred Shares shall be
treated as a registered or record holder of such Rights."
Section 4. ACKNOWLEDGMENT THAT DISTRIBUTION DATE HAS NOT
OCCURRED. The parties hereto acknowledge that, up to and through the date of
this Amendment, no Person has become an Acquiring Person, no event has occurred
or with the passage of time will occur that has resulted or would result in the
occurrence of a Distribution Date, a Trigger Event, or an event described in
Section 11.1.2(A) of the Rights Agreement, and no such event has occurred or
will occur by reason of the issuance of the Convertible Preferred Shares, or any
of the Common Shares into which such Convertible Preferred Shares are
convertible, to the Preferred Investors.
Section 5. RIGHTS AGREEMENT AS AMENDED. The term "Agreement"
as used in the Rights Agreement shall be deemed to refer to the Rights Agreement
as amended hereby. This Amendment shall be effective as of the date hereof and,
except as set forth herein, the Rights Agreement shall remain in full force and
effect and be otherwise unaffected hereby.
Section 6. OFFICER'S CERTIFICATE. In accordance with Section
26 of the Rights Agreement, the Company has provided the Rights Agent a
certificate executed by an authorized officer of the Company, stating that the
Amendment is in compliance with the terms of Section 26 of the Rights Agreement.
Section 7. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all of such counterparts shall together constitute
but one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed and their respective corporate seals to be hereunto affixed,
all as of the day and year first above written.
GARDENBURGER, INC.
By: /s/ Richard C. Dietz
-------------------------------------------
Name: Richard C. Dietz
Title: Executive Vice President and
Chief Financial Officer
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: /s/ Joanne Gorostiola
-------------------------------------------
Name: Joanne Gorostiola
--------------------------------------
Title: Assistant Vice President
--------------------------------------
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Company's balance sheets and related statements of operations for the
period ended March 31, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,684
<SECURITIES> 0
<RECEIVABLES> 6,599
<ALLOWANCES> 208
<INVENTORY> 17,248
<CURRENT-ASSETS> 34,222
<PP&E> 15,303
<DEPRECIATION> 3,587
<TOTAL-ASSETS> 52,581
<CURRENT-LIABILITIES> 31,521
<BONDS> 32,105
0
0
<COMMON> 10,092
<OTHER-SE> (4,249)
<TOTAL-LIABILITY-AND-EQUITY> 52,581
<SALES> 13,563
<TOTAL-REVENUES> 13,563
<CGS> 7,353
<TOTAL-COSTS> 7,353
<OTHER-EXPENSES> 14,088
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 654
<INCOME-PRETAX> (8,507)
<INCOME-TAX> (3,051)
<INCOME-CONTINUING> (5,456)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,456)
<EPS-PRIMARY> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
EXHIBIT 99
DESCRIPTION OF COMMON STOCK
OF GARDENBURGER, INC.
General
The authorized capital stock of Gardenburger, Inc. (the "Company"),
consists of 5,000,000 shares of Preferred Stock, no par value ("Preferred
Stock"), and 25,000,000 shares of Common Stock, no par value ("Common Stock").
All outstanding shares of Common Stock are fully paid and nonassessable. Holders
of Common Stock have no preemptive or conversion rights and there are no
redemption or sinking fund provisions relating to the Common Stock. The holders
of outstanding shares of Common Stock are entitled to one vote per share on
matters submitted to the vote of holders of Common Stock. Voting for directors
is not cumulative. Subject to the rights of outstanding shares of Preferred
Stock, the holders of Common Stock are entitled to such dividends as the Board
of Directors may declare out of assets legally available therefor, at such times
and in such amounts as the Board deems advisable, and to share pro rata in all
assets of the Company available for distribution to its shareholders upon
liquidation. See "Preferred Stock" below for an explanation of the effect of the
issuance of 3,250,000 shares of Preferred Stock in April 1999 on the rights of
holders of Common Stock.
Preferred Stock
The Company had outstanding at May 1, 1999, 2,762,500 shares of its
Series A Convertible Preferred Stock (the "Series A Shares") and 487,500 shares
of its Series B Convertible Preferred Stock (the "Series B Shares" and, together
with the Series A Shares, the "Preferred Shares").
Subject to the approval of the holders of a majority of the Preferred
Shares, additional shares of the Company's authorized Preferred Stock may be
issued in the future in one or more new series without any further action by the
holders of the Common Stock, except as required by law or as required for shares
quoted on The Nasdaq Stock Market as National Market System securities. The
Board of Directors, within the limitations provided by law and the Company's
Articles of Incorporation, is authorized to designate the different series and
fix and determine the relative rights and preferences of any series so
established.
A summary of the terms of the Preferred Shares follows.
CONVERSION RIGHTS. The Preferred Shares are convertible into shares of
Common Stock at a conversion price of $10.00 per share, or initially on a
one-for-one basis, at any time at the discretion of the holder. The conversion
price is subject to adjustment for stock dividends, stock splits,
recapitalizations, and other anti-dilution provisions. All shares of a series of
the Preferred Shares will be automatically converted into Common Stock upon the
vote or written consent of the holders of at least two-thirds of the outstanding
shares of such series. The conversion price for the Series B Shares will be
-1-
<PAGE>
adjusted to $3.75 if the Company fails to meet specified performance targets for
fiscal years 1999 and 2000.
DIVIDEND RIGHTS. The Preferred Shares are entitled to a 12% cumulative
annual dividend payable upon redemption of the shares or in the event of a sale
or liquidation of the Company. Accruals of dividends do not bear interest. The
Company is prohibited from paying cash dividends to holders of its Common Stock
("Junior Dividends") unless dividends have been declared and paid on all
outstanding Preferred Shares in an amount equal to the greater of the 12%
cumulative dividends accrued on such Preferred Shares through the record date
for the Junior Dividend and the amount of the Junior Dividend payable on the
Preferred Shares on an as-converted basis, in each case less the amount of any
12% cumulative dividends previously paid on such Preferred Shares. All
accumulated dividends on any Preferred Shares which are converted shall be
forfeited, other than dividends as to which the Company has previously breached
its payment obligation.
LIQUIDATION PREFERENCE. Upon the liquidation or dissolution of the
Company, the holders of Preferred Shares are entitled to receive a payment of
$10.00 per share plus all accumulated and unpaid dividends, including amounts
payable in connection with Junior Dividends. The right of holders of Common
Stock to distribution of the Company's assets upon liquidation is junior to the
liquidation preference of the Preferred Shares. Each holder of Preferred Shares
may deem a merger, sale of all or substantially all the assets of the Company, a
capital reorganization of the Company or a reclassification of the Common Stock
to be a liquidation of the Company. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of Preferred
Shares will have no right to any of the remaining assets of the Company.
REDEMPTION PROVISIONS. The Preferred Shares of each series may be
redeemed at any time after December 31, 2004, at the election of a majority of
the holders of each series at a price equal to the liquidation preference. The
Preferred Shares may also be redeemed at the option of the Company after
December 31, 2004, at a price equal to 105% of the liquidation preference plus
accumulated and unpaid dividends, provided that the Common Stock then issuable
upon conversion of the Preferred Shares is freely tradable upon issuance and the
market price of the Common Stock for the 60 trading days preceding notice of
redemption is at least 200% of the conversion price then in effect.
VOTING RIGHTS. Each Preferred Share is entitled to one vote (or such
other number of votes equal to the number of shares of Common Stock into which
such Preferred Share is then convertible) in the election of directors and any
other matters presented to the shareholders of the Company for their action or
consideration. Except to the extent otherwise required by law or the Company's
Articles of Incorporation, holders of Preferred Shares will vote together with
the holders of Common Stock as a single voting group. Corporate actions as to
which holders of the Series A Shares and Series B Shares are entitled to vote as
separate voting groups under provisions of the Oregon Business Corporation Act
include amendments to the Company's Articles of Incorporation (including
pursuant to a plan of merger) that would increase or decrease the number of
authorized shares of the series, effect an exchange or reclassification of the
shares into shares of another class or vice versa, change the terms of the
shares of the series, create a new class of shares with rights or preferences
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that are superior or substantially equal to the shares of the series, or cancel
rights to distributions or dividends that have accumulated but have not yet been
declared on shares of the series. If the proposed amendment would affect the
Series A Shares and Series B Shares in a substantially similar way, the shares
of both series would be required to vote together as a single voting group on
the amendment.
As long as at least 1,408,875 Series A Shares remain outstanding, the
holders of the Series A Shares are entitled to elect two directors by a majority
of the outstanding Series A Shares, voting as a separate voting group. Also, as
long as at least 552,500 Series A Shares and 97,500 Series B Shares remain
outstanding, the Preferred Shares are entitled to vote together as a single
voting group (that is, without the Common Shares) with respect to proposals by
the Company to engage in specified significant corporate actions, including,
among others, the authorization or issuance of additional Series A Shares or
Series B Shares or a class of Preferred Stock on a parity with or having
priority over the Preferred Shares, any amendment to the Company's Articles of
Incorporation or bylaws that would adversely alter the rights of the holders of
the Preferred Shares, a change of control, merger, liquidation or
recapitalization of the Company, the payment of dividends or distributions on
its capital stock other than the Preferred Shares, an increase in the authorized
number of directors of the Company above ten, or certain acquisition, lease,
loan or asset sale transactions.
NO PREEMPTIVE RIGHTS. The Preferred Shares do not have preemptive
rights.
Preferred Stock Purchase Rights
On April 25, 1996, the Board of Directors declared a dividend of one
right (a "right") for each share of Common Stock outstanding at the close of
business on May 20, 1996 (the "Record Date"). As long as the Rights are attached
to the shares of the Common Stock, the Company will issue one Right (subject to
adjustment) with each new share issued so that all outstanding shares will have
attached Rights. In addition, the holders of the Preferred Shares will be
entitled to the same rights and benefits as are provided with respect to shares
of Common Stock on an as-converted basis.
When the Rights first become exercisable, each Right will entitle the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Junior Participating Preferred Stock (the "Junior Preferred Shares") at
a price of $47.00 per one one-hundredth of a Junior Preferred Share, subject to
adjustment for antidilution provisions (the "Purchase Price"). A copy of the
Rights Agreement, dated as of April 25, 1996, as amended by Amendment No. 1
dated as of March 26, 1998 and Amendment No. 2 dated as of April 14, 1999 (the
"Rights Agreement"), between the Company and First Chicago Trust Company of New
York as Rights Agent (the "Rights Agent"), pursuant to which the Rights have
been issued, may be obtained by shareholders from the Company. The Company has
agreed that, from and after the distribution date (as defined below), the
Company will reserve 250,000 Junior Preferred Shares initially for issuance upon
exercise of the Rights. The Rights will expire on April 25, 2006, subject to the
Company's right to extend such date (the "Final Expiration Date"), unless
earlier redeemed or exchanged by the Company or terminated.
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The Rights are not exercisable and are attached to and trade with
shares of Common Stock until the earlier to occur of (i) the 10th day after a
public announcement that any person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding Common Stock or (ii) the
10th day after the commencement or announcement of an intention to make a tender
offer or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Stock
(the earlier of (i) and (ii) being called the "Distribution Date"). Upon such an
event, the Rights will trade separately. An Acquiring Person will not include
(x) Paul F. Wenner, together with his affiliates and associates, including,
without limitation, the Paul F. Wenner Charitable Foundation Trust
(collectively, "Wenner") or (y) Dresdner Kleinwort Benson Private Equity
Partners LP, together with its affiliates and associates (collectively
"Dresdner"), so long as Wenner beneficially owns not more than 25% and Dresdner
not more than 22% of the outstanding Common Stock (other than as the result of
share repurchases by the Company). Also, the persons who acquired Preferred
Shares in April 1999 will not be deemed to be an Acquiring Person solely by
reason of their beneficial ownership of the Preferred Shares or the shares of
Common Stock into which the Preferred Shares are or may become convertible.
Each Junior Preferred Share purchasable upon exercise of the Rights
will be entitled to a minimum preferential quarterly dividend payment of $1.00
per share but will be entitled to an aggregate dividend of 100 times the
dividend, if any, declared per share of Common Stock. In the event of
liquidation, the holders of the Junior Preferred Shares will be entitled to a
minimum preferential liquidation payment of $100.00 per share but will be
entitled to an aggregate payment of 100 times the payment made per share of
Common Stock. Each Junior Preferred Share will have 100 votes and will vote
together with the Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each Junior Preferred Share will be entitled to receive 100 times the
amount received per share of Common Stock. These rights are protected by
customary antidilution provisions. Because of the nature of the dividend,
liquidation and voting rights of the Junior Preferred Shares, the value of one
one-hundredth of a Junior Preferred Share purchasable upon exercise of each
Right should approximate the value of one share of Common Stock.
In the event that a Person becomes an Acquiring Person (except pursuant
to certain cash offers for all outstanding shares of Common Stock approved by
the Board or pursuant to an acquisition of Preferred Shares or shares of Common
Stock into which such Preferred Shares are convertible where the Board of
Directors determines in good faith that such acquisition is not contrary to the
best interests of the Company) or if the Company were the surviving corporation
in a merger with an Acquiring Person or any affiliate or associate of an
Acquiring Person and the shares of Common Stock were not changed or exchanged,
each holder of a Right, other than Rights that are or were acquired or
beneficially owned by the Acquiring Person (which Rights will thereafter be
void), will thereafter have the right to receive upon exercise that number of
shares of Common Stock having a market value of two times the then current
Purchase Price of the Right. With certain exceptions, in the event that the
Company were acquired in a merger or other business combination transaction or
more than 50% of its assets or earning power were sold, proper provision shall
be made so that each holder of a Right shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price of the
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Right, that number of shares of common stock of the acquiring company which at
the time of such transaction would have a market value of two times the then
current Purchase Price of the Right.
The Rights will cause substantial dilution to a person or group that
acquires 15% or more of the Common Stock on terms not approved by the Company's
Board of Directors. However, the Rights should not interfere with any merger or
other business combination approved by the Board of Directors at any time prior
to the first date that a person or group has become an Acquiring Person.
Convertible Notes
On March 27, 1998, the Company sold $15,000,000 aggregate principal
amount of 7% Convertible Senior Subordinated Notes (the "Notes") due April 1,
2003, to Dresdner Kleinwort Benson Private Equity Partners LP ("Dresdner")
pursuant to a Note Purchase Agreement dated as of March 27, 1998. The Notes may
be converted at any time prior to maturity or prepayment, in whole or in part,
into shares of the Common Stock. The initial conversion price was $12.90 per
share, subject to adjustment for changes in capitalization and other
antidilution provisions. The conversion price as of May 12, 1999, was $12.12 per
share, as adjusted for the issuance of the Preferred Shares at a price of $10.00
per share and the grant of certain options to the Company's employees,
directors, and consultants.
Pursuant to the Note Purchase Agreement, the Company may not, without
the prior written consent of the holders of a majority of the shares of Common
Stock issued or issuable upon conversion of the Notes (the "Majority Holders"),
(i) amend the Company's Articles of Incorporation, Bylaws or the Rights
Agreement between the Company and First Chicago Trust Company of New York in a
manner materially adverse to Dresdner's rights and preferences under the Note
Purchase Agreement and the Notes, (ii) create a new class or series of
securities on a par with or senior to the Notes, or (iii) engage in certain
significant corporate transactions, including, but not limited to, a merger or
sale of the Company or its business, liquidation or dissolution of the Company,
certain business acquisitions, and the incurrence of indebtedness or lease
obligations in excess of specified thresholds. So long as at least $5,000,000 in
principal amount of the Notes remains outstanding and Dresdner owns at least a
majority of the principal amount of Notes outstanding, the Company may not
declare any dividends or make any distributions with respect to its capital
stock or redeem or purchase any of its capital stock without the prior written
consent of the Majority Holders. In addition, so long as any Notes remain
outstanding, Paul F. Wenner, Lyle K. Hubbard and the Company have agreed to take
all reasonably necessary and desirable actions within their control so that an
individual designated by the Majority Holders is elected as a director of the
Company (a "Designated Director"). If at any time a Designated Director is not a
member of the Board of Directors, the Majority Holders have the right to appoint
a representative to attend and observe board meetings at the Company's expense.
Transfer Agent
The Company's transfer agent is First Chicago Trust Company of New
York.
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