SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 9, 1998
HARVEST RESTAURANT GROUP, INC.
------------------------------
(Exact name of Registrant as specified in its charter)
Texas
-----
(State or Other Jurisdiction of Incorporation)
33-95796 76-0406417
-------- ----------
(Commission File Number) (I.R.S. Employer
Identification No.)
1250 N.E. Loop 410, Suite 335, San Antonio, Texas 78209
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (210) 824-2496
Not applicable
--------------
(former name of former address, if changed since last report)
<PAGE>
INFORMATION INCLUDED IN REPORT ON FORM 8-K
Item 4. Changes in Registrant's Certifying Accountant
Effective July 17, 1998, Akin, Doherty, Klein & Feuge, P.C. ("Akin Doherty"
or the "Accountants") resigned as the certifying accountant for Harvest
Restaurant Group, Inc. (the "Company"). Due to the pending merger with TRC
Acquisition Corporation and the planned relocation of the corporate offices to
Atlanta, Georgia as described in Item 5 below, the Company does not intend to
retain a new independent accountant until after the completion of the merger. It
is anticipated that after completion of the merger, TRC's current independent
accountants, PriceWaterhouseCoopers, LLP, will be retained as the Company's new
independent accountants.
The report of Akin Doherty on the consolidated financial statements of
Harvest Restaurant Group, Inc. for the year ended December 28, 1997 was
qualified as to an uncertainty to continue as a going concern. The report for
the year ended December 29, 1996 contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles.
There were no disagreements with Akin Doherty during the two years ended
December 28, 1997 and December 29, 1996 on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
There were no events communicated by Akin Doherty during the two years
ended December 28, 1997 and December 29, 1996 regarding the following:
1. That the internal controls necessary for the Company to develop reliable
financial statements did not exist.
2. That information has come to the Accountant's attention that has led it
to no longer be able to rely on management's representations or that has made it
unwilling to be associated with the financial statements prepared by management.
3. That the Accountants needed to expand significantly the scope of their
audit or that they have become aware of information that if further investigated
may materially impact the fairness and reliability of a previously issued audit
report or underlying financial statements or cause it to be unwilling to rely on
management's representations or be associated with the Company's financial
statements.
4. That information has come to the Accountant's attention that it has
concluded materially impacts the fairness or reliability of a previously issued
audit report or the underlying financial statements and that due to the
Accountant's resignation the issue has not been resolved to the Accountant's
satisfaction prior its resignation.
2
<PAGE>
The Company has requested that Akin Doherty furnish it with a letter
addressed to the Securities and Exchange Commission stating whether or not it
agrees with the above statements. A copy of such letter will be filed as an
amendment to this Form 8-K upon receipt.
The Company had not previously retained or consulted with any new
independent accountant with respect to the application of accounting principles
to any transaction, the type of audit opinion that might be rendered on the
Company's consolidated financial statements, or as to any matter that was either
the subject of a disagreement as defined in 304(a)(1)(iv), or a reportable event
(as described in paragraph (a)(1)(iv) of Item 304 Regulation S-K).
Item 5. Other Events
On July 9, 1998, the Company executed a definitive share exchange agreement
to merge with TRC Acquisition Corporation ("TRC"), the operator of Rick Tanner's
Original Rotisserie Grill restaurants ("Tanner's"). TRC owns, operates and
franchises Tanner's restaurants, a twelve-year-old chain of full service, casual
dining restaurants in Georgia and Alabama. TRC operates eleven Tanner's
restaurants in Atlanta, Georgia, and two franchised Tanner's restaurants are
opened, one in Macon, Georgia and one in Montgomery, Alabama. The merger is
subject to, among other things, (i) completion of due diligence by both parties,
(ii) obtaining settlement agreements on substantially all of the Company's
outstanding liabilities, (iii) the continuation of the Company's listing on the
Nasdaq Stock Market, and (iv) shareholder approval of the merger.
When the merger becomes effective, the TRC shareholders including holders
of all options and warrants, will own approximately 60% of the total outstanding
equity of the Company on a fully diluted basis. The board of directors of the
Company will be increased to seven members, with three of the Company's five
present directors resigning. The Company's corporate offices will also be
relocated to Atlanta, Georgia to be in closer proximity with the core Tanner's
restaurant operations.
In connection with the merger, the Company entered a Securities Purchase
Agreement with an investor group providing for $6 million of equity funding, $4
million of which has been deposited into escrow. The primary use of proceeds is
for the further development of Tanner's restaurants. The Securities Purchase
Agreement provides for the issuance of 600 shares of the Company's $1.00 par
value Series C Preferred Stock, at face value of $10,000 per share, in three
separate fundings which will all be concluded within 30 days after completion of
merger. The shares are to be issued to private investor groups in reliance upon
the transaction exemption afforded by Regulation D, as promulgated by the
Securities Act of 1933, as amended.
3
<PAGE>
The Series C Preferred Stock is convertible into the Company's Common
Stock. The conversion rate per share is equal to $10,000 divided by 80% of the
average bid price of the company's Common Stock at the time of conversion. The
Company intends to file a registration statement with the Securities and
Exchange Commission to register the underlying securities within 90 days.
Item 7. Financial Statements and Exhibits
Exhibits:
- ---------
The following exhibits are filed as part of this Report:
Exhibit No. Title
- ----------- -----
10.42 Share Exchange Agreement between Harvest Restaurant Group, Inc.
and TRC Acquisition Corporation dated July 9, 1998.
10.43 Securities Purchase Agreement dated July 9, 1998
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 hereunto duly authorized.
HARVEST RESTAURANT GROUP, INC.
(Registrant)
By: /s/ William J. Gallagher
------------------------------------
William J. Gallagher
Date: July 24, 1998 Chairman and Chief Executive Officer
-------------------
4
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I CONDITIONS TO OBLIGATION OF THE PARTIES 2
Section 1.1 Conditions to Obligations 2
Section 1.2 Contemplated Transactions 2
1.2.1 Financing 2
1.2.2 Shareholder Approval of New Board of Directors 3
1.2.3 Employment Agreements 3
1.2.4 Continued Listing 3
1.2.5 Settlement of Liabilities 3
1.2.6 Conversion of Series A Convertible Preferred Stock 3
1.2.7 Combined Financials of Harvest and TRC 3
ARTICLE II FEASIBILITY PERIOD 4
Section 2.1 Feasibility Study 4
Section 2.2 Pre-Closing Documents to be Delivered 4
2.2.1 Financial Statements 4
2.2.2 Asset List 4
2.2.3 Leases 4
2.2.4 Contracts 4
2.2.5 Certificates 4
2.2.6 Taxes 4
2.2.7 Litigation 4
2.2.8 Violations 5
2.2.9 Organizational Documents 5
ARTICLE III THE CLOSING 5
Section 3.1 Closing 5
3.1.1 Time and Place of Closing 5
3.1.2 Actions of Harvest at Closing 5
3.1.2.1 Resignations 5
3.1.2.2 Certificate of Harvest 5
3.1.2.3 Corporation Resolutions 5
3.1.2.4 Exchange of Shares 6
3.1.3 Actions of TRC at Closing 6
3.1.3.1 Resignations 6
3.1.3.2 Certificate of TRC 6
3.1.3.3 Corporation Resolutions 6
3.1.4 Effective Date 6
ARTICLE IV EXCHANGE OF SHARES 6
Section 4.1 Exchange of Shares 6
4.1.1 Exchange of TRC Common Stock 6
4.1.2 Exchange of Rick Tanner Note and TRC Class A Preferred Stock 7
Section 4.2 Exchange Procedure 7
4.2.1 TRC Common Stock 7
4.2.2 TRC Class A Preferred Stock 7
Section 4.3 Appraisal Rights 7
-i-
<PAGE>
ARTICLE V TRC REPRESENTATIONS AND WARRANTIES 7
Section 5.1 TRC's Representations and Warranties 7
5.1.1 Capitalization 8
5.1.1.1 Authorized Stock 8
5.1.1.2 Issued Capital Stock 8
5.1.2 Organization Standing and Power 8
5.1.3 Subsidiaries 8
5.1.4 Title to Assets 8
5.1.5 Other Relationships 8
5.1.6 Other Transactions 9
5.1.7 Undisclosed Liabilities 9
5.1.8 Absence of Certain Changes or Events 9
5.1.9 Condition of Assets 9
5.1.10 Compliance With Law 9
5.1.11 Contracts 9
5.1.12 Permits, Licenses, Consents 9
5.1.13 Absence of Defaults 10
5.1.14 Litigation 10
5.1.15 No Breach or Violation of Law 10
5.1.16 Validity and Authorization 10
5.1.17 Completeness; No Misrepresentations 10
5.1.18 Tax Matters 11
5.1.19 Financial Statements 11
5.1.20 Full Disclosure 11
5.1.21 Absence of Certain Changes and Events 11
5.1.22 Taxes 13
5.1.23 Intellectual Property 15
5.1.24 Books and Records 17
5.1.25 Leased Properties 17
5.1.26 Employees and Employee Benefit Plans 17
5.1.27 Compensation 18
5.1.28 Insurance 18
5.1.29 Full Disclosure 18
ARTICLE VI TRC'S COVENANTS 19
Section 6.1 Continuation of Business 19
Section 6.2 No Solicitation 19
-ii-
<PAGE>
ARTICLE VII HARVEST'S REPRESENTATIONS AND WARRANTIES 19
Section 7.1 Harvest's Representations and Warranties 19
7.1.1 Capitalization 19
7.1.1.1 Authorized Stock 19
7.1.1.2 Issued Common Stock 20
7.1.1.3 Issued Preferred Stock 20
7.1.2 Standing and Power 20
7.1.3 Subsidiaries 20
7.1.4 Title to Asset 20
7.1.5 Other Relationships 20
7.1.6 Other Transactions 20
7.1.7 Undisclosed Liabilities 20
7.1.8 Absence of Certain Changes, or Events 21
7.1.9 Condition of Assets 21
7.1.10 Compliance With Law 21
7.1.11 Contracts and Commitments 21
7.1.12 Permits, Licenses, Consents 21
7.1.13 Absence of Defaults 22
7.1.14 Litigation 22
7.1.15 No Breach or Violation of Law 22
7.1.16 Validity and Authorization 22
7.1.17 Completeness: No Misrepresentations 22
7.1.18 Tax Matters 23
7.1.19 Financial Statements 23
7.1.20 Absence of Certain Changes and Events 23
7.1.21 Taxes 25
7.1.22 Compliance With Law 27
7.1.23 Intellectual Property 27
7.1.24 Books and Records 29
7.1.25 Leased Properties 29
7.1.26 Employees and Employee Benefit Plans 29
7.1.27 Compensation 30
7.1.28 Insurance 30
7.1.29 Full Disclosure 30
7.1.30 Securities and Nasdaq Listing 30
ARTICLE VIII HARVEST'S COVENANTS 31
Section 8.1 Continuation of Business 31
Section 8.2 No Solicitation 31
Section 8.3 Termination of Stock Option Plan 31
--------------------------------
ARTICLE IX TERMINATION 31
Section 9.1 Termination Events 31
Section 9.2 Effect of Termination 32
-iii-
<PAGE>
ARTICLE X INDEMNIFICATION; REMEDIES 32
Section 10.1 Survival; Right to Indemnification Not Affected by
Knowledge 32
Section 10.2 Indemnification and Payment of Damages by Harvest 32
Section 10.3 Indemnification and Payment of Damages by Harvest -
Environmental Matters 33
Section 10.4 Indemnification and Payment of Damages by TRC 33
Section 10.5 Indemnification and Payment of Damages by TRC -
Environmental Matters 34
Section 10.6 Time Limitations 34
Section 10.7 Procedure for Indemnification - Third Party Claims 35
ARTICLE XI CONDITIONS TO THE EXCHANGE OF STOCK 36
Section 11.1 Conditions Precedent to Performance by Harvest 36
Section 11.2 Board and Stockholder Approval 36
11.2.1 Representations; True Representations and Covenants
Performed 36
11.2.2 No Litigation Affecting Merger 36
11.2.3 Securities Laws 36
11.2.4 Regulatory Compliance, Approvals and Consents 36
11.2.5 Filings 37
Section 11.3 Conditions Precedent to Performance by TRC 37
11.3.1 Board and Stockholder Approval 37
11.3.2 Representations True and Covenants Performed 37
11.3.3 No Litigation Affecting Merger 37
11.3.4 Securities Laws 37
11.3.5 Regulatory Compliance, Approvals and Consents 37
11.3.6 Filings 38
ARTICLE XII NOTICES 38
Section 12.1 Notices 38
Section 12.2 Change of Address 39
ARTICLE XIII GENERAL 39
Section 13.1 Governing Law 39
Section 13.2 Press Releases 39
Section 13.3 Entire Agreement 39
Section 13.4 Successors 39
Section 13.5 Modification 39
Section 13.6 Severability 39
Section 13.7 Counterparts 40
Section 13.8 Signatures by Facsimile 40
Section 13.9 Remedies of the Parties 40
Section 13.10 Arbitration 40
Section 13.11 Attorney's Fees 40
Section 13.12 Cooperation and Records Retention 40
-iv-
<PAGE>
SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT is made and entered into as of this _____ day
of June, 1998, between HARVEST RESTAURANT GROUP, INC., a Texas corporation
("Harvest"), and TRC ACQUISITION CORPORATION, a Georgia corporation ("TRC"),
referred to jointly as the ("Parties").
RECITALS
WHEREAS, TRC has approximately 4,110,000 issued and outstanding shares of
common stock and warrants and options (all warrants and options to be converted
into the 4,110,000 shares prior to the closing contemplated herein) ("TRC Common
Stock"), and approximately 2,000 issued and outstanding shares of class A
preferred stock ("TRC Class A Preferred Stock"), which represents all of the
issued and outstanding capital stock of TRC;
WHEREAS, the principal assets and business of TRC are the operation of
approximately eleven (11) Tanner's restaurants and the franchise of two (2)
Tanner's restaurants, which are described by name and location on Schedule "1"
("Tanner's Restaurant(s)");
WHEREAS, Harvest is a public corporation which operates quick service
restaurants under the name Harvest Rotisserie and Harvest Food Court which
includes the brand names of Red Line Burgers and Old San Antonio Taco Factory;
WHEREAS, on June 9, 1998, Harvest was notified by the NASDAQ Stock Market,
Inc., that its continued listing on The Nasdaq Small Cap Market was subject to
revocation for its failure to meet the net tangible assets/market
capitalization/net income requirement as set forth in NASD Marketplace Rule
4310(c)(2) and for its failure to meet the minimum bid price requirements set
forth in NASD Marketplace Rule 4310(c)(4). A hearing was set before the NASD on
July 9, 1998 (the "NASD Hearing");
WHEREAS, on May _____, 1998, the parties executed a letter of intent
wherein the basic terms of the transactions described herein were agreed to and
reduced to writing, subject to further negotiations;
WHEREAS, this Agreement is entered into to, among other matters, rectify
the deficiencies with NASDAQ Compliance;
WHEREAS, it is understood and agreed that prior to the Effective Date (the
"Effective Date"), the outstanding capital stock of Harvest, including shares
issuable upon exercise of options and warrants, shall not exceed the following
share amounts: 3,463,009 shares of Common Stock (the "Harvest Common Stock"),
635,892 shares of Series A Convertible Preferred Stock (the "Harvest Series A
Preferred Stock"), 133 shares of Series B Convertible Preferred Stock (the
"Harvest Series B Preferred Stock"), and 3,083,000 options or warrants for
Common Stock, 1,923,400 warrants for Series A Convertible Preferred Stock shares
upon exercise of all warrants and options, and 400,000 warrants to Sterling
Capital and J.P. Carey at a strike price of $2.50 per share (the "Harvest
Warrants and Options") (the Harvest Common Stock, Harvest Series A Preferred
Stock and Harvest Series B Preferred Stock are sometimes collectively referred
to herein as "Harvest Capital Stock"). Except to the extent of the number of
Harvest Series B Preferred Stock issued in connection with the financing
described in paragraph 1.2.1 below, to the extent that the number of actual
outstanding shares of Harvest Capital Stock on the Effective Date exceeds the
share amounts stated above, then the shares of Harvest Common Stock to be issued
to the holders of TRC Common Stock as set forth above shall be adjusted pro rata
to maintain the same ownership percentage;
<PAGE>
WHEREAS, the intended result of this Shareholder Exchange Agreement is for
Harvest to issue 17,000,000 shares of Harvest Common Stock to TRC Shareholders
in exchange for 100% of the issued and outstanding TRC Common Stock;
WHEREAS, it is intended that the TRC convertible subordinated debenture to
Rick Tanner (the "Rick Tanner Note") and the TRC Class A Preferred Stock shall
be exchanged for a newly created series of preferred stock of Harvest (the
"Harvest Series C Preferred Stock"). Harvest Series C Preferred Stock shall
accrue dividends at the annual rate of 8%, and is convertible at the option of
the holder at any time after six (6) months into shares of Harvest Common Stock
at conversion rate of $2.50 for each share of Harvest Common Stock. Harvest
Series C Preferred Stock may be redeemed at the option of Harvest after six (6)
months after the Effective Date upon thirty (30) days written notice for $.01
per share if the closing price of Harvest's Common Stock on the NASDAQ SmallCap
Market averages at least $3.50 per share for a period of twenty (20) consecutive
trading days, if after notice to any Harvest Series C Preferred Stock holder,
and such holder does not convert. Harvest Series C Preferred Stock shall have
the rights, preferences, privileges and restrictions as are specified in the
Statement of Resolution attached hereto as Schedule 2;
WHEREAS, the Parties intend this transaction to qualify as a "tax-free
reorganization" within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that TRC become a subsidiary
of Harvest. The Parties believe that the value of Harvest stock to be received
is equal to the value of the TRC stock to be surrendered in exchange therefor.
No other consideration that could constitute "other property" within the meaning
of Section 356 of the Code is being paid by Harvest for the stock of TRC in the
merger;
NOW, THEREFORE, in reliance upon the recitals set forth above, the parties
agree as follows:
ARTICLE I.
CONDITIONS TO OBLIGATION OF THE PARTIES
Section 1.1 Conditions to Obligations. The obligation of the Parties under
this Agreement to consummate the share exchange under this Agreement is
contingent upon the completion of certain other transactions listed below and
defined collectively as the "Contemplated Transactions." Each of the Parties
shall use its best efforts to complete all of the Contemplated Transactions. If
any of the Contemplated Transactions are not completed, then the Parties shall
not be in default of their obligations under this Agreement and each party's
sole remedy shall be the termination of this Agreement.
Section 1.2 Contemplated Transactions. This Agreement contemplates that the
following multiple transactions (collectively, the "Contemplated Transactions")
be completed before or concurrently with the Closing of this transaction.
1.2.1 Financing. A financing commitment of $6,000,000.00 plus
additional sums, if a higher amount shall be required to maintain the listing of
Harvest securities on the Nasdaq Stock Market, shall be obtained on or before
the Nasdaq Hearing and is to be used approximately as follows:
(a) $1,500,000.00 to the Harvest subsidiary described below for
the development of five (5) Tanner's restaurants;
(b) $500,000.00 for the payoff of Harvest existing obligations;
and
(c) the remainder for corporate purposes.
2
<PAGE>
Such financing shall be on terms equal to or better than the terms set forth on
Schedule 1.2.1 attached hereto and made a part hereof, and all other terms
reasonably requested by TRC.
The monies to be provided in 1.2.1(a) shall be funded to a new, wholly-owned
subsidiary of Harvest ("Harvest Subsidiary") within five (5) business days after
the date of NASD Hearing of the continued listing of Harvest. The sums shall be
funded for the express purposes described above in Section 1.2.1. Prior to the
advancement of payment of any monies by the Harvest Subsidiary, (1) TRC shall
franchise to the Harvest Subsidiary the right to own and operate three (3)
Tanner's Restaurants on terms mutually agreeable; (2) Harvest and TRC shall
enter into a development and management agreement, on terms mutually agreeable,
for TRC to develop the three (3) Tanner's Restaurants; and (3) Harvest and TRC
shall enter into an option in favor of the Harvest Subsidiary to require TRC to
purchase the three (3) Tanner's Restaurants, in the event that TRC, for any
reason, does not consummate the closing set forth in this Agreement. The option
shall be on terms mutually agreeable to the parties. The remainder of financing
proceeds shall be available at Closing.
1.2.2 Shareholder Approval of New Board of Directors. Harvest shall
have shareholder approval of a new Harvest Board of Directors in compliance with
all laws, which directors are set forth on Schedule 1.2.2. It is agreed and
understood that election of new Directors is subject to closing of the
transaction described in this Agreement.
1.2.3 Employment Agreements. William Gallagher and Clyde Culp shall
have executed employment agreements or amendments to employment agreements with
Harvest, the essential and principal terms of which are set out and attached
hereto as Schedule 1.2.3 and made a part hereof.
1.2.4 Continued Listing. The shares of Harvest Common Stock shall be
approved for continued listing on The Nasdaq Stock Market at the NASD Hearing.
Upon consummation of the transactions contemplated in this Agreement, the
Harvest Common Stock shall be in compliance with all NASDAQ listing
requirements.
1.2.5 Settlement of Liabilities. Harvest shall obtain settlement
agreements from all creditors with known, actual or contingent outstanding
liabilities in excess of $10,000.00. The total amount of the settlement
agreements shall be approximately $550,000.00, but not to exceed $700,000.00.
1.2.6 Conversion of Series A Convertible Preferred Stock. Harvest
shall have converted the Series A Convertible Preferred Stock to Common Stock.
1.2.7 Combined Financials of Harvest and TRC. That the Combined
Financials of Harvest and TRC are as set forth on Schedule 1.2.7 attached hereto
and made a part hereof in accordance with generally accepted accounting
principals and the Securities and Exchange Commission ("SEC") concurs.
ARTICLE II.
FEASIBILITY PERIOD
Section 2.1 Feasibility Study. Each party is granted the right to conduct a
feasibility study of all of the existing and contingent assets and liabilities
of the other party including a physical inspection of all leases, improvements,
fixtures, mechanical equipment, personnel property, and other tangible and
intangible assets ("Feasibility Study"). Each party shall have until August 9,
3
<PAGE>
1998 to conduct such a Feasibility Study ("Feasibility Period"). During the
Feasibility Period, either party, or their designated agents, may enter upon the
leased or owned premises of the other party for such analyses, tests, and
inspections which may be deemed necessary by either party. If either party
determines, in their sole judgment, that the transaction is not desirable for
any reason, then that party may, on written notice to the other party, on or
before expiration of the Feasibility Period, terminate this Agreement without
penalty or being in default of their obligations. If the written notice is not
given to the other party on or before 5:00 p.m. Eastern Standard Time on the
expiration date of the Feasibility Period, this right to terminate shall be
deemed to have been waived by the party failing to give the notice.
Section 2.2 Pre-Closing Documents to be Delivered. Each party shall deliver
to the other party copies of the following within five (5) business days from
the date of signature of this Agreement by all parties. Failure to deliver any
of the listed documents is an independent reason for the other party to
rightfully terminate this Agreement. If any one or more of the items described
in Section 2.02 do not exist, the disclosing party shall advise the receiving
party, in writing, to that effect.
2.2.1 Financial Statements. Copies of financial statements as set
forth in Sections 5.1.19 and 7.1.19. This includes monthly sales and tax reports
for the period commencing January 1, 1998, through the calendar month
immediately preceding the date of submittal of the same.
2.2.2 Asset List. A detail of inventory of all equipment, furnishings,
fixtures, and inventories as of ___________, 1998.
2.2.3 Leases. All leases of real or personal property and any
documents pertaining to such leases in the disclosing parties' possession.
2.2.4 Contracts. Copies of all contracts and warranties and related
documents including service, maintenance, management, employment, or other
agreements, including loan agreements which affect the disclosing party or its
assets. If such exist, all documents, notices, or citations indicating a default
or breach by the disclosing party of any contract in which the disclosing party
is a party.
2.2.5 Certificates. Certificates of all fire, hazard, liability, and
other insurance policies maintained by the disclosing party.
2.2.6 Taxes. The most recent real estate and personal property tax
statements regarding the disclosing party's property along with the disclosing
party's federal income tax returns for the last two (2) years and proof of
payment of all sales and payroll taxes.
2.2.7 Litigation. If such exists, all notices, citations, or other
documents evidencing actions, suits or proceedings pending or threatened or
asserted against the disclosing party, at law or in equity, before any state,
federal, county, municipal or other governmental department, commission, board,
bureau, agency, or instrumentality, whether domestic or foreign.
2.2.8 Violations. If such exists, all documents, notices, or citations
indicating a violation by the disclosing party of zoning, building, fire, or
similar law, ordinance, code, order, regulation or restriction claimed by any
applicable governmental authority.
4
<PAGE>
2.2.9 Organizational Documents. All currently effective organizational
documents and other records of the disclosing party including, without
limitation, articles, by-laws, a list of directors, minutes, and stock ledger.
ARTICLE III.
THE CLOSING
Section 3.1 Closing.
3.1.1 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of Nelson
Mullins Riley & Scarborough, L.L.P., First Union Plaza, Suite 1400, 999
Peachtree Street, N.E., Atlanta, Georgia 30309 at 10:00 a.m., local time, on a
date to be designated by Harvest (the "Closing Date") which shall be no later
than the 5th business day after the later to occur of (i) the expiration of the
Feasibility Period, (ii) obtaining approval from Harvest stockholders and its
Board of Directors as required in Section 10.2.1, provided, however, in no event
later than December 31, 1998. Prior to, or concurrent with the Closing, the
Articles of Share Exchange or any such other documents as may be required to be
filed to effect the merger shall be filed with the appropriate offices of any
Secretary of State and the merger shall thereby become effective.
3.1.2 Actions of Harvest at Closing. At the Closing, Harvest shall
deliver to TRC the following:
3.1.2.1 Resignations. Harvest shall deliver to TRC the written
and executed resignations of the directors of Harvest and any such executed
employment agreements, dated as of the Effective Date, as called for in this
Agreement.
3.1.2.2 Certificate of Harvest. Harvest shall deliver to TRC a
certificate which shall be dated as of Closing and which shall be signed by
Harvest's Chief Executive Officer certifying (i) the authority of Harvest to
enter into and consummate the transactions contemplated by this Agreement (along
with a copy of the proxy sent to each shareholder and a copy of the shareholder
vote); (ii) the authority of the officers of Harvest to execute and deliver any
document contemplated by this Agreement on behalf of Harvest; (iii) that the
representations and warranties of Harvest obtained herein were correct and true
when made and are correct and true as of the date of Closing (except to the
extent that any representation or warranty of Harvest specifically relates to an
earlier date); and (iv) that each and every covenant and agreement of Harvest
contained in the Agreement to be performed by Harvest on or prior to Closing has
been performed by Harvest.
3.1.2.3 Corporation Resolutions. Harvest shall deliver to TRC
certified copies of the resolutions of the Board of Directors of Harvest
authorizing the execution, delivery, and performance of this Agreement and the
transactions contemplated herein.
3.1.2.4 Exchange of Shares. Harvest shall deliver all shares
contemplated by Section 4.01.
3.1.3 Actions of TRC at Closing. At the Closing, TRC shall deliver to
Harvest the following:
5
<PAGE>
3.1.3.1 Resignations. TRC shall deliver to Harvest the written
and executed resignations of such directors of TRC and such executed employment
agreements, dated as of the Effective Date, as called for in this Agreement.
3.1.3.2 Certificate of TRC. TRC shall deliver to Harvest a
Certificate, which shall be dated as of Closing and which shall be signed by
TRC's Chief Executive Officer certifying (i) the authority of TRC to enter into
and consummate the transactions contemplated by this Agreement; (ii) the
authority of the officers of TRC to execute and deliver any document
contemplated by this Agreement on behalf of TRC; (iii) that the representations
and warranties of TRC obtained herein were correct and true when made and are
correct and true as of the date of Closing (except to the extent that any
representation or warranty of TRC specifically relates to an earlier date); and
(iv) that each and every covenant and agreement of TRC contained in the
Agreement to be performed by TRC on or prior to Closing has been performed by
TRC.
3.1.3.3 Corporation Resolutions. TRC shall deliver to Harvest
certified copies of the resolutions of the Board of Directors of TRC and the
shareholder approval of TRC authorizing the execution, delivery, and performance
of this Agreement and the transactions contemplated herein.
3.1.4 Effective Date. The date on which the Exchange of Shares occurs
and becomes effective is hereinafter called the "Effective Date." The Effective
Date shall be the date of the filing of the Articles of Share Exchange with any
state Secretary of State that is required for the exchange of shares to lawfully
occur. The parties shall cause all such documents and instruments to be filed
with the appropriate state Secretaries of State as promptly as practicable upon
satisfaction of the conditions described herein.
ARTICLE IV.
EXCHANGE OF SHARES
Section 4.1 Exchange of Shares. Upon the Effective Date, by virtue of this
Agreement, each of the following shall be deemed to occur contemporaneously:
4.1.1 Exchange of TRC Common Stock. As of the Effective Date, all
shares of TRC Common Stock that are outstanding shall be converted into the
right to receive a total of 18,000,000 fully paid and non-assessable shares of
Harvest Common Stock (or such higher adjusted amount as provided for in the
recitals, equally among all issued and outstanding shares of TRC Common Stock
unless ratably reduced pursuant to a reverse split of Harvest Common Stock.
4.1.2 Exchange of Rick Tanner Note and TRC Class A Preferred Stock.
The Rick Tanner Note, valued in an amount of approximately $3,700,000.00, and
the TRC Class A Preferred Stock, valued in an amount of $3,525,000.00, along
with the Employment Agreement of Rick Tanner, shall be exchanged for 722,500
shares of Harvest Series C Preferred Stock at a value of $10.00 per share in
accordance with the provisions of Section 4.2, unless ratably reduced pursuant
to a reverse split of
Harvest Common Stock.
Section 4.2 Exchange Procedure.
4.2.1 TRC Common Stock. Unless surrendered to Harvest for exchange at
the Closing, as soon as practical after the Effective Date, the holder of each
share of TRC Common Stock exchanged pursuant to Section 4.1 shall surrender to
Harvest the certificate for such shares. Following the receipt of the TRC Common
Stock certificate, Harvest shall cause its transfer agent to issue, or Harvest
6
<PAGE>
itself shall issue, to each surrendering holder a certificate representing the
number of shares of Harvest Common Stock into which such TRC Common Stock shall
have been converted. Until so surrendered and exchanged, each outstanding
certificate which, prior to the Effective Date, represented TRC Common Stock
shall, following the Effective Date, be deemed for all purposes to evidence
ownership of the number of shares of Harvest Common Stock into which such shares
of TRC Common Stock have been converted.
4.2.2 TRC Class A Preferred Stock. Unless surrendered to Harvest for
exchange at the Closing, as soon as practical after the Effective Date, the
holder of each share of TRC Class A Preferred Stock exchanged pursuant to
Section 4.1.2 shall surrender to Harvest the certificate for such shares for
cancellation. Following the receipt of the TRC Class A Preferred Stock
certificate, Harvest will issue to each surrendering holder a certificate
represented the number of shares of Harvest Series C Preferred Stock into which
such TRC Class C Preferred Stock shall have been converted. Until so surrendered
and exchanged, each outstanding certificate which, prior to the Effective Date,
representing TRC Class A Preferred Stock shall, following the Effective Date, be
deemed for all purposes to evidence ownership of the number of shares of Harvest
Series C Preferred Stock into which such shares of TRC Class A Preferred Stock
have been converted.
Section 4.3 Appraisal Rights. Notwithstanding anything to the contrary
contained in this Agreement, dissenting shares (as defined under Georgia law) of
TRC shall not be canceled or converted into Harvest Common Stock unless and
until the holder thereof shall have failed to perfect or shall have effectively
withdrawn or lost his right to seek payment of the fair value of his shares
under applicable law. If any such holder shall have so failed to perfect or
shall have effectively withdrawn or lost such right, such holder's Dissenting
Shares shall thereupon be deemed to have been exchanged into, at the Effective
Date, Harvest Common Stock, as set forth in this Article. Any payments made in
respect of Dissenting Shares shall be made by TRC, out of funds other than those
provided hereunder.
ARTICLE V.
TRC REPRESENTATIONS AND WARRANTIES
Section 5.1 TRC's Representations and Warranties. TRC makes the following
representations and warranties to Harvest as a material inducement for Harvest
to enter into this Agreement subject only to such disclaimers as disclosures and
exceptions as are expressly set forth in the attachments hereto. These
representations and warranties are limited to the best actual knowledge of TRC
Directors and officers. Further, immaterial breaches of these representations
and warranties are specifically agreed to not comprise actionable breaches. All
of TRC warranties and representations herein are modified to the extent needed
to take into account TRC disclosures set forth or identified in the attachment
hereto entitled Schedule 5.1 -- TRC Disclosures, and made a part hereof.
5.1.1 Capitalization.
5.1.1.1 Authorized Stock. The authorized capital stock of TRC
consists of 100,000,000 shares of TRC Common Stock, no par value per share, and
1,000,000 shares of preferred stock, $1.00 par value per share, of which 2,000
shares have been designated as Class A.
5.1.1.2 Issued Capital Stock. There are 4,110,000 shares of TRC
Common Stock issued and outstanding, and or warrants and 2,000 shares of TRC
Class A Preferred Stock, all of which are owned beneficially and of record by
the listed shareholders. All such issued and outstanding shares of TRC capital
stock duly authorized, validly issued, fully paid and non-assessable, were not
issued in violation of the terms of any contract, agreement or commitment
binding upon TRC or any preemptive rights or rights of first refusal, and were
issued in compliance with all of its charter documents and applicable law.
7
<PAGE>
5.1.2 Organization Standing and Power. TRC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia and is qualified to do business where the failure to be so qualified
would materially and adversely affect its condition, properties, assets or
operations. TRC has all requisite corporate power and authority to enter into
and perform and consummate the transactions contemplated by this Agreement. The
copies of the charter documents of TRC and all amendments thereto and of its
bylaws as amended to date which have heretofore been furnished or delivered to
Harvest are correct and complete.
5.1.3 Subsidiaries. TRC has no subsidiaries other than those set forth
on Schedule 5.1.
5.1.4 Title to Assets. TRC has good, valid and indefeasible title to
its assets, free and clear of all security interests, mortgages, liens,
encumbrances, title retention or security agreements, claims, restrictions,
leases, options, rights of first offer or first refusal, confidentiality or
secrecy agreements, non-competition agreements, defects of title or other
encumbrances, or rights of others, other than those set forth on Schedule 5.1.
The execution and delivery of this Agreement and the consummation of the
transaction contemplated hereby will not constitute a violation of, nor be in
conflict with, nor constitute a default, under any terms or provisions of any
contract, lease, mortgage, indenture, or any other document whatsoever to which
TRC may be a party or to which TRC may be bound on each Closing Date.
5.1.5 Other Relationships. No affiliate, director, officer, principal
executive, or employee of, or consultant to TRC owns, directly or indirectly, in
whole or in part, any property, asset or right, tangible or intangible, relating
to or affecting TRC other than those set forth on Schedule 5.1.
5.1.6 Other Transactions. No affiliate, director, officer, principal
executive or employee of TRC, has, directly or indirectly, engaged in any
transaction with TRC outside of the ordinary course of business.
5.1.7 Undisclosed Liabilities. Prior to expiration of the Feasibility
Period, TRC has provided to Harvest a listing of its liabilities, at Schedule
5.1, except as and to the extent reflected or disclosed (or adequately reserved
for or against) in the financial statements, or except as specifically provided
by this Agreement, TRC has no debts, liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, whether due or to become
due, including, but not limited to, liabilities or obligations on account of
known fraud by any merchant, customer, taxes, other governmental charges,
duties, penalties, interest, fines, vacation pay, workmen's compensation claims,
or pension plan obligations, and there is no known basis for the assertion
against TRC.
5.1.8 Absence of Certain Changes or Events. The business of TRC has
been operated only in the usual and ordinary course of business and there has
not been any occurrence, event or condition outside of the ordinary course of
business.[since when?]
5.1.9 Condition of Assets. The assets of TRC are in good operating
condition for the purposes of conducting the business of TRC on the Effective
Date as such business has been or is being conducted. TRC has good and
marketable title to all of the Assets subject to no mortgage, pledge, lien,
conditional sales agreement, encumbrance, security interest, or charge of any
nature whatsoever, except as herein provided.
8
<PAGE>
5.1.10 Compliance With Law. TRC has complied and is in compliance with
all applicable zoning decisions and has complied and is in compliance with all
applicable federal, state, and local laws, statutes, licensing requirements,
rules, and regulations, and judicial or administrative decisions. TRC has been
granted all licenses, permits (temporary and otherwise), authorizations, and
approvals from federal, state, and local government regulatory or zoning bodies
necessary to carry on the business and maintain the assets of TRC, all of which
are currently valid and in full force and effect. All such licenses, permits,
authorizations and approvals shall be valid and in full force and effect upon
the consummation of the transactions contemplated by this Agreement. There is no
order issued, or proceeding pending or threatened, or notice served with respect
to any violation of any law, ordinance, order, writ, decree, rule, or regulation
issued by any federal state, local, or foreign court or governmental agency or
instrumentality applicable to TRC. TRC has valid business licenses to carry on
its operations.
5.1.11 Contracts. All of TRC's contracts, agreements, customer and
supplier purchase order and other commitments are legal, valid and binding and
in full force and effect, and there are no defaults thereunder. None of the
rights of TRC thereunder shall be impaired by the consummation of the
transactions contemplated by this Agreement, and all of the rights of TRC
thereunder shall be enforceable by Harvest after the Merger without the consent
or agreement of any other party except for the agreements specifically listed in
attachments hereto, which contracts require consent to assignment. Copies of all
such contracts have heretofore been delivered to Harvest by TRC and are true and
complete and include all amendments and supplements thereto and modifications
thereof.
5.1.12 Permits, Licenses, Consents. TRC has all governmental leases,
licenses, permits, consents, approvals, authorizations, qualifications and
orders necessary to conduct its business and to operate its properties and
assets, and such leases, licenses, permits, consents, approvals, authorizations,
qualifications and orders are in full force and effect. No notification to or
approval of any governmental agency is required for all governmental leases,
licenses, permits, consents, approvals, authorizations, qualifications and
orders to remain in full force and effect after the Closing. No violations exist
or have been recorded in respect of any governmental lease, license, permit,
consent, approval authorization, qualification or order of TRC. No proceeding is
pending or, to the best of TRC's knowledge, threatened looking toward the
revocation or limitation of any such governmental lease, license, permit,
consent, approval, authorization, qualification or order and there is no basis
or grounds for any such revocation or limitation. TRC has complied in all
material respects with all present and, to the best of TRC's knowledge, enacted,
but not yet effective, federal, state and local laws, rules, regulations,
ordinances, codes, orders, licenses and permits relating to any of its
properties or applicable to its business.
5.1.13 Absence of Defaults. TRC is not nor is it alleged to be, in
default under, or in breach of any term or provision of, any contract,
agreement, lease, license, commitment, instrument or fiduciary or other
obligation. No other party to any contract, agreement, lease, license,
commitment, instrument or fiduciary or other obligation to which TRC is party is
in default thereunder or in breach of any term or provision thereof. There
exists no condition or event which, after notice or lapse of time or both, would
constitute a default by any party to any such contract, agreement, lease,
license, commitment, instrument or fiduciary or other obligation.
5.1.14 Litigation. There is (i) no suit, action or claim, (ii) no
investigation or inquiry by any administrative agency or governmental body, and
(iii) no legal, administrative or arbitration proceeding pending or, to the best
of TRC's knowledge, threatened against TRC or any of the properties, assets,
business or prospects of TRC or to which TRC is or might become a party, and to
the best of TRC's knowledge, there is no basis or grounds for any such suit,
action, claim, investigation, inquiry or proceeding, including but not limited
to, labor, equal employment opportunity, safety and health, environmental and
antitrust laws. There is no outstanding order, writ, injunction or decree of any
court, administrative agency or governmental body or arbitration tribunal
against or affecting or relating to TRC.
9
<PAGE>
5.1.15 No Breach or Violation of Law. The execution and delivery of
this Agreement by TRC and the consummation of the transactions contemplated
hereby will not (i) conflict with, or result in the breach of any of the terms
or conditions of, or constitute a default under, or result in the acceleration
of any obligation under, or require any consent, approval or notice under, the
charter documents or the bylaws, or any resolution of TRC or any contract,
agreement, commitment, indenture, mortgage, deed of trust, lease, pledge
agreement, note, bond, license or other instrument or obligation to which TRC is
now a party or by which TRC or any of the properties or assets of TRC may be
bound or affected, or (ii) violate any law, or any rule or regulation of any
administrative agency or governmental body, or any order, writ, injunction or
decree of any court, administrative agency or governmental body.
5.1.16 Validity and Authorization. This Agreement has been duly
authorized by all necessary corporate and shareholder action and duly and
validly executed and delivered by TRC and is legally binding on TRC in
accordance with its terms.
5.1.17 Completeness; No Misrepresentations. The copies of all
instruments, agreements, and written information, including without limitation
the Schedules hereto, delivered pursuant to this Agreement or otherwise
furnished or made available to Harvest by TRC, or any representatives of either
of them are complete and correct as of the date hereof. The representations and
warranties made by TRC in this Agreement or in any Schedule or other document
furnished in connection with this Agreement do not contain any untrue statement
of a material fact, or omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading. The fact that
Harvest and its representatives have conducted an investigation of TRC prior to
the execution of this Agreement shall not affect the representations and
warranties contained in this Article or the extent of the obligations or
liabilities of TRC in the event of a breach of any such representation or
warranty.
5.1.18 Tax Matters. TRC has duly and timely filed all returns with
respect to any taxes required to be filed by it or for which it may be held
responsible, and has paid, or will pay on a timely basis, all taxes shown to be
due and payable on such returns, all deficiencies and assessments of taxes,
notice of which has been received by it, and all other taxes payable by it. TRC
is not aware of any basis upon which any assessment for a material amount of
additional taxes could be made
5.1.19 Financial Statements. It is understood that TRC's financial
statements are not audited unless indicated as such on the delivered financial
documents. The year-end financial statements and interim financial statements
delivered by TRC to Harvest have been prepared in accordance with generally
accepted accounting principles and present fairly the financial position of TRC
as of December 28, 1997, and as of April 19, 1998, respectively, and the
statement of income presents fairly the results of operations and changes in
financial position of TRC for the periods ended December 28, 1997, and April 19,
1998, respectively, and sales reports for the period commencing January 1, 1998,
through the calendar month immediately preceding the date of submittal of the
same, all in conformity with generally accepted accounting principles applied on
a basis consistent with that of prior periods, except that the interim financial
statements are not audited and do not contain footnotes and are subject to audit
adjustments.
10
<PAGE>
5.1.20 Full Disclosure. TRC has disclosed to Harvest all material
facts relating to TRC and its operations and has not knowingly omitted to
disclose to Harvest any material fact relating to TRC, or its operations
necessary to make the statements made herein not misleading.
5.1.21 Absence of Certain Changes and Events. Except as set forth in
Schedule 5.1 hereto, since the date of the interim financial statements there
has not been:
(i) Any material adverse change in the financial condition,
results of operation, assets, liabilities or prospects of TRC, or any
occurrence, circumstance, or combination thereof which reasonably
could be expected to result in any such material adverse change;
(ii) Any transaction relating to or involving TRC, or the assets
of TRC which was entered into or carried out by TRC other than for
fair consideration in the ordinary course of business;
(iii) Any change by TRC in its accounting or tax practices or
procedures;
(iv) Any incurrence of any liability, other than liabilities
incurred in the ordinary course of business consistent with past
practices;
(v) Any sale, lease, or disposition of, or any agreement to sell,
lease, or dispose of any of its properties (whether leased or owned),
or the assets of TRC, other than sales, leases, or dispositions of
goods, materials, or equipment in the ordinary course of business or
as contemplated by this Agreement;
(vi) Any event permitting any of the assets or the properties of
TRC (whether leased or owned) to be subjected to any pledge,
encumbrance, security interest, lien, charge, or claim of any kind
whatsoever (direct or indirect) (collectively, "Liens");
(vii) Any increase in compensation or any adoption of, or
increase in, any bonus, incentive compensation, pension, profit
sharing, retirement, insurance, medical reimbursement or other
employee benefit plan, payment or arrangement to, for, or with any
employee of TRC;
(viii) Any payment or distribution of any bonus to, or
cancellation of indebtedness owing from, or incurring of any liability
relating to any employees, consultants, directors, officers, or
agents, or any persons related thereto;
(ix) Any notice (written or unwritten) from any employee of TRC
that such employee has terminated, or intends to terminate, such
employee's employment with TRC;
(x) Any adverse relationship or condition with suppliers or
vendors that may have an adverse effect on TRC;
(xi) Any event, including, without limitation, shortage of
materials or supplies, fire, explosion, accident, requisition or
taking of property by any governmental agency, flood, drought,
earthquake, or other natural event, riot, act of God or a public
enemy, or damage, destruction, or other casualty, whether covered by
insurance or not, which has had an adverse effect on TRC, the
properties (whether leased or owned), or any such event which could be
expected to have an adverse effect on TRC, the properties (whether
leased or owned), or the assets of TRC;
11
<PAGE>
(xii) Any modification, waiver, change, amendment, release,
rescission, accord and satisfaction, or termination of, or with
respect to, any term, condition, or provision of any contract,
agreement, license, or other instrument to which TRC is a party and
relating to or affecting TRC other than any satisfaction by
performance in accordance with the terms thereof in the ordinary
course of business;
(xiii) Any discharge or satisfaction of any lien or payment of
any liabilities, other than in the ordinary course of business;
(xiv) Any waiver of any rights of substantial value by TRC, other
than waivers having no material adverse effect on TRC;
(xv) Any issuance of equity securities of TRC or any issuance of
warrants, calls, options or other rights calling for the issuance,
sale, or delivery of TRC's equity securities;
(xvi) Any declaration of any dividend or any distribution of any
shares of its capital stock, or redemption, purchase, or other
acquisition of any shares of its capital stock or any grant of an
option, warrant, or other right to purchase or acquire any such
shares;
(xvii) Any amendment, or agreement to amend, TRC's Articles of
Incorporation or Bylaws, or any merger or consolidation with, or any
agreement to merge or consolidate with, any other corporation,
partnership, limited liability company or any other entity;
(xviii) Any reduction, or agreement to reduce, the cash or
short-term investments of TRC, other than to meet cash needs arising
in the ordinary course of business;
(xix) Any work interruptions, labor grievances or claims filed,
proposed law or regulation or any event of any character, materially
adversely affecting future prospects of TRC;
(xx) Any revaluation by TRC of any of its assets;
(xxi) Any loan by TRC to any person or entity, or any guaranty by
TRC of any loan; or
(xxii) Any other event or condition of any character which
materially adversely affects, or reasonably may be expected to so
affect, the assets of TRC or the properties (whether leased or owned)
of TRC.
12
<PAGE>
5.1.22 Taxes.
(i) Definitions. For purposes of this Agreement:
(a) the term "Taxes" means (A) all federal, state, local, foreign
and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatever, together with any interest and any
penalties, additions to tax or additional amounts with respect
thereto, (B) any liability for payment of amounts described in
clause (A) whether as a result of transferee liability, of being
a member of an affiliated, consolidated, combined or unitary
group for any period, or otherwise through operation of law, and
(C) any liability for the payment of amounts described in clauses
(A) or (B) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to
indemnify any other person; and the term "Tax" means any one of
the foregoing Taxes; and
(b) the term "Returns" means all returns, declarations, reports,
statements, claims for refund and other documents required to be
filed in respect of Taxes, and the term "Return" means any one of
the foregoing Returns.
(ii) TRC has properly completed and filed on a timely basis
(including extensions) and in correct form all Returns required to be
filed on or prior to the Closing. As of the time of filing, the
foregoing Returns correctly reflected the facts regarding the income,
business, assets, operations, activities, status or other matters of
TRC or any other information required to be shown thereon. In
particular, the foregoing Returns are not subject to unpaid penalties
under Section 6662 of the Internal Revenue Code of 1986, as amended
(the "Code"), relating to accuracy-related penalties (or any
corresponding provision of state, local or foreign Tax law) or any
other unpaid penalties.
(iii) With respect to all amounts in respect of Taxes imposed
upon TRC, or for which TRC is liable, whether to taxing authorities
(as, for example, under law) or to other persons or entities (as, for
example, under tax allocation agreements), with respect to all taxable
periods ending on or before the Closing and portions of periods
commencing before the Closing and ending after the Closing, all
applicable tax laws and agreements have been fully complied with, and
all such amounts required to be paid by TRC to taxing authorities or
others on or before the Closing have been paid, and all such amounts
required to be paid by TRC to taxing authorities or others after the
Closing which have not been paid are reflected on the financial
statements of TRC.
(iv) No notices raising tax issues have been received by TRC from
any taxing authority in connection with any of the Returns. No
extensions or waivers of statutes of limitations with respect to the
Returns have been given by or requested from TRC. All deficiencies
asserted or assessments made as a result of any examinations have been
fully paid, or are fully reflected as a liability in the financial
statements of TRC, or are being contested and an adequate reserve
therefor has been established and is fully reflected in the financial
statements of TRC.
13
<PAGE>
(v) There are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of TRC.
(vi) TRC is not a party to or bound by (nor will TRC become a
party to or become bound by) any tax indemnity, tax sharing or tax
allocation agreement.
(vii) TRC has never been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code.
(viii) TRC has not filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income Tax law) or
agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income Tax law) apply to any
disposition of any asset owned by it.
(ix) None of the assets of TRC directly or indirectly secures any
debt the interest on which is tax exempt under Section 103(a) of the
Code.
(x) None of the assets of TRC is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(xi) TRC has not made and will not make a deemed dividend
election under Treas. Reg. ss.1.1502-32(f)(2) or a consent dividend
election under Section 565 of the Code.
(xii) TRC has not agreed to make, nor is it required to make, any
adjustment under Sections 481(a) or 263A of the Code or any comparable
provision of state or foreign tax laws by reason of a change in
accounting method or otherwise.
(xiii) TRC is not party to any joint venture, partnership, or
other arrangement or contract which could be treated as a partnership
for federal income tax purposes.
(xiv) TRC's book basis of each of its assets is reflected in its
financial statements.
(xv) All elections with respect to Taxes made during the fiscal
years ended December 31, 1996, December 31, 1996 and December 31, 1997
are reflected on the Returns for such periods, copies of which have
been provided to Harvest.
5.1.23 Intellectual Property.
(i) TRC and its subsidiaries own or have the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary or desirable for the operation of the
business of TRC. Each item of Intellectual Property owned or used by
any of TRC and its subsidiaries immediately prior to the closing
hereunder will be owned or available for use by TRC, its subsidiaries,
or its subsidiaries on identical terms and conditions immediately
subsequent to the closing hereunder. Each of TRC and its subsidiaries
has taken all necessary and desirable action to maintain and protect
each item of Intellectual Property that it owns or uses.
14
<PAGE>
(ii) None of TRC and its subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties, and none of TRC
shareholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of TRC and its
subsidiaries has ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that any of TRC
and its subsidiaries must license or refrain from using any
Intellectual Property rights of any third party). TRC and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of TRC and its subsidiaries, no third
party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
any of TRC and its subsidiaries.
(iii) Schedule 5.1 identifies each patent or registration which
has been issued to any of TRC and its subsidiaries with respect to any
of its Intellectual Property, identifies each pending patent
application or application for registration which any of TRC and its
subsidiaries has made with respect to any of its Intellectual
Property, and identifies each license, agreement, or other permission
which any of TRC and its subsidiaries has granted to any third party
with respect to any of its Intellectual Property (together with any
exceptions). TRC has delivered to Harvest correct and complete copies
of all such patents, registrations, applications, licenses,
agreements, and permission (as amended to date) and has made available
to Harvest correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of
each such item. Schedule 5.1 also identifies each trade name or
unregistered trademark used by any of TRC and its subsidiaries in
connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in Schedule 5.1:
(a) TRC and its subsidiaries possess all right, title, and
interest in and to the item, free and clear of any security
interest, license, or other restriction;
(b) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(c) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item; and
(d) none of TRC and its subsidiaries has ever agreed to indemnify
any person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iv) Schedule 5.1 identifies each item of Intellectual Property
that any third party owns and that any of TRC and its subsidiaries
uses pursuant to license, sublicense, agreement, or permission. TRC
has delivered to Harvest correct and complete copies of all such
licenses, sublicenses, agreements, and permission (as amended to
date). With respect to each item of Intellectual Property required to
be identified in Schedule 5.1:
15
<PAGE>
(a) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force
and effect.
(b) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments
and assumptions referred to above);
(c) no party to the license, sublicense, agreement, or permission
is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach of default or
permit termination, modification, or acceleration thereunder;
(d) no party to the license, sublicense, agreement, or permission
has repudiated any provision thereof;
(e) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are
true and correct with respect to the underlying license;
(f) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(g) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of TRC and its subsidiaries, is threatened
which challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(h) none of TRC and its subsidiaries has granted any sublicense
or similar right with respect to the license, sublicense,
agreement, or permission.
(v) None of TRC and the directors and officers (and employees
with responsibility for Intellectual Property matters) of TRC and its
subsidiaries has any new products, inventions, procedures, or methods
of manufacturing or processing that any competitors or other third
parties have developed which reasonably could be expected to supersede
or make obsolete any product or process of any of TRC and its
subsidiaries.
5.1.24 Books and Records. The books and records of TRC to which
Harvest and their accountants and attorneys have been given access are the true
books and records of TRC and truly and fairly reflect the underlying facts and
transactions in all respects.
5.1.25 Leased Properties. The Financial Statements and Schedule 5.1
hereto together list all personal property (including equipment leases) and real
property leased by TRC in connection with the business (the "Leased Properties")
and the aggregate annual rent or other fees payable under all such leases. TRC
has a valid leasehold or ownership interest in all of the Leased Properties,
free and clear of any liens. The negotiation and consummation of this Agreement
and the transactions contemplated hereby will not result in any penalties, the
acceleration of payments or the termination of any lease of Leased Properties.
16
<PAGE>
5.1.26 Employees and Employee Benefit Plans.
5.1.26.1 Other than as set forth in Schedule 5.1 hereto, TRC is
not a party to any pension, profit sharing, savings, retirement or other
deferred compensation plan, or any bonus (whether payable in cash or stock) or
incentive program, or any group health plan (whether insured or self-funded), or
any disability or group life insurance plan or other employee welfare benefit
plan, or to any collective bargaining agreement or other agreement, written or
oral, with any trade or labor union, employees' association or similar
organization. TRC is not a party to, nor has made any contribution to or
otherwise incurred any obligation under, any "multi-employer plan" as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
5.1.26.2 With respect to each such plan set forth in Schedule 5.1
(a "Plan"), TRC has furnished to Harvest or their counsel complete and accurate
copies of the Plan documents (including trust documents, insurance policies or
contracts, employee booklets, summary plan descriptions and other authorizing
documents, and any material employee communications). With respect to each Plan
subject to ERISA as either an employee pension benefit plan within the meaning
of Section 3(2) of ERISA or an employee welfare benefit plan within the meaning
of Section 3(1) of ERISA, TRC has prepared in good faith and timely filed all
requisite governmental reports and has properly and timely posted, or
distributed all notices and reports to employees required to be filed, posted,
or distributed with respect to each Plan. Each Plan has at all times been
properly and completely funded by TRC and has been operated and administered in
all respects in accordance with its terms and all applicable laws, including,
but not limited to, ERISA and the Code.
5.1.26.3 All Plans that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Code have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
included as part of Schedule 5.1 hereof. Except as disclosed on Schedule 5.1,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries have been timely
filed and distributed, and copies thereof are included as part of Schedule 5.1
hereof. TRC further represents that:
(a) there have been no terminations, partial terminations, or
discontinuance of contributions to any such Qualified Plan
intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service;
(b) no such plan listed in Schedule 5.1, subject to the
provisions of Title IV of ERISA has been terminated;
(c) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such
plan listed in Schedule 5.1; and
(d) TRC has not incurred any liability under Section 4062 of
ERISA.
17
<PAGE>
5.1.26.4 TRC has not made any oral or written communications to
its current or former employees that guarantee current or former employees
continuation of employer-provided benefits or retirement coverage under TRC's
welfare benefit plans or which would have any effect on TRC's ability to
terminate retiree or any other benefits to all current or former employees.
5.1.26.5 TRC has not violated any of the health care continuation
coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985 applicable to its Employees prior to the Closing or any prior actions of or
transactions entered into by TRC.
5.1.27 Compensation. TRC has delivered to Harvest an accurate
schedule, attached to this Agreement as Schedule 5.1, showing all officers,
directors, and key employees of TRC and the rate of compensation (and the
portions thereof attributable to salary, bonus, and other compensation,
respectively) of the directors, officers, and key employees. ------------
5.1.28 Insurance. TRC maintains policies of insurance covering the
assets of TRC, properties, and business in types and amounts as set forth in
Schedule 5.1. TRC is in compliance with each of such policies such that none of
the coverage provided under such policies has been invalidated and TRC has not
received any written notice of cancellation of any such policies. Schedule 5.1
lists and describes all TRC insurance policies in effect immediately prior to
the time of Closing. Such policies are with reputable insurers and are in
amounts sufficient for the prudent protection of the properties and the Business
of TRC.
5.1.29 Full Disclosure. TRC has disclosed to all material facts
relating to TRC and its operations and has not knowingly omitted to disclose to
Harvest any material fact relating to TRC, or its operations necessary to make
the statements made herein not misleading.
ARTICLE VI.
TRC's COVENANTS
Section 6.1 Continuation of Business. TRC covenants and agrees with Harvest
as follows, between the date hereof and the Effective Date, unless otherwise
consented to in writing by Harvest or as provided for by this Agreement, (i) it
shall conduct its affairs solely in the ordinary course of business consistent
with past practice and shall not materially change its policies and practices;
(ii) shall not issue or cause to be issued by TRC any capital stock or security
convertible into capital stock, except pursuant to outstanding warrants,
convertible preferred stock, stock options and convertible debentures, or grant
any options or rights to acquire capital stock, or otherwise alter TRC's capital
structure; (iii) shall not repurchase any of its securities or pay any dividend
or make any distribution with respect to its securities other than normal cash
dividends; (iv) shall not enter into any contract or arrangement other than in
the ordinary course of business; and (v) shall not amend its charter documents
or bylaws.
Section 6.2 No Solicitation. Unless and until the Effective Date occurs,
TRC shall not (i) solicit any offer to acquire all or any part of TRC's
business, assets or other properties or capital stock, whether by merger,
purchase of assets, tender offer or otherwise or (ii) except as required by law,
disclose, directly or indirectly, any information not customarily disclosed to
any person or entity concerning TRC's business or properties, afford to any
other person or entity access to TRC's properties, books or records or otherwise
assist or encourage any person or entity in connection with any of the
foregoing.
18
<PAGE>
ARTICLE VII.
HARVEST'S REPRESENTATIONS AND WARRANTIES
Section 7.1 Harvest's Representations and Warranties. Harvest makes the
following representations and warranties to TRC as a material inducement for TRC
to enter into this Agreement subject only to such disclaimers as disclosures and
exceptions as are expressly set forth in the attachments hereto. These
representations and warranties are limited to the best actual knowledge of
Harvest Directors and officers. Further, immaterial breaches of these
representations and warranties are specifically agreed to not comprise
actionable breaches. All of Harvest's warranties and representations herein are
modified to the extent needed to take into account Harvest's disclosures set
forth or identified in the attachment hereto entitled Schedule 7.1 -- Harvest
Disclosures and made a part thereof.
7.1.1 Capitalization.
7.1.1.1 Authorized Stock. The authorized capital stock of Harvest
consists of 20,000,000 shares of Harvest Common Stock, $0.01 par value per
share, and by Closing shall be 100,000,000 shares of Harvest Common Stock, $0.01
par value per share, and 5,000,000 shares of preferred stock, $1.00 par value
per share, of which 3,000,000 shares have been designated as Series A Preferred
Stock and 1,000 shares have been designated as Series B Preferred Stock.
7.1.1.2 Issued Common Stock. There are 3,463,009 (18,000,000 to
be issued in this transaction) shares of Harvest Common Stock issued and
outstanding. All such issued and outstanding shares of Harvest Common Stock are
duly authorized, validly issued, fully paid and non-assessable, were not issued
in violation of the terms of any contract, agreement or commitment binding upon
Harvest or any preemptive rights or rights of first refusal, and were issued in
compliance with all of its charter documents and applicable law.
7.1.1.3 Issued Preferred Stock. There are 635,892 shares of
Harvest Series A Preferred Stock and 133 shares of Harvest Series B Preferred
Stock issued and outstanding. All such issued and outstanding shares of Harvest
Preferred Stock are duly authorized, validly issued, fully paid and
non-assessable, were not issued in violation of the terms of any contract,
agreement or commitment binding upon Harvest or any preemptive rights or rights
of first refusal, and were issued in compliance with all of its charter
documents and applicable law.
7.1.2 Organization Standing and Power. Harvest is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and is qualified to do business where the failure to be so qualified would
materially and adversely affect its condition, properties, assets or operations.
Harvest has all requisite corporate power and authority to enter into and
perform and consummate the transactions contemplated by this Agreement. The
copies of the charter documents of Harvest and all amendments thereto and of its
bylaws as amended to date which have heretofore been furnished or delivered to
the TRC are correct and complete.
7.1.3 Subsidiaries. Harvest has no subsidiaries other than those
listed on Schedule 7.1.
7.1.4 Title to Assets. Harvest has good, valid and indefeasible title
to its assets, free and clear of all security interests, mortgages, liens,
encumbrances, title retention or security agreements, claims, restrictions,
leases, options, rights of first offer or first refusal, confidentiality or
secrecy agreements, non-competition agreements, defects of title or other
encumbrances of rights of others. The execution and delivery of this Agreement
and the consummation of the transaction contemplated hereby will not constitute
a violation of, nor be in conflict with, nor constitute a default, under any
terms or provisions of any contract, lease, mortgage, indenture, or any other
document whatsoever to which Harvest may be a party or to which Harvest may be
bound on each Closing Date.
19
<PAGE>
7.1.5 Other Relationships. No affiliate, director, officer, principal
executive, or employee of or consultant to Harvest owns, directly or indirectly,
in whole or in part, any property, asset or right, tangible or intangible
relating to or affecting Harvest.
7.1.6 Other Transactions. No affiliate, director, officer, principal
executive or employee of Harvest, has, directly or indirectly, engaged in any
transaction with Harvest outside of the ordinary course of business.
7.1.7 Undisclosed Liabilities. Prior to expiration of the Feasibility
Period, Harvest has provided to TRC a listing of its liabilities, at Schedule
7.1, except as and to the extent reflected or disclosed (or adequately reserved
for or against) in the financial statements, or except as specifically provided
by this Agreement, Harvest has no debts, liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, whether due or to
become due, including, but not limited to, liabilities or obligations on account
of known fraud by any merchant customer, taxes, other governmental charges,
duties, penalties, interest, fines, vacation pay, workmen's compensation claims,
or pension plan obligations and there is no known basis for the assertion
against Harvest.
7.1.8 Absence of Certain Changes, or Events. The business of Harvest
has been operated only in the usual and ordinary course of business and there
has not been any occurrence, event or condition outside of the ordinary course
of business.
7.1.9 Condition of Assets. The assets of Harvest are in good operating
condition for the purposes of conducting the business of Harvest on the
Effective Date as such business has been or is being conducted. Harvest has good
and marketable title to all of its assets subject to no mortgage, pledge, lien,
conditional sales agreement, encumbrance, security interest, encumbrance, or
charge of any nature whatsoever, except as herein provided.
7.1.10 Compliance With Law. Harvest has complied and is in compliance
with all applicable zoning decisions and has complied and is in compliance with
all applicable federal, state, and local laws, statutes, licensing requirements,
rules, and regulations, and judicial or administrative decisions. Harvest has
been granted all licenses, permits (temporary and otherwise), authorizations,
and approvals from federal, state, and local government regulatory or zoning
bodies necessary to carry on the business and maintain the assets of Harvest,
all of which are currently valid and in full force and effect. All such
licenses, permits, authorizations and approvals shall be valid and in full force
and effect upon the consummation of the transactions contemplated by this
Agreement. There is no order issued, or proceeding pending or threatened, or
notice served with respect to any violation of any law, ordinance, order, writ,
decree, rule, or regulation issued by any federal state, local, or foreign court
or governmental agency or instrumentality applicable to Harvest. Harvest has
valid business licenses to carry on its operations.
7.1.11 Contracts and Commitments. All of Harvest's contracts,
agreements, customer and supplier purchase order and other commitments are
legal, valid and binding and in full force and effect, and there are no defaults
thereunder. None of the rights of Harvest thereunder shall be impaired by the
consummation of the transactions contemplated by this Agreement, and all of the
rights of Harvest thereunder shall be enforceable by TRC after the Merger
without the consent or agreement of any other party except for the agreements
specifically listed in attachments hereto, which contracts require consent to
assignment. Copies of all such contracts have heretofore been delivered to TRC
by Harvest and are true and complete and include all amendments and supplements
thereto and modifications thereof.
20
<PAGE>
7.1.12 Permits, Licenses, Consents. Harvest has all governmental
leases, licenses, permits, consents, approvals, authorizations, qualifications
and orders necessary to conduct its business and to operate its properties and
assets, and such leases, licenses, permits, consents, approvals, authorizations,
qualifications and orders are in full force and effect. No notification to or
approval of any governmental agency is required for all governmental leases,
licenses, permits, consents, approvals, authorizations, qualifications and
orders to remain in full force and effect after the Closing. No violations exist
or have been recorded in respect of any governmental lease, license, permit,
consent, approval, authorization, qualification or order of Harvest. No
proceeding is pending or, to the best of Harvest's knowledge, threatened,
looking toward the revocation or limitation of any such governmental lease,
license, permit, consent, approval, authorization, qualification or order and
there is no basis or grounds for any such revocation or limitations Harvest has
complied in all material respects with all present and, to the best of Harvest's
knowledge, enacted but not yet effective, federal state and local laws, rules,
regulations, ordinances, codes, orders, licenses and permits relating to any of
its properties or applicable to its business.
7.1.13 Absence of Defaults. Except as provided in the attached
disclosures, Harvest is not nor is it alleged to be, in default under, or in
breach of any term or provision of, any contract, agreement, lease, license,
commitment, instrument or fiduciary or other obligation. No other party to any
contract, agreement, lease, license, commitment, instrument or fiduciary or
other obligation to which Harvest is party is in default thereunder or in breach
of any term or provision thereof. There exists no condition or event which,
after notice or lapse of time or both, would constitute a default by any party
to any such contract, agreement, lease, license, commitment, instrument or
fiduciary or other obligation.
7.1.14 Litigation. Except as provided in the attached disclosures,
there is (i) no suit, action or claim, (ii) no investigation or inquiry by any
administrative agency or governmental body, and (iii) no legal, administrative
or arbitration proceeding pending or, to the best of Harvest's knowledge,
threatened against Harvest or any of the properties, assets, business or
prospects of Harvest or to which Harvest is or might become a party, and to the
best of Harvest's knowledge, there is no basis or grounds for any such suit,
action, claim, investigation, inquiry or proceeding, including but not limited
to, labor, equal employment opportunity, safety, health, environmental and
antitrust laws. There is no outstanding order, writ, injunction or decree of any
court, administrative agency or governmental body or arbitration tribunal
against or affecting or relating to Harvest.
7.1.15 No Breach or Violation of Law. The execution and delivery of
this Agreement by Harvest and the consummation of the transactions contemplated
hereby will not (i) conflict with, or result in the breach of any of the terms
or conditions of or constitute a default under, or result in the acceleration of
any obligation under, or require any consent, approval or notice under, the
charter documents or the bylaws or any resolution of Harvest or any contract,
agreement, commitment, indenture, mortgage, deed of trust, lease, pledge
agreement, note, bond, license or other instrument or obligation to which
Harvest is now a party or by which Harvest or any of the properties or assets of
Harvest may be bound or affected, or (ii) violate any law, or any rule or
regulation of any administrative agency or governmental body, or any order,
writ, injunction or decree of any court, administrative agency or governmental
body.
21
<PAGE>
7.1.16 Validity and Authorization. This Agreement has been duly
authorized by all necessary corporate action and upon approval of Harvest
shareholders is duly and validly executed and delivered by Harvest and is
legally binding on Harvest in accordance with its terms.
7.1.17 Completeness: No Misrepresentations. The copies of all
instruments, agreements, and written information, including without limitation
the Schedules hereto, delivered pursuant to this Agreement or otherwise
furnished or made available to TRC by Harvest, or any representatives of either
of them are complete and correct as of the date hereof. The representations and
warranties made by Harvest in this Agreement or in any Schedule or other
document furnished in connection with this Agreement do not contain any untrue
statement of a material fact, or omit to state a material fact necessary to make
the statements or facts contained herein or therein not misleading. The fact
that TRC and its representatives have conducted an investigation of Harvest
prior to the execution of this Agreement shall not affect the representations
and warranties contained in this Article VII or the extent of the obligations or
liabilities of Harvest in the event of a breach of any such representation or
warranty.
7.1.18 Tax Matters. Harvest has duly and timely filed all returns with
respect to any taxes required to be filed by it or for which it may be held
responsible, and has paid, or will pay on a timely basis, all taxes shown to be
due and payable on such returns, all deficiencies and assessments of taxes,
notice of which has been received by it, and all other taxes payable by it.
Harvest is not aware of any basis upon which any assessment for a material
amount of additional taxes could be made.
7.1.19 Financial Statements. It is understood that Harvest's financial
statements are not audited unless indicated as such on the delivered financial
documents. The year-end financial statements and interim financial statements
delivered by Harvest to TRC have been prepared in accordance with generally
accepted accounting principles and present fairly the financial position of
Harvest as of December 28, 1997, and as of April 19, 1998, respectively, and the
statement of income presents fairly the results of operations and changes in
financial position of Harvest for the periods ended December 28, 1997, and April
19, 1998, respectively, and sales reports for the period commencing January 1,
1998, through the calendar month immediately preceding the date of submittal of
the same, all in conformity with generally accepted accounting principles
applied on a basis consistent with that of prior periods, except that the
interim financial statements are not audited and do not contain footnotes and
are subject to audit adjustments.
7.1.20 Absence of Certain Changes and Events. Except as set forth in
Schedule 7.1 hereto, since the date of the interim financial statements there
has not been:
7.1.20.1 Any material adverse change in the financial condition,
results of operation, assets, liabilities or prospects of Harvest, or any
occurrence, circumstance, or combination thereof which reasonably could be
expected to result in any such material adverse change;
7.1.20.2 Any transaction relating to or involving Harvest, or the
assets of Harvest which was entered into or carried out by Harvest other than
for fair consideration in the ordinary course of business;
7.1.20.3 Any change by Harvest in its accounting or tax practices
or procedures;
7.1.20.4 Any incurrence of any liability, other than liabilities
incurred in the ordinary course of business consistent with past practices;
22
<PAGE>
7.1.20.5 Any sale, lease, or disposition of, or any agreement to
sell, lease, or dispose of any of its properties (whether leased or owned), or
the assets of Harvest, other than sales, leases, or dispositions of goods,
materials, or equipment in the ordinary course of business or as contemplated by
this Agreement;
7.1.20.6 Any event permitting any of the assets or the properties
of Harvest (whether leased or owned) to be subjected to any pledge, encumbrance,
security interest, lien, charge, or claim of any kind whatsoever (direct or
indirect) (collectively, "Liens");
7.1.20.7 Any increase in compensation or any adoption of, or
increase in, any bonus, incentive compensation, pension, profit sharing,
retirement, insurance, medical reimbursement or other employee benefit plan,
payment or arrangement to, for, or with any employee of Harvest;
7.1.20.8 Any payment or distribution of any bonus to, or
cancellation of indebtedness owing from, or incurring of any liability relating
to any employees, consultants, directors, officers, or agents, or any persons
related thereto;
7.1.20.9 Any notice (written or unwritten) from any employee of
Harvest that such employee has terminated, or intends to terminate, such
employee's employment with Harvest;
7.1.20.10 Any adverse relationship or condition with suppliers or
vendors that may have an adverse effect on Harvest;
7.1.20.11 Any event, including, without limitation, shortage of
materials or supplies, fire, explosion, accident, requisition or taking of
property by any governmental agency, flood, drought, earthquake, or other
natural event, riot, act of God or a public enemy, or damage, destruction, or
other casualty, whether covered by insurance or not, which has had an adverse
effect on Harvest, the properties (whether leased or owned), or any such event
which could be expected to have an adverse effect on Harvest, the properties
(whether leased or owned), or the assets of Harvest;
7.1.20.12 Any modification, waiver, change, amendment, release,
rescission, accord and satisfaction, or termination of, or with respect to, any
term, condition, or provision of any contract, agreement, license, or other
instrument to which Harvest is a party and relating to or affecting the Harvest
other than any satisfaction by performance in accordance with the terms thereof
in the ordinary course of business;
7.1.20.13 Any discharge or satisfaction of any lien or payment of
any liabilities, other than in the ordinary course of business;
7.1.20.14 Any waiver of any rights of substantial value by
Harvest, other than waivers having no material adverse effect on Harvest;
7.1.20.15 Any issuance of equity securities of Harvest or any
issuance of warrants, calls, options or other rights calling for the issuance,
sale, or delivery of Harvest's equity securities;
7.1.20.16 Any declaration of any dividend or any distribution of
any shares of its capital stock, or redemption, purchase, or other acquisition
of any shares of its capital stock or any grant of an option, warrant, or other
right to purchase or acquire any such shares;
23
<PAGE>
7.1.20.17 Any amendment, or agreement to amend, Harvest's
Articles of Incorporation or Bylaws, or any merger or consolidation with, or any
agreement to merge or consolidate with, any other corporation, partnership,
limited liability company or any other entity;
7.1.20.18 Any reduction, or agreement to reduce, the cash or
short-term investments of Harvest, other than to meet cash needs arising in the
ordinary course of business;
7.1.20.19 Any work interruptions, labor grievances or claims
filed, proposed law or regulation or any event of any character, materially
adversely affecting future prospects of Harvest;
7.1.20.20 Any revaluation by Harvest of any of its assets;
7.1.20.21 Any loan by Harvest to any person or entity, or any
guaranty by Harvest of any loan; or
7.1.20.22 Any other event or condition of any character which
materially adversely affects, or reasonably may be expected to so affect, the
assets of Harvest or the properties (whether leased or owned) of Harvest.
7.1.21 Taxes.
7.1.21.1 Definitions. For purposes of this Agreement:
(a) the term "Taxes" means (A) all federal, state, local,
foreign and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes,
fees, assessments or charges of any kind whatever, together
with any interest and any penalties, additions to tax or
additional amounts with respect thereto, (B) any liability
for payment of amounts described in clause (A) whether as a
result of transferee liability, of being a member of an
affiliated, consolidated, combined or unitary group for any
period, or otherwise through operation of law, and (C) any
liability for the payment of amounts described in clauses
(A) or (B) as a result of any tax sharing, tax indemnity or
tax allocation agreement or any other express or implied
agreement to indemnify any other person; and the term "Tax"
means any one of the foregoing Taxes; and
(b) the term "Returns" means all returns, declarations, reports,
statements, claims for refund and other documents required
to be filed in respect of Taxes, and the term "Return" means
any one of the foregoing Returns.
7.1.21.2 Harvest has properly completed and filed on a timely
basis (including extensions) and in correct form all Returns required to be
filed on or prior to the Closing. As of the time of filing, the foregoing
Returns correctly reflected the facts regarding the income, business, assets,
operations, activities, status or other matters of Harvest or any other
information required to be shown thereon. In particular, the foregoing Returns
are not subject to unpaid penalties under Section 6662 of the Internal Revenue
Code of 1986, as amended (the "Code"), relating to accuracy-related penalties
(or any corresponding provision of state, local or foreign Tax law) or any other
unpaid penalties.
24
<PAGE>
7.1.21.3 With respect to all amounts in respect of Taxes imposed
upon Harvest, or for which Harvest is liable, whether to taxing authorities (as,
for example, under law) or to other persons or entities (as, for example, under
tax allocation agreements), with respect to all taxable periods ending on or
before the Closing and portions of periods commencing before the Closing and
ending after the Closing, all applicable tax laws and agreements have been fully
complied with, and all such amounts required to be paid by Harvest to taxing
authorities or others on or before the Closing have been paid, and all such
amounts required to be paid by Harvest to taxing authorities or others after the
Closing which have not been paid are reflected on the financial statements of
Harvest.
7.1.21.4 No notices raising tax issues have been received by
Harvest from any taxing authority in connection with any of the Returns. No
extensions or waivers of statutes of limitations with respect to the Returns
have been given by or requested from Harvest. All deficiencies asserted or
assessments made as a result of any examinations have been fully paid, or are
fully reflected as a liability in the financial statements of Harvest, or are
being contested and an adequate reserve therefor has been established and is
fully reflected in the financial statements of Harvest.
7.1.21.5 There are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of Harvest.
7.1.21.6 Harvest is not a party to or bound by (nor will Harvest
become a party to or become bound by) any tax indemnity, tax sharing or tax
allocation agreement.
7.1.21.7 Harvest has never been a member of an affiliated group
of corporations within the meaning of Section 1504 of the Code.
7.1.21.8 Harvest has not filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income Tax law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign income Tax law) apply to any disposition of any asset owned by
it.
7.1.21.9 None of the assets of Harvest directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of the
Code.
7.1.21.10 None of the assets of Harvest is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
7.1.21.11 Harvest has not made and will not make a deemed
dividend election under Treas. Reg. ss.1.1502-32(f)(2) or a consent dividend
election under Section 565 of the Code.
7.1.21.12 Harvest has not agreed to make, nor is it required to
make, any adjustment under Sections 481(a) or 263A of the Code or any comparable
provision of state or foreign tax laws by reason of a change in accounting
method or otherwise.
25
<PAGE>
7.1.21.13 Harvest is not party to any joint venture, partnership,
or other arrangement or contract which could be treated as a partnership for
federal income tax purposes.
7.1.21.14 Harvest's book basis of each of its assets is reflected
in its financial statements.
7.1.21.15 All elections with respect to Taxes made during the
fiscal years ended December 31, 1996, December 31, 1996 and December 31, 1997
are reflected on the Returns for such periods, copies of which have been
provided to TRC.
7.1.22 Compliance With Law. Harvest has complied and is in compliance
with all applicable zoning decisions and has complied and is in compliance with
all applicable federal, state, and local laws, statutes, licensing requirements,
rules, and regulations, and judicial or administrative decisions. Harvest has
been granted all licenses, permits (temporary and otherwise), authorizations,
and approvals from federal, state, and local government regulatory or zoning
bodies necessary to carry on the business and maintain the assets of Harvest,
all of which are currently valid and in full force and effect. All such
licenses, permits, authorizations and approvals shall be valid and in full force
and effect upon the consummation of the transactions contemplated by this
Agreement. There is no order issued, or proceeding pending or threatened, or
notice served with respect to any violation of any law, ordinance, order, writ,
decree, rule, or regulation issued by any federal state, local, or foreign court
or governmental agency or instrumentality applicable to Harvest. Harvest has
valid business licenses to carry on its operations.
7.1.23 Intellectual Property.
7.1.23.1 Harvest and its subsidiaries own or have the right to
use pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary or desirable for the operation of the business of Harvest.
Each item of Intellectual Property owned or used by any of Harvest and its
subsidiaries immediately prior to the closing hereunder will be owned or
available for use by Harvest, its subsidiaries, or its subsidiaries on identical
terms and conditions immediately subsequent to the closing hereunder. Each of
Harvest and its subsidiaries has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or uses.
7.1.23.2 None of Harvest and its subsidiaries has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of Harvest shareholders
and the directors and officers (and employees with responsibility for
Intellectual Property matters) of Harvest and its subsidiaries has ever received
any charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that any of
Harvest and its subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). Harvest and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Harvest and
its subsidiaries, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of any of Harvest and its subsidiaries.
7.1.23.3 Schedule 7.1 identifies each patent or registration
which has been issued to any of Harvest and its subsidiaries with respect to any
of its Intellectual Property, identifies each pending patent application or
application for registration which any of Harvest and its subsidiaries has made
with respect to any of its Intellectual Property, and identifies each license,
agreement, or other permission which any of Harvest and its subsidiaries has
granted to any third party with respect to any of its Intellectual Property
(together with any exceptions). Harvest has delivered to TRC correct and
complete copies of all such patents, registrations, applications, licenses,
agreements, and permission (as amended to date) and has made available to TRC
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Schedule 7.1 also
identifies each trade name or unregistered trademark used by any of Harvest and
its subsidiaries in connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in Schedule 7.1:
26
<PAGE>
(a) Harvest and its subsidiaries possess all right, title, and
interest in and to the item, free and clear of any security
interest, license, or other restriction;
(b) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(c) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, enforceability,
use, or ownership of the item; and
(d) none of Harvest and its subsidiaries has ever agreed to
indemnify any person for or against any interference,
infringement, misappropriation, or other conflict with
respect to the item.
7.1.23.4 Schedule 7.1 identifies each item of Intellectual
Property that any third party owns and that any of Harvest and its subsidiaries
uses pursuant to license, sublicense, agreement, or permission. Harvest has
delivered to TRC correct and complete copies of all such licenses, sublicenses,
agreements, and permission (as amended to date). With respect to each item of
Intellectual Property required to be identified in Schedule 7.1:
(a) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full
force and effect.
(b) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the
consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to
above);
(c) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute
a breach of default or permit termination, modification, or
acceleration thereunder;
(d) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(e) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above
are true and correct with respect to the underlying license;
27
<PAGE>
(f) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(g) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of Harvest and its subsidiaries, is
threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(h) none of Harvest and its subsidiaries has granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
7.1.23.5 None of Harvest and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Harvest and
its subsidiaries has any new products, inventions, procedures, or methods of
manufacturing or processing that any competitors or other third parties have
developed which reasonably could be expected to supersede or make obsolete any
product or process of any of Harvest and its subsidiaries.
7.1.24 Books and Records. The books and records of Harvest to which
TRC and their accountants and attorneys have been given access are the true
books and records of Harvest and truly and fairly reflect the underlying facts
and transactions in all respects.
7.1.25 Leased Properties. The Financial Statements and Schedule 7.1
hereto together list all personal property (including equipment leases) and real
property leased by Harvest in connection with the business (the "Leased
Properties") and the aggregate annual rent or other fees payable under all such
leases. Harvest has a valid leasehold or ownership interest in all of the Leased
Properties, free and clear of any liens. The negotiation and consummation of
this Agreement and the transactions contemplated hereby will not result in any
penalties, the acceleration of payments or the termination of any lease of
Leased Properties.
7.1.26 Employees and Employee Benefit Plans.
7.1.26.1 Other than as set forth in Schedule 7.1 hereto, Harvest
is not a party to any pension, profit sharing, savings, retirement or other
deferred compensation plan, or any bonus (whether payable in cash or stock) or
incentive program, or any group health plan (whether insured or self-funded), or
any disability or group life insurance plan or other employee welfare benefit
plan, or to any collective bargaining agreement or other agreement, written or
oral, with any trade or labor union, employees' association or similar
organization. Harvest is not a party to, nor has made any contribution to or
otherwise incurred any obligation under, any "multi-employer plan" as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
7.1.26.2 With respect to each such plan set forth in Schedule 7.1
(a "Plan"), Harvest has furnished to TRC or their counsel complete and accurate
copies of the Plan documents (including trust documents, insurance policies or
contracts, employee booklets, summary plan descriptions and other authorizing
documents, and any material employee communications). With respect to each Plan
subject to ERISA as either an employee pension benefit plan within the meaning
of Section 3(2) of ERISA or an employee welfare benefit plan within the meaning
of Section 3(1) of ERISA, Harvest has prepared in good faith and timely filed
all requisite governmental reports and has properly and timely posted, or
distributed all notices and reports to employees required to be filed, posted,
or distributed with respect to each Plan. Each Plan has at all times been
properly and completely funded by Harvest and has been operated and administered
in all respects in accordance with its terms and all applicable laws, including,
but not limited to, ERISA and the Code.
28
<PAGE>
7.1.26.3 All Plans that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Code have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
included as part of Schedule 7.1 hereof. Except as disclosed on Schedule 7.1,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries have been timely
filed and distributed, and copies thereof are included as part of Schedule 7.1
hereof. Harvest further represents that:
(a) there have been no terminations, partial terminations, or
discontinuance of contributions to any such Qualified Plan
intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service;
(b) no such plan listed in Schedule 7.1, subject to the
provisions of Title IV of ERISA has been terminated;
(c) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such
plan listed in Schedule 7.1; and
(d) Harvest has not incurred any liability under Section 4062 of
ERISA.
7.1.26.4 Harvest has not made any oral or written communications
to its current or former employees that guarantee current or former employees
continuation of employer-provided benefits or retirement coverage under
Harvest's welfare benefit plans or which would have any effect on Harvest's
ability to terminate retiree or any other benefits to all current or former
employees.
7.1.26.5 Harvest has not violated any of the health care
continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 applicable to its Employees prior to the Closing or
any prior actions of or transactions entered into by Harvest.
7.1.27 Compensation. Harvest has delivered to TRC an accurate
schedule, attached to this Agreement as Schedule 7.1, showing all officers,
directors, and key employees of Harvest and the rate of compensation (and the
portions thereof attributable to salary, bonus, and other compensation,
respectively) of the directors, officers, and key employees.
7.1.28 Insurance. Harvest maintains policies of insurance covering the
assets of Harvest, properties, and business in types and amounts as set forth in
Schedule 7.1. Harvest is in compliance with each of such policies such that none
of the coverage provided under such policies has been invalidated and Harvest
has not received any written notice of cancellation of any such policies.
Schedule 7.1 lists and describes all Harvest insurance policies in effect
immediately prior to the time of Closing. Such policies are with reputable
insurers and are in amounts sufficient for the prudent protection of the
properties and the Business of Harvest.
29
<PAGE>
7.1.29 Full Disclosure. Harvest has disclosed to TRC all material
facts relating to Harvest and its operations and has not knowingly omitted to
disclose to TRC any material fact relating to Harvest, or its operations
necessary to make the statements made herein not misleading.
7.1.30 Securities and Nasdaq Listing. Harvest is currently listed on
NASDAQ. Harvest is subject to the reporting requirements of the Securities and
Exchange Act of 1933 (the "Exchange Act").
ARTICLE VIII.
HARVEST'S COVENANTS
Section 8.1 Continuation of Business. Harvest covenants and agrees as
follows: between the date hereof and the Closing, unless otherwise consented to
in writing by TRC or as provided for by this Agreement, (i) it shall conduct its
affairs solely in the ordinary course of business consistent with past practice
and shall not materially change its policies and practices; (ii) shall not issue
or cause to be issued by Harvest any capital stock or security convertible into
capital stock, except pursuant to outstanding warrants, convertible preferred
stock, stock options and convertible debentures, or grant any options or rights
to acquire capital stock, or otherwise alter Harvest's capital structure; (iii)
shall not repurchase any of its securities or pay any dividend or make any
distribution with respect to its securities other than normal cash dividends;
(iv) shall not enter into any contract or arrangement other than in the ordinary
course of business; and (v) shall not amend its charter documents or bylaws.
Section 8.2 No Solicitation. Unless and until the Closing occurs, Harvest
shall not (i) solicit any offer to acquire all or any part of Harvest's
business, assets or other properties or capital stock, whether by merger,
purchase of assets, tender offer or otherwise or (ii) except as required by law,
disclose, directly or indirectly, any information not customarily disclosed to
any person or entity concerning Harvest's business or properties, afford to any
other person or entity access to Harvest's properties, books or records or
otherwise assist or encourage any person or entity in connection with any of the
foregoing.
Section 8.3 Termination of Stock Option Plan. Harvest shall use its best
efforts to modify its Stock Option Plan, if any, at or prior to Closing to
account for new employees from TRC to be included thereunder. As of the Closing,
the amount outstanding under the Stock Option Plan shall not exceed 483,000
shares at $1.00 strike price and all such shares have been included in the total
of all Harvest Common Shares listed in the "Whereas" clauses.
ARTICLE IX.
TERMINATION
Section 9.1 Termination Events. This Agreement may, by notice given prior
to or at the Closing, be terminated:
9.1.1 by either TRC or Harvest if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
9.1.2 (i) by TRC if any of the conditions in Article I and Article XI
have not been satisfied as of the Closing or if satisfaction of such a condition
is or becomes impossible (other than through the failure of TRC to comply with
its obligations under this Agreement) and TRC has not waived such condition on
or before the Closing; or (ii) by Harvest, if any of the conditions in Article I
and Article XI have not been satisfied of the Closing or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Harvest
to comply with their obligations under this Agreement) and Harvest has not
waived such condition on or before the Closing;
30
<PAGE>
9.1.3 by mutual consent of TRC and Harvest; or
9.1.4 by either TRC or Harvest if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before December
31, 1998, or such later date as the parties may agree upon.
Section 9.2 Effect of Termination. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Article I, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections ____ and ____ will survive; provided, however, that if
this Agreement is terminated by a party because of the Breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE X.
INDEMNIFICATION; REMEDIES
Section 10.1 Survival; Right to Indemnification Not Affected by Knowledge.
All representations, warranties, covenants, and obligations in this Agreement,
and any other certificate or document delivered pursuant to this Agreement will
survive the Closing. The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
Knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing, with respect
to the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
Section 10.2 Indemnification and Payment of Damages by Harvest. Harvest
will indemnify and hold harmless TRC, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with: (a) any breach of any representation or warranty made by
Harvest in this Agreement or any other certificate or document delivered by
Harvest pursuant to this Agreement; (b) any breach of any representation or
warranty made by Harvest in this Agreement as if such representation or warranty
were made on and as of the Closing.
31
<PAGE>
10.2.1 any breach by either Harvest of any covenant or obligation of
such Harvest in this Agreement;
10.2.2 any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Harvest (or any Person acting
on its behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to TRC.
Section 10.3 Indemnification and Payment of Damages by Harvest -
Environmental Matters. In addition to the provisions of Section 10.2, Harvest
will indemnify and hold harmless TRC for, and will pay to TRC, the amount of any
Damages (including costs of cleanup, containment, or other remediation) arising,
directly or indirectly, from or in connection with:
10.3.1 any Environmental, Health, and Safety Liabilities arising out
of or relating to: (i) (A) the ownership, operation, or condition at any time on
or prior to the Closing of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
Harvest has or had an interest, or (B) any Hazardous Materials or other
contaminants that were present on the Facilities or such other properties and
assets at any time on or prior to the Closing; or (ii) (A) any Hazardous
Materials or other contaminants, wherever located, that were, or were allegedly,
generated, transported, stored, treated, released, or otherwise handled by
Harvest or by any other Person for whose conduct they are or may be held
responsible at any time on or prior to the Closing, or (B) any Hazardous
Activities that were, or were allegedly, conducted by Harvest or by any other
Person for whose conduct they are or may be held responsible; or
10.3.2 any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
Harvest or any other Person for whose conduct they are or may be held
responsible, in any way arising from or allegedly arising from any Hazardous
Activity conducted or allegedly conducted with respect to the facilities or the
operation of Harvest prior to the Closing, or from Hazardous Material that was
(i) present or suspected to be present on or before the Closing, on or at the
facilities (or present or suspected to be present on any other property, if such
Hazardous Material emanated or allegedly emanated from any of the facilities and
was present or suspected to be present on any of the facilities on or prior to
the Closing) or (ii) Released or allegedly Released by Harvest or any other
Person for whose conduct they are or may be held responsible, at any time on or
prior to the Closing.
TRC will be entitled to control any cleanup, any related proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 10.3.
Section 10.4 Indemnification and Payment of Damages by TRC. TRC will
indemnify and hold harmless Harvest, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with: (a) any breach of any representation or warranty made by TRC in
this Agreement or any other certificate or document delivered by TRC pursuant to
this Agreement; (b) any breach of any representation or warranty made by TRC in
this Agreement as if such representation or warranty were made on and as of the
Closing.
32
<PAGE>
10.4.1 any breach by either TRC of any covenant or obligation of such
TRC in this Agreement;
10.4.2 any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with TRC (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Harvest.
Section 10.5 Indemnification and Payment of Damages by TRC - Environmental
Matters. In addition to the provisions of Section 10.2, TRC will indemnify and
hold harmless Harvest for, and will pay to Harvest, the amount of any Damages
(including costs of cleanup, containment, or other remediation) arising,
directly or indirectly, from or in connection with:
10.5.1 any Environmental, Health, and Safety Liabilities arising out
of or relating to: (i) (A) the ownership, operation, or condition at any time on
or prior to the Closing of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
TRC has or had an interest, or (B) any Hazardous Materials or other contaminants
that were present on the Facilities or such other properties and assets at any
time on or prior to the Closing; or (ii) (A) any Hazardous Materials or other
contaminants, wherever located, that were, or were allegedly, generated,
transported, stored, treated, released, or otherwise handled by TRC or by any
other Person for whose conduct they are or may be held responsible at any time
on or prior to the Closing, or (B) any Hazardous Activities that were, or were
allegedly, conducted by TRC or by any other Person for whose conduct they are or
may be held responsible; or
10.5.2 any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
TRC or any other Person for whose conduct they are or may be held responsible,
in any way arising from or allegedly arising from any Hazardous Activity
conducted or allegedly conducted with respect to the facilities or the operation
of TRC prior to the Closing, or from Hazardous Material that was (i) present or
suspected to be present on or before the Closing, on or at the facilities (or
present or suspected to be present on any other property, if such Hazardous
Material emanated or allegedly emanated from any of the facilities and was
present or suspected to be present on any of the facilities on or prior to the
Closing) or (ii) Released or allegedly Released by TRC or any other Person for
whose conduct they are or may be held responsible, at any time on or prior to
the Closing.
TRC will be entitled to control any cleanup, any related proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 10.5.
Section 10.6 Time Limitations. If the Closing occurs, Harvest shall have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing, other than those in Sections _____, _____, _____, _____ and
_____, unless on or before [two years] _____________, 19___ TRC notifies Harvest
of a claim specifying the factual basis of that claim in reasonable detail to
the extent then known by TRC; a claim with respect to Section ____, ____, ____,
or ____, or a claim for indemnification or reimbursement not based upon any
representation or warranty or any covenant or obligation to be performed and
complied with prior to the Closing, may be made at any time. If the Closing
occurs, TRC shall have no liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing, unless on or before Harvest
notifies TRC of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Harvest.
33
<PAGE>
Section 10.7 Procedure for Indemnification - Third Party Claims.
10.7.1 Promptly after receipt by an indemnified party under Section
10.2, 10.4, or (to the extent provided in the last sentence of Section 10.3)
Section 10.3 of notice of the commencement of any Proceeding against it (the
"Proceeding"), such indemnified party shall, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
10.7.2 If any Proceeding referred to in Section 10.07.1 is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party shall, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party shall not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it shall be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
10.7.3 Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party shall not be bound by any determination of a Proceeding
so defended or any compromise or settlement effected without its consent (which
may not be unreasonably withheld).
34
<PAGE>
10.7.4 Harvest and TRC hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Harvest with respect to such a
claim anywhere in the world.
10.7.5 Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
ARTICLE XI.
CONDITIONS TO THE EXCHANGE OF STOCK
Section 11.1 Conditions Precedent to Performance by Harvest. The
obligations of Harvest under this Agreement are subject to the satisfaction of
the following conditions (any or all of which may be waived by Harvest in its
sole discretion to the extent permitted by law):
11.1.1 Board and Stockholder Approval. The Merger shall have been
effectively adopted and approved at or prior to the Effective Date by the Board
of Directors and stockholders of TRC in accordance with applicable law; it is
understood, however, that such adoption and approval shall have been obtained
prior to the expiration of the Feasibility Period.
11.1.2 Representations; True Representations and Covenants Performed.
The representations and warranties of TRC set forth herein shall be true and
correct in all material respects immediately prior to the Closing with the same
effect as if made at that time. TRC shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by them on or prior to the Closing.
11.1.3 No Litigation Affecting Merger. No judgment, decree, order or
ruling of any court or regulatory or governmental authority shall have been
issued or entered against TRC which would be violated by the consummation of
this transaction, and no person or entity which is not a party to this Agreement
shall have commenced any litigation against TRC seeking to restrain or prohibit,
or to obtain substantial damages in connection with, this Agreement or the
transactions contemplated hereby.
11.1.4 Securities Laws. All approvals, consents, permits, licenses or
qualifications from authorities administrating the securities or "blue-sky" laws
of any state having jurisdiction required for the consummation of this
transaction shall have been obtained and shall be effective.
11.1.5 Regulatory Compliance, Approvals and Consents. TRC shall have
complied with all legal provisions applicable to this transaction, and all
approvals required under any legal provision to carry out this transaction, and
all consents required to be obtained in connection with this transaction in
order to avoid a default under any contract, agreement, commitment, lease,
mortgage, instrument or other document to or by which any of TRC is a party or
may be bound, shall have been obtained on terms reasonably satisfactory to
Harvest.
35
<PAGE>
11.1.6 Filings. A duly certified, executed and acknowledged copy of
articles of merger with respect to the merger shall have been filed with the
appropriate Secretary in accordance with applicable law and a duly certified,
executed and acknowledged copy of this Agreement, or a certificate of merger
with respect thereto, shall have been filed with the appropriate Secretary in
accordance with applicable law.
Section 11.2 Conditions Precedent to Performance by TRC. The obligations of
TRC under this Agreement are subject to the satisfaction of the following
conditions (any or all of which may be waived by TRC in their sole discretion to
the extent permitted by law):
11.2.1 Board and Stockholder Approval. This Agreement and the
transactions and matters contemplated herein shall have been effectively adopted
and approved at or prior to the Closing by the Board of Directors of Harvest and
stockholders of Harvest in accordance with applicable law and Harvest shall have
delivered such certificate and evidence of the same as reasonably requested by
TRC. Those matters include, without limitation, shareholder and Board of
Directors' approval of a reverse split of the shares of each class of stock of
Harvest [NASDAQ notice? Shares registered? Or exemption criteria satisfied?]
[timing? pre- or post- merger?] to meet Nasdaq requirements, and approval of the
merger contemplated herein, approval of the Board of Directors contemplated in
Schedule 1.2.3, approval of a change of management, if required, and approval by
Harvest Warrant holders of a reset to these Warrants as contemplated in Section
_____ of this Agreement.
11.2.2 Representations True and Covenants Performed. The
representations and warranties of Harvest set forth herein shall be true and
correct in all material respects immediately prior to the Effective Date with
the same effect as if made at that time. Harvest shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by them on or prior to the Effective Date. The
President of Harvest shall have delivered to TRC a certificate to such effect.
11.2.3 No Litigation Affecting Merger. No judgment, decree, order or
ruling of any court or regulatory or governmental authority shall have been
issued or entered against Harvest which would be violated by the completion of
the Merger, and no person or entity which is not a party to this Agreement shall
have commenced any litigation against Harvest seeking to restrain or prohibit,
or to obtain substantial damages in connection with, this Agreement or the
transactions contemplated hereby.
11.2.4 Securities Laws. All approvals, consents, permits, licenses or
qualifications from authorities administering the securities or "blue-sky" laws
of any state having jurisdiction required for the consummation of the Merger
shall have been obtained and shall be effective.
11.2.5 Regulatory Compliance, Approvals and Consents. Harvest shall
have complied with all legal provisions applicable to this transaction, and all
approvals required under any legal provision to carry out this transaction, and
all consents required to be obtained in connection with this transaction in
order to avoid a default under any contract, agreement, commitment, lease,
mortgage, instrument or other document to or by which Harvest is a party or may
be bound, shall have been obtained on terms reasonably satisfactory to TRC.
36
<PAGE>
11.2.6 Filings. A duly certified, executed and acknowledged copy of
this Agreement, or a certificate of merger with respect thereto, shall have been
filed with the appropriate state Secretary in accordance with applicable law and
a duly certified, executed and acknowledged copy of articles of merger with
respect to the Merger shall have been filed with the appropriate Secretary in
accordance with applicable law.
ARTICLE XII.
NOTICES
Section 12.1 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder or with respect
hereto shall be in writing, and may be given by (a) personal service, (b)
first-class United States mail postage prepaid, (c) overnight delivery service,
charges prepaid or (d) telecopy or other means of electronic transmission, if
confirmed promptly by any of the methods specified in clauses (a)-(c) of this
sentence, and will be deemed to have been duly given or made when delivered
personally, when mailed first-class, postage prepaid, registered or certified
mail, overnight delivery service, charges prepaid or when sent by electronic
transmission, to the respective parties, as follows:
If to Harvest: Harvest Restaurant Group, Inc,
1250 N.E. Loop 410, Suite 335
San Antonio, Texas 78209
Attention: William J. Gallagher
Telecopy: (210) 824-6725
Copy to: Rosenberg, Tuggey, Agather, Rosenthal & Rodriquez P.C.
140 E. Houston Street, 2nd Floor
San Antonio, Texas 78205
Attention: Timothy N. Tuggey
Telecopy: (210) 225-1800
If to TRC: TRC Acquisition Corporation
2662 Holcomb Bridge Rd., Suite 320
Alpharetta, Georgia 30022
Attention: Clyde Culp III
Telecopy: (770) 518-1443
Copy to: Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, GA 30309
Attention: Wade H. Stribling, Esq.
Telecopy: (404) 817-6194
Section 12.2 Change of Address. Any of the parties hereto may change the
address to which such communications are to be directed to it or him by giving
written notice to the other parties in the manner provided in Section 11.01.
37
<PAGE>
ARTICLE XIII.
GENERAL
Section 13.1 Governing Law. This Agreement and the performance of the
transactions contemplated hereby shall be governed by and construed and enforced
in accordance with the laws of Texas, notwithstanding any contrary application
of conflicts of laws principles.
Section 13.2 Press Releases. The parties hereto agree to use their best
efforts to coordinate the preparation of and making of any public announcements
of the transactions contemplated by this Agreement. No such release or public
announcement pertaining to the transactions contemplated by this Agreement may
be made by either party without the prior written consent of the other party,
unless such release or announcement is required by law.
Section 13.3 Entire Agreement. This Agreement and the Schedules hereto and
the agreements, documents and instruments referred to herein, set forth the
entire agreement and understanding of the parties in respect of the transactions
contemplated hereby and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof, whether oral or written.
The parties hereto have not relied upon any promises, representations,
warranties, agreements, covenants or undertakings, other than those expressly
set forth or referred to herein.
Section 13.4 Successors. This Agreement and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
TRC, its respective successors and permitted assigns, and Harvest and its
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be transferred or assigned (by
operation of law or otherwise) by any of the parties hereto without the prior,
written consent of the other parties.
Section 13.5 Modification. This Agreement may not be changed, amended,
terminated, augmented, rescinded, or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first part, to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
Section 13.6 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
Section 13.7 Counterparts. This Agreement and any amendment or modification
hereof may be executed simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
Section 13.8 Signatures by Facsimile. Any facsimile signature of any party
hereto shall constitute a legal, valid and binding execution hereof by such
party.
38
<PAGE>
Section 13.9 Remedies of the Parties. TRC acknowledges that, in addition to
all other remedies to which Harvest is entitled, Harvest shall have the right to
enforce the terms of this Agreement by a decree of specific performance,
provided Harvest is not in material default hereunder. Harvest acknowledges
that, in addition to all other remedies to which TRC is entitled, TRC shall have
the right to enforce the terms of this Agreement by a decree of specific
performance, provided TRC is not in material default hereunder. The parties also
agree that the rights and remedies of each party to this Agreement set forth in
this Agreement and in all of the exhibits and schedules attached hereto and
documents referred to herein shall be cumulative and shall inure to the benefit
of each such party.
Section 13.10 Arbitration. In the event of a dispute between the parties
arising under this Agreement, the parties shall submit to binding arbitration
before a single arbitrator in Atlanta, Georgia, under the Commercial Arbitration
Rules of the American Arbitration Association. The decision of the arbitrator
shall be final and binding with respect to the dispute subject to arbitration
and shall be enforceable in any court of competent jurisdiction. Nothing in this
paragraph 13.10 shall derogate from the rights of the parties to seek
preliminary injunctive relief to preserve the status quo.
Section 13.11 Attorney's Fees. In the event of arbitration or litigation
filed or instituted between the parties with respect to this Agreement or
related agreements, the prevailing party will be entitled to receive from the
other party all costs, damages and expenses, including reasonable attorney's
fees, incurred by the prevailing party in connection with that action or
proceeding whether or not the controversy is reduced to judgment or award. The
prevailing party will be that party who may be fairly said by the arbitrator(s)
or the court to have prevailed on the major disputed issues.
Section 13.12 Cooperation and Records Retention. TRC and Harvest shall (i)
provide the other with access to such records, original or copies, or assistance
as may reasonably be requested by them in connection with the preparation of any
Tax Return, in connection with any audit or other examination by any Taxing
authority or any judicial or administrative proceedings relating to liability
for Taxes, or financial reporting obligations, (ii) each retain and provide the
other, with any records or other information which may be relevant to any such
Tax Return, audit or examination, proceeding or determination, or financial
reporting obligations, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Tax Return of the other for any
period. All Tax Returns, supporting work schedules and other records or
information which may be relevant to such Tax Returns for all tax periods or
portions thereof ending before or including the Closing date shall remain with
Harvest or TRC and shall be made available for inspection and copying by the
parties hereto during normal business hours.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first above written.
HARVEST RESTAURANT GROUP, INC. TRC ACQUISITION CORPORATION
- ----------------------------------------- --------------------------------
By: William J. Gallagher By: Clyde Culp III
Title: Chairman & Chief Executive Officer Title:
39
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between Harvest Restaurant Group, Inc., a
Texas corporation, with headquarters located at 1250 N.E. Loop 410, Suite 335,
San Antonio, TX 78209 ("Company"), and the undersigned (the "Buyer").
WITNESSETH:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D" as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the " 1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, 7% Series C Convertible Preferred Stock, $1.00 par
value per share (the "Preferred Stock"), of the Company which will be
convertible into shares of the Company's Common Stock, $.01 par value per share
(the "Common Stock"), together referred to as the shares ("Shares"); upon the
terms and subject to the conditions of such Preferred Stock (the Common Stock
and the Preferred Stock sometimes referred to herein as the "Securities"), and
subject to acceptance of this Agreement by the Company.
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. The undersigned hereby agrees to initially purchase from
the Company, the Preferred Stock of the Company, in the principal amount set
forth on the signature page of this Agreement, out of a total offering of
$6,000,000 in Preferred Stock as more specifically set forth in section 4(h),
and having the terms and conditions and being in the form attached hereto as
Annex I. The Preferred Stock is being offered at a purchase price of ten
thousand dollars ($10,000) per share in minimum subscription amounts of at least
five (5) shares ($50,000). The offering amount for the first tranche is two
hundred (200) shares of Preferred Stock and no less than two hundred (200)
shares of Preferred Stock for the second and third tranches each, or a total of
six hundred shares (600) of Preferred Stock and a total of six million dollars
($6,000,000). The offering amount may be increased upon the consent of 100% of
the purchasers. The purchase price for the Preferred Stock for each purchaser
shall be as set forth on the signature page hereto and shall be payable in
United States Dollars.
b. Form of Payment. The Buyer shall pay the purchase price for the
Preferred Stock by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Escrow
Agreement attached hereto as Annex II (the "Escrow Agreement") as set forth
below. Promptly following payment by the Buyer to the Escrow Agent of the
purchase price of the Preferred Stock, the Company shall deliver the Preferred
Stock duly executed on behalf of the Company to the Escrow Agent. By signing
this Agreement, Buyer and Company, and subject to acceptance by the Escrow
Agent, agree to all of the terms and conditions of, and becomes a party to, the
Escrow Agreement, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
<PAGE>
c. Method of Payment. Payment into escrow of the purchase price for
the Preferred Stock shall be made by wire transfer of funds to:
The Bank of New York
ABA # 021000018
GLA 111-565
Re: TAS#335400 Harvest Restaurant Group Escrow
Attn: Peggy McWhorter, 770-698-5186
Not later than 12:00 noon, Eastern time, on July 8, 1998 the Company shall have
accepted this Agreement and returned a signed counterpart of this Agreement to
the Escrow Agent by facsimile: the Buyer(s) shall deposit with the Escrow Agent
the aggregate purchase price for the Preferred Stock of an initial amount of
$2,000,000 for the first, $2,000,000 of which shall be for the First Closing (as
defined below), the Second Closing shall be within thirty (30) business days of
the effective date of the merger of Harvest Restaurant Group, Inc. with TRC
Acquisition Corporation. The exact timing of the payment for the Third Closing
shall occur as described in Section 4.g. Time is of the essence with respect to
such payments, and failure by the Buyer to make such payments shall allow the
Company to cancel this Agreement.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
a. The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows: Without limiting Buyers right to sell the
Preferred Stock or any Common Stock pursuant to the Registration Statement the
buyer is purchasing the Preferred Stock and will acquiring shares of Common
Stock issuable upon conversion of the Preferred Stock for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof;
b. The Buyer is (i) an "accredited investor" as that is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), and (ii) experienced in making investments of the kind described
in this Agreement and the related documents, (iii) able, by reason of the
business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities;
c. All subsequent offers and sales of the Preferred Stock and the
shares of Common Stock issuable upon conversion of, or issued as dividends on,
the Preferred Stock (the "Shares") by the Buyer shall be made pursuant to
registration of the Shares under the 1933 Act or pursuant to an exemption from
registration;
d. The Buyer understands that the Preferred Stock are being offered
and sold, and the shares are being offered, to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyers compliance with, the representations, warranties, agreements,
acknowledgements and understanding of the Buyer to acquire the Preferred Stock
and receive an offer of the Shares;
e. The Buyer and its advisors, if any, have been furnished with, or
obtained through independent investigation, all materials relating to the
business, finances and operations of the Company and materials relating to the
offer and sale of the Preferred Stock and the offer of the Shares which have
been requested by the Buyer, including Risk Factors, Capitalization Schedule and
Use of Proceeds included with Annex V hereto. The Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the Company and have
received complete and satisfactory answers to any such inquiries, Without
limiting the generality of the foregoing, the Buyer has also had the opportunity
to obtain and to review the Company's (1) Annual Report on Form 10-K for the
fiscal year ended December 28, 1997, (2) Quarterly Report on Form 10-Q for the
fiscal quarter ended April 19, 1998, and (3) Forms 8-K available via the EDGAR
on line data base (the "Company's SEC Documents").
2
<PAGE>
f. The Buyer understands that its investment in the Securities
involves a high degree of risk;
g. The Buyer understands that no United States federal or state agency
or any other government governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. Neither the Buyer, nor any affiliate of the Buyer, has any present
intention of entering into, any put option, short position, or other similar
position with respect to the Preferred Stock or the Shares.
j. Notwithstanding the provisions hereof or of the Preferred Stock, in
no event (except with respect to an Event of Mandatory Conversion upon the
maturity of the Preferred Stock) shall the holder be entitled to convert any
Preferred Stock to the extent after such conversion, the sum of (1) the number
of shares of Common Stock beneficially owned by the Buyer and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Preferred Stock), and
(2) the number of shares of Common Stock issuable upon the conversion of the
Preferred Stock with respect to which the determination of this provision is
being made, would result in beneficial ownership by the Buyer and its affiliates
of more than 4.99% of the outstanding shares of Common Stock. For purposes of
the provision to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), except as otherwise provided in clause (1) of
such provision.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Shares. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Series A Preferred or Common
Stock.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. The Company has registered its Common Stock pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Common
Stock is listed and remains eligible for trading on the Nasdaq Small Cap Market.
The Company has received written notice with respect to the continued
eligibility of the its securities for such listing and has scheduled an oral
hearing with Nasdaq on July 9, 1998 to present its plan for compliance with
listing qualification rules.
c. Authorized Shares. The Company has sufficient, authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Preferred Stock. The Shares have been duly authorized and, when issued upon
conversion of, or as dividends on, the Preferred Stock, will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder.
d. Securities Purchase Agreement; Registration Rights Agreement and
Stock. This Agreement and the Registration Rights Agreement, the form of which
is attached hereto as Annex IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby, have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Registration Rights Agreement, when executed and
delivered by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally; and the Preferred Stock will be duly and validly authorized
and, when executed and delivered on behalf of the Company in accordance with
this Agreement, will be a valid and binding obligation of the Company in
accordance with its terms, subject to general principles of equity and to
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
3
<PAGE>
e. Non-contravention. The execution and delivery of this Agreement and
the Registration Rights Agreement by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, (ii) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
including any listing agreement for the Common Stock except as herein set forth,
(iii) to its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or (iv) to its knowledge, order of any court,
United States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, except such conflict, breach or default which would not have a
material adverse effect on the transactions contemplated herein.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the Stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. None of the SEC Filings with the Securities and
Exchange Commission since and including the filing of the 10-K ending December
28, 1997 contained, at the time they were filed, any untrue statement of a
material fact or omit 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. The Company has since December 28,
1997 timely filed all requisite forms, reports and exhibits thereto with the
Securities and Exchange Commission.
h. Absence of Certain Changes. Since January 1, 1998, all material
adverse change and material adverse developments in the business, properties,
operations, financial condition, or results of operations of the Company have
been disclosed in the public filings made by the Company, and no further
material adverse developments exist, except as disclosed in Annex V or in the
documents referred to in Section 2(e) hereof.
i. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally) or as disclosed in
the documents referred to in Section 2(e), that has not been disclosed in
writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
j. Absence of Litigation. Except as set forth in Annex V hereto, and
in the documents referred to in Section 2(e), which the Buyer has reviewed,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board or body pending or, to the knowledge of the Company,
threatened against or affecting the Company, wherein an unfavorable decision,
ruling or finding would have a material adverse effect on the business or
financial condition of the Company or the transactions contemplated by this
Agreement or any of the documents contemplated hereby or which would adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of such other
documents.
k. Absence of Events of Default. Except as set forth in Annex V hereto
and Section 3(e), no Event of Default, as defined in the respective agreement to
which the Company is a party, and no event which, with the giving of notice or
the passage of time or both, would become an Event of Default (as so defined),
has occurred and is continuing, which would have a material adverse effect on
the Company's financial condition or results of operations.
l. Prior Issues. Any convertible securities issued by the Company
during the past 12 months has been fully disclosed as set forth in Annex V.
4
<PAGE>
4. CERTAIN COVENANTS AND ACKNOWLEDGEMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Preferred Stock have not been and are not being registered under the provisions
of the 1933 Act and, except as provided in the Registration Rights Agreement,
the Shares have not been and are not being registered under the 1933 Act, and
may not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the
Preferred Stock, and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
in accordance with an effective registration statement ("Registration
Statement"), the Shares issued to the Holder upon conversion of the Preferred
Stock shall bear a restrictive legend in substantially the following form (and a
stop transfer order may be placed against transfer of the Preferred Stock and
such Shares):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to enter
into the Registration Rights Agreement, in substantially the form attached
hereto as Annex IV, on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Preferred Stock to the Buyer under
any United States laws and regulations, or by any domestic securities exchange
or trading market, and to provide a copy thereof to the Buyer promptly after
such filing.
e. Reporting Status. So long as the Buyer beneficially owns any of the
Preferred Stock, the Company shall file all reports required to be filed with
the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall
not terminate its status as an issuer required to file reports under the 1934
Act even if the 1934 Act or the rules and regulations thereunder would permit
such termination.
f. Use of Proceeds. The Company will use the proceeds from the sale of
the Preferred Stock (excluding amounts paid by the Company for legal fees and
finders fees in connection with the sale of the Preferred Stock) as set forth in
Annex V.
g. Company's Option. At the option of the Company, in addition to
Buyer's initial $2,000,000 First Closing, the Buyer agrees to purchase up to an
additional $2,000,000 principal amount of Preferred Stock (the "Additional
Preferred Stock") in two additional closings (the "Additional Closing Dates") of
$2,000,000. The Second Closing shall occur within thirty (30) business days from
the effective date of the merger between the Company and TRC Acquisition
Corporation, and the Third Closing shall occur within thirty (30) days from the
effective date of the Registration Statement to be filed prior to the
Registration Rights Agreement ("Registration Statement") upon the same terms and
5
<PAGE>
conditions as those applicable to the Preferred Stock issued pursuant to this
Agreement (collectively, the "Additional Closing Dates"). Buyers obligation to
purchase the Additional Preferred Stock on the Additional Closing Dates shall be
contingent upon the satisfaction of the following conditions: On the Additional
Closing Dates (i) the Company has placed into escrow a sufficient number of
shares of registered Common Stock to the satisfaction of the Buyer, (the
"Effective Date"), and (ii) the representations and warranties of the Company
contained herein are true and correct in all material respects to the
satisfaction of the Buyer. Each share of such Preferred Stock shall mature on
the last day of the 36th month following its issuance.
h. Available Shares. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, shares of Preferred and
Common Stock sufficient to yield the number of shares of Preferred or Common
Stock issuable at conversion as may be required to satisfy the conversion rights
of the Buyer pursuant to the terms and conditions of the Preferred Stock.
Company agrees when it files the registration statement in accordance with the
terms of the Registration Rights Agreement it will register 2.5 times the number
of shares of Common Stock that Buyer's Preferred Stock would have converted into
on the date of filing such Registration Statement.
i. Capital Raising Restrictions. The Company agrees that for a period
ending no less than sixty (60) days after any Closing Date or Additional Closing
Date it will not issue any securities at a discount (other than in a public debt
offering with an original issue discount) that can be convertible into Company's
Common Stock without the express written consent of 75% of the then existing
holders of the Preferred Stock.
j. [LEFT INTENTIONALLY BLANK]
k. Company Understands Dilutive Impact of Issuing Additional Shares of
Preferred or Common Stock. Company represents it is aware that the issuance of
additional shares of Series A or B Preferred or Company's Common Stock will have
a dilutive effect on the current security holders of each such class of stock.
Company understands there is a possibility that the stock price of the Company's
Series A or B Preferred Stock or its Common Stock could drop upon the issuance
(or expected issuance) of additional shares of such security and that the larger
amount of money it raises increases the likelihood that a higher number of new
shares will be sold into the market and negatively impact the stock price of
each such class of stock.
l. Rule 144 Stock Issued and Outstanding. Company represents that the
number of shares of Rule 144 stock that have been issued are listed in
accompanying Exhibit V, and that to the best of the Company's knowledge all or
substantially all of such shares have been converted into the market as of June
30, 1998.
m. Company Has Not Paid Brokers to Promote Company's Stock. Company
represents that to the best of its knowledge the Company has never paid off any
brokers or been a party to pay offs to sell or promote its shares of Common
Stock or Series A Preferred.
n. Timely Filing of Registration Statement. Company understands that a
delay in the filing of the S-3 registration statement (or other suitable form
agreed to by Buyer) pursuant to the accompany Registration Rights Agreement
could result in economic loss to the Buyer. As compensation to the Buyer for
such loss, the Company agrees to pay Buyer or holder for the late filing of the
registration statement, Company agrees to pay Buyer or holder for such late
filing an amount, payable in cash, equal to 2% of the gross purchase price paid
by Buyer for the Series C Preferred Stock if not filed within thirty (30) days
from the Closing. Such amounts shall be in addition to the amounts payable if
Company fails to have the registration statement declared effective within 90
days, as detailed in the Registration Rights Agreement of even date.
6
<PAGE>
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the aggregate
purchase price for the Preferred Stock in accordance with Section I (c) hereof,
the Company will irrevocably instruct its transfer agent to issue d or Common
Stock from time to time upon conversion of the Preferred Stock in such amounts
as specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Preferred Stock. The Company warrants
that no instruction other than such instructions referred to in this Section 5
and stop transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this Section shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Buyer (or holder) provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration of a resale by
the Buyer (or holder) of any of the Securities in accordance with clause (1)(B)
of Section 4(a) of this Agreement is not required under the 1933 Act, the
Company shall (except as provided in clause (2) of Section 4(a) of this
Agreement) permit the transfer of the Securities and, in the case of the Shares,
Promptly instruct the Company's transfer agent to issue one or more certificates
for Common Stock without legend in such name and in such denominations as
specified by the Buyer (or holder).
b. The Company will permit the Buyer or holder to exercise its right
to convert the Preferred Stock by taxing an executed and completed Notice of
Conversion to the Company and delivering within three business days thereafter,
a copy or the original Notice of Conversion and the original Preferred Stock
certificate representing a sufficient number of shares to the Company or
transfer agent by express courier, (with a copy to the other party). Each date
on which a Notice of Conversion is faxed to and received by the Company in
accordance with the provisions hereof shall be deemed a Conversion Date. The
Company will transmit the certificates representing the Shares issuable upon
conversion of any Preferred Stock (together with the Preferred Stock
representing the Shares not so converted) to the Buyer via overnight express
courier, by electronic transfer or otherwise, within three business days after
receipt by the Company of a Notice of Conversion and the original Preferred
Stock certificates (the "Delivery Date").
c. The Company understands that a delay in the issuance of the Shares
of Common Stock beyond the Delivery Date could result in economic loss to the
Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
Buyer or holder for late issuance and delivery of the Shares upon conversion in
accordance with the following schedule, where "No. Business Days Late" is
defined as the number of business days beyond three (3) business days from the
Delivery Date.
Late Payment For Each $10,000
No. Business days Late Preferred Share Being Converted
- ----------------------- -------------------------------
1 0
2 0
3 $50
4 $100
5 $150
6 $200
7 $250
8 $300
9 $400
10 $500
greater than 10 $500 plus $50 for each Business Day Late
beyond 10 days
7
<PAGE>
The Company shall pay by check any late payments to Buyer or holder
incurred under this section and deliver such payments by overnight courier on
the 15th and last day of each month. The amount of such payment shall include
amounts owed under this section through the 14th and next to last day of each
month. Alternatively, Buyer or holder may elect to receive payment in Shares at
the conversion rate detailed in the Statement of Resolution for the Preferred
Stock.
Furthermore, in addition to any other remedies which may be available
to the Buyer, in the event that the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
Delivery Date, the Buyer will be entitled at its option to revoke the relevant
Notice of Conversion by delivering notice to such effect to the Company
whereupon the Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
6. DELIVERY INSTRUCTIONS.
The Preferred Stock shall be delivered by the Company to the Escrow Agent
pursuant to Section 1(b) hereof, or a delivery against payment basis on the
Closing Date and on each Additional Closing Date.
7. CLOSING DATES.
The date and time of the issuance and sale to Buyer(s) of its initial First
Closing of $2,000,000 of Preferred Stock (the "Closing" or "Issuance") shall
occur upon the fulfillment or waiver of all closing conditions pursuant to
Sections 8 and 9, and the closing of the Second Closing of Preferred Stock and
Third Closing of Preferred Stock (the "Additional Closing Dates") shall occur in
a manner consistent with Section 4.g. The closing shall occur on such date and
at such locations as the parties shall mutually agree. Notwithstanding anything
to the contrary contained herein, the Escrow Agent will be authorized to release
the funds representing the Purchase Price for the Preferred Stock, and the
Preferred Stock only upon satisfaction of the conditions set forth in Section 8
hereof for each Closing.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Preferred
Stock on the Closing Date and Additional Closing Date to the Buyer pursuant to
this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of such an agreement as
evidenced by execution of this Agreement by the Company for Two Million Dollars
($2,000,000) for its initial First Closing Date, and Two Million Dollars
($2,000,000.00) in Preferred Stock for each of the two the Additional Closing
Dates (or such lesser amount as the Company, in its sole discretion, shall
determine);
b. Delivery by the Buyer to the Escrow Agent of good funds as payment
in full of an amount equal to the purchase price for the Preferred Stock in
accordance with Section I (c) hereof for each separate Closing;
c. The accuracy on the Closing Date and Additional Closing Date(s) of
the representations and warranties of the Buyer contained in this Agreement as
if made on the Closing Date and the performance by the Buyer on or before the
Closing Date and Additional Closing Date of all covenants and agreements of the
Buyer required to be performed on or before the Closing Date and Additional
Closing Date;
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8
<PAGE>
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Stock on the Closing Date and Additional Closing Date is conditioned
upon:
a. Acceptance by Buyer of this Agreement for the sale of Preferred
Stock, as indicated by the execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the Preferred Stock
in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date and
Additional Closing Dates of the representations and warranties of the Company
contained in this Agreement as if made on the Closing Date and Additional
Closing Dates and the performance by the Company on or before the Closing Date
and Additional Closing Dates of all covenants and agreements of the Company
required to be performed on or before the Closing Date and Additional Closing
Dates;
d. On the initial First Closing Date and each of the Additional
Closing Dates, the Company's securities shall have been approved for continued
listing on The Nasdaq SmallCap Market;
e. On the first Additional Closing Date, the Company has effected the
merger with TRC Acquisition Corp.; and
f. On the second Additional Closing Date, the Registration Statement
has been declared effective by the U.S. Securities and Exchange Commission.
10. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based upon forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
11. NOTICES.
Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be deemed effectively given (i) on
the date delivered, (a) by personal delivery, or (b) if advance copy is given by
fax, (ii) seven business days after deposit in the United States Postal Service
by regular or certified mail, or (iii) three business days mailing by
international express courier, with postage and fees paid, addressed to each of
the other parties thereunto entitled as the following addresses, or at such
other addresses as a party may designate by ten days advance written notice to
each of the other parties hereto.
COMPANY: Harvest Restaurant Group, Inc. with a copy to:
1250 N. E. Loop 410, Suite 335 Gary Agron, Esq.
San Antonio, TX 78209 5445 DTC Parkway, Suite 520
Attention: President Englewood, CO 80111
Telecopier No. (210) 824-3398 Telecopier No. (303) 770-7257
PURCHASER: At the address set forth on the signature page of this Agreement.
ESCROW AGENT: The Bank of New York
BNY Business Center, Inc.
Suite 520
100 Ashford Center North
Atlanta, Georgia 30338
Attn: Peggy McWhorter
Telecopier No. (770) 698-5195
9
<PAGE>
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Company's representations and warranties shall survive the execution and
delivery hereof of this Agreement and the delivery of the Preferred Stock.
Buyer's representations, in the extent not affected by time, shall also survive
the execution and delivery of this Agreement and Buyer's receipt of the
Preferred Stock.
13. EXPENSES.
Each of the Company and the Buyer shall pay all costs and expenses incurred
by such party in connection with the negotiation, investigation, preparation,
execution, and delivery of this Agreement and the Registration Rights Agreement.
The costs and expenses of J.P. Carey Securities, Inc. and its counsel shall be
paid for by the Company at each of the First, Second, and Third Closing.
IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by the Buyer or one of its officers thereunto duly authorized as of the
date set forth below.
AGGREGATE PURCHASE PRICE OF BUYER'S PREFERRED STOCK: TRANCHE 1 $2,000,000
TRANCHE 2 $2,000,000
TRANCHE 3 $2,000,000
10
<PAGE>
SIGNATURES FOR ENTITITES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this _________ day of
__________________, 1998.
BUYER
By: __________________________________
(Signature of Authorized Person)
Name:
Title:
This Agreement has been accepted as of __________________, 1998.
HARVEST RESTAURANT GROUP, INC.
By: __________________________________
William Gallagher, Chairman of the
Board and CEO
11
<PAGE>
NOTICE OF CONVERSION
--Harvest Restaurant Group, Inc.--
(To be Executed by the Registered Holder
in order to Convert its Series C Preferred Stock)
The undersigned hereby irrevocably elects to convert its Series C Preferred
Stock (the "Preferred Stock") of Harvest Restaurant Group, Inc. (the "Company")
into shares of Company's Common Stock ("Common Stock") according to the
conditions of the Statement of Resolution and consistent with the provisions of
the Securities Purchase Agreement, as of the date written below in connection
with the resale of the underlying Common Stock. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
Holder for any conversion, except for transfer taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Preferred Stock shall be made in compliance with Regulation D,
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the "Act") or pursuant to an exemption from registration under the
Act, subject to any restrictions on sale or transfer set forth in the Securities
Purchase Agreement between the Company and the original holder of the Preferred
Stock submitted herewith for conversion.
The undersigned hereby confirms that its representations and warranties
contained within the Subscription Agreement between the undersigned and the
Company (to the extent not affected by the passing of time) are true and correct
as of the date of this Notice (including but not limited to the fact that the
undersigned is not an underwriter, dealer or other person who participates
pursuant to a contractual arrangement in the distribution of the Securities
offered or sold in reliance on Regulation D).
Date of Conversion:
Number of Series C
Preferred Shares to be
converted:
Stock Certificate Nos. of Series
C Preferred Shares to be Converted:
Applicable Conversion Price:
Number of Shares of Common
Signature: _____________________________
Name: __________________________________
N.Y. Address:
----------------------------------------
----------------------------------------
No shares of Common Stock will be issued until the original Preferred Stock
Certificate(s) to be converted and the Notice of Conversion are received by the
Company or its Transfer Agent. The Holder shall (i) fax, on or prior to 11:59
p.m., New York City time, on the date of conversion, a copy of this completed
and fully executed Notice of Conversion to the Company at the-office of the
12
<PAGE>
Company or its designated Transfer Agent for the Preferred Stock that the Holder
elects to convert and (ii) surrender, to a common courier for delivery to the
office of the Company or the Transfer Agent, the original Preferred Stock
Certificate(s) representing the Preferred Stock being converted. The Company or
its Transfer Agent shall issue shares of Common Stock and surrender them to a
common courier for delivery to the Preferred Stock Holder no later than three
(3) business days following receipt of a facsimile of this Notice of Conversion
and receipt by the Company or its Transfer-Agent of the Preferred Stock
Certificates) to be converted, pursuant to the terms of the Statement of
Resolution and the Securities Purchase Agreement, and shall make payments for
the number of business days such issuance and delivery is late, pursuant to the
terms of the Securities Purchase Agreement.
ACKNOWLEDGED AND AGREED
HARVEST RESTAURANT GROUP, INC.
By: __________________________________
Name: __________________________________
Title: __________________________________
Date: __________________________________
13
<PAGE>
Harvest Restaurant Group, Inc.
------------------------------
ANNEX I FORM OF STATEMENT OF RESOLUTION
ANNEX 11 ESCROW AGREEMENT
ANNEX III OMITTED
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
14
