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): January 14, 1999
Harvest Restaurant Group, Inc.
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(Exact name of Registrant as specified in charter)
Texas 33-95796 76-0406417
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(State or other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification Number)
2662 Holcomb Bridge Road, Suite 320, Alpharetta, Georgia 30022
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(Address of principal executive offices) (Zip Code)
(770) 518-1444
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(Registrant's Telephone Number, including Area Code)
1250 N.E. Loop 410, Suite 335, San Antonio, Texas 78209
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(Former Address)
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Item 1. Changes in Control of Registrant.
On January 14, 1999, TRC Acquisition Corporation ("TRC") merged into a
subsidiary of Harvest Restaurant Group, Inc. (the "Company") in a forward
triangular merger, and former shareholders of TRC now own 50.1% of the Company's
outstanding shares of common stock. Under the terms of the merger agreement, all
but one of the directors of the Company prior to the merger resigned and were
replaced with three directors from TRC. Specifically, Messrs. Theodore M. Heesch
and Michael Hogan resigned from the Company's board of directors, which as of
the merger was changed to consist of William J. Gallagher, who remains on the
board after serving as a director of the Company prior to the merger, and
Messrs. Clyde E. Culp, III, Richard E. Tanner and James R. Walker, all of whom
were directors of TRC. The continuing director and the three new directors
beneficially own shares of the Company's common stock as follows:
Name of Number of Shares Percentage of
Director Owned(1) Right to Acquire(2) Outstanding Shares
-------- -------- ------------------- ------------------
Clyde E. Culp, III 1,178,063 78,538 15.1%
William J. Gallagher 46,667 140,000 2.2%
Richard E. Tanner 1,413,675 353,419 20.6%
James R. Walker(3) 765,741 54,976 9.9%
(1) Includes shares for which the named person has sole voting and investment
power, unless otherwise indicated in the footnotes. Excludes shares that
may be acquired through stock option or warrant exercises.
(2) Shares that can be acquired through stock option exercises through the date
that is 60 days after the date of this Report.
(3) Mr. Walker is an equity owner of SECA VII, LLC, which owns 765,741 shares
and has the right to acquire 54,976 shares.
The new directors did not obtain any loans or pledges for the purpose of
acquiring control.
Item 2. Acquisition or Disposition of Assets
On January 14, 1999, TRC Acquisition Corporation ("TRC") merged into a
subsidiary of Harvest Restaurant Group, Inc. (the "Company") in a forward
triangular merger. As a result of the merger, the Company now owns and operates
11 restaurants located in Georgia and franchises two additional restaurants, one
in Georgia and one in Alabama. All of these restaurants operate under the name
"Rick Tanner's Original Grill" and offer a menu of varied American fare in a
market segment positioned between fast food chicken restaurants, home meal
replacement restaurants, and full bar casual restaurants.
As consideration for the merger, the Company issued 4,123,219 shares of
common stock to the holders of TRC common stock, representing 50.1% of the
common stock of the Company now outstanding. The exchange ratio used in the
merger was negotiated by the executive officers of the Company and TRC and then
approved by the respective boards of directors of the Company and TRC and by the
shareholders of TRC. In addition, the holders of TRC Class A Preferred Stock,
together with the holder of a subordinated debenture and an employee who agreed
to terminate his employment agreement, received an aggregate of 744,500 shares
of the Company's Series E Preferred Stock, which after six months will be
convertible into 2,978,000 shares of common stock.
In connection with the merger, two directors of the Company resigned
(Messrs. Heesch and Hogan), and the Company's board of directors was changed to
consist of William J. Gallagher, who remains on the board after serving as a
director of the Company prior to the merger, and Messrs. Clyde E. Culp, III,
Richard E. Tanner and James R. Walker, all of whom were directors of TRC. In
addition, the Company's officers resigned and several TRC officers became
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officers of the Company: Mr. Culp became the Chairman and Chief Executive
Officer, Mr. Robert J. Hoffman became the Senior Vice President for Operations,
and Mr. Timothy R. Robinson became the Chief Financial Officer and Secretary.
In connection with the merger, the Company secured a financing commitment
from third party investors for $4,000,000, which will be invested in the
Company's Series D Convertible Preferred Stock in 1999. To comply with a
condition of this financing commitment, the Company will hold a special meeting
of its shareholders in early 1999 to seek their approval to amend the Company's
articles of incorporation to increase the number of authorized common shares
from 20,000,000 to not less than 100,000,000.
The merger agreement provides that the merger became effective for
accounting and financial purposes, to the fullest extent permitted by law, on
December 27, 1998.
For further information regarding the merger, see the exhibits hereto,
which are incorporated herein by this reference.
Item 4. Changes in Registrant's Certifying Accountant.
As a result of the merger described in Items 1 and 2 above, Porter Keadle
Moore, LLP, the independent accountants for TRC before the merger, became the
Company's independent accountants. (As disclosed in a Report on Form 8-K dated
July 9, 1998, the Company's prior independent accountants resigned effective
July 17, 1998.) Neither the Company nor anyone on its behalf consulted Porter
Keadle Moore, LLP regarding any matter described in Item 304(a)(2)(i) or (ii) of
Regulation S-B.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
The Company has determined that it is impracticable to provide with this
Report on Form 8-K the required financial statements relating to the
transaction as prescribed by Item 310 of Regulation S-B. The Company will
file the required financial statements in an amendment to this Report on
Form 8-K within 60 days of the date that this Report on Form 8-K is due.
(b) Pro Forma Financial Statements
The Company has determined that it is impracticable to provide with this
Report on Form 8-K the required pro forma financial statements as
prescribed by Item 310 of Regulation S-B. The Company will file the
required pro forma financial statements in an amendment to this Report on
Form 8-K within 60 days of the date that this Report on Form 8-K is due.
(c) Exhibits
Exhibit No. Description
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2.1 Agreement and Plan of Merger by and among Harvest Restaurant
Group, Inc. a Texas corporation, Hartan, Inc., a Texas
corporation, and TRC Acquisition Corporation, a Georgia
corporation, dated December 27, 1998.
99.1 Press release dated January 14, 1999.
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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.
Dated: January 21, 1999 By: /s/ Clyde E. Culp, III
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Clyde E. Culp, III
Chairman of the Board and
Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Description
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2.1 Agreement and Plan of Merger by and among Harvest Restaurant
Group, Inc., a Texas corporation, Hartan, Inc., a Texas
corporation, and TRC Acquisition Corporation, a Georgia
corporation, dated December 27, 1998.
99.1 Press release dated January 14, 1999.
EXHIBIT 2.1
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
by and among
Harvest Restaurant Group, Inc., a Texas Corporation,
Hartan, Inc., a Texas Corporation,
and
TRC Acquisition Corporation, a Georgia Corporation
Dated as of December 27, 1998
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TABLE OF CONTENTS
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PAGE
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ARTICLE I. CONDITIONS TO OBLIGATION OF THE PARTIES............................3
Section 1.1 Conditions to Obligations......................................3
Section 1.2 Contemplated Transactions......................................3
1.2.1 Financing......................................................3
1.2.2 New Board of Directors and Executive Officers..................4
1.2.3 Employment and Severance Agreements............................4
1.2.4 Settlement of Liabilities......................................4
1.2.5 Amendment or Correction of Harvest Articles of Incorporation...4
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.........................................................5
2.2.4 Contracts......................................................5
2.2.5 Certificates...................................................5
2.2.6 Taxes..........................................................5
2.2.7 Litigation.....................................................5
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...........................................6
3.1.2.2 Certificate of Harvest.................................6
3.1.2.3 Corporation Resolutions................................6
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
3.1.5 Actions of Hartan at Closing....................................7
3.1.5.1 Resignations...........................................7
3.1.5.2 Certificate of Hartan..................................7
3.1.5.3 Corporate Resolutions..................................7
ARTICLE IV. EXCHANGE OF SHARES................................................7
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Section 4.1 Exchange of Shares..............................................7
4.1.1 Exchange of TRC Common Stock....................................7
4.1.2 Exchange of TRC Options.........................................7
4.1.3 Exchange of TRC Warrants........................................8
4.1.4 Exchange of Rick Tanner Note and TRC Class A Preferred Stock....9
4.1.5 Exchange of Santa Cruz Squeeze, Inc. Note.......................9
Section 4.2 Exchange Procedure..............................................9
4.2.1 TRC Common Stock................................................9
4.2.2 TRC Class A Preferred Stock.....................................9
Section 4.3 Appraisal Rights................................................9
Section 4.4 Merger Procedure................................................9
ARTICLE V. TRC REPRESENTATIONS AND WARRANTIES.................................10
Section 5.1 TRC's Representations and Warranties ...........................10
5.1.1 Capitalization..................................................10
5.1.1.1 Authorized Stock ......................................10
5.1.1.2 Issued Capital Stock...................................10
5.1.2 Organization Standing and Power.................................10
5.1.3 Subsidiaries....................................................11
5.1.4 Title to Assets.................................................11
5.1.5 Other Relationships.............................................11
5.1.6 Other Transactions..............................................11
5.1.7 Undisclosed Liabilities.........................................11
5.1.8 Absence of Certain Changes or Events............................11
5.1.9 Condition of Assets.............................................11
5.1.10 Compliance With Law............................................11
5.1.11 Contracts......................................................12
5.1.12 Permits, Licenses, Consents....................................12
5.1.13 Absence of Defaults............................................12
5.1.14 Litigation.....................................................13
5.1.15 No Breach or Violation of Law..................................13
5.1.16 Validity and Authorization.....................................13
5.1.17 Completeness; No Misrepresentations............................13
5.1.18 Tax Matters....................................................13
5.1.19 Financial Statements...........................................13
5.1.20 Full Disclosure................................................14
5.1.21 Absence of Certain Changes and Events..........................14
5.1.22 Taxes..........................................................16
5.1.23 Intellectual Property..........................................17
5.1.24 Books and Records..............................................19
5.1.25 Leased Properties..............................................19
5.1.26 Employees and Employee Benefit Plans...........................20
5.1.27 Compensation...................................................21
5.1.28 Insurance......................................................21
5.1.29 Full Disclosure................................................21
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ARTICLE VI. TRC'S COVENANTS...................................................21
Section 6.1 Continuation of Business........................................21
Section 6.2 No Solicitation.................................................21
ARTICLE VII. HARVEST'S AND HARTAN'S REPRESENTATIONS AND WARRANTIES............22
Section 7.1 Harvest's and Hartan's Representations and Warranties...........22
7.1.1 Capitalization..................................................22
7.1.1.1 Authorized Stock........................................22
7.1.1.2 Issued Common Stock.....................................22
7.1.1.3 Issued Preferred Stock..................................22
7.1.2 Organization Standing and Power.................................22
7.1.3 Subsidiaries....................................................22
7.1.4 Title to Assets.................................................23
7.1.5 Other Relationships.............................................23
7.1.6 Other Transactions..............................................23
7.1.7 Financial Information...........................................23
7.1.8 Absence of Certain Changes, or Events...........................23
7.1.9 Condition of Assets.............................................23
7.1.10 Compliance With Law............................................23
7.1.11 Contracts and Commitments......................................24
7.1.12 Permits, Licenses, Consents....................................24
7.1.13 Absence of Defaults............................................24
7.1.14 Litigation.....................................................24
7.1.15 No Breach or Violation of Law..................................25
7.1.16 Validity and Authorization.....................................25
7.1.17 Completeness: No Misrepresentations............................25
7.1.18 Tax Matters....................................................25
7.1.19 Financial Statements...........................................25
7.1.20 Absence of Certain Changes and Events..........................25
7.1.21 Taxes..........................................................27
7.1.22 Compliance With Law............................................29
7.1.23 Intellectual Property..........................................29
7.1.24 Books and Records..............................................31
7.1.25 Leased Properties..............................................31
7.1.26 Employees and Employee Benefit Plans...........................32
7.1.27 Compensation...................................................33
7.1.28 Insurance......................................................33
7.1.29 Full Disclosure................................................33
7.1.30 Securities and Nasdaq Listing..................................33
ARTICLE VIII. HARVEST'S COVENANTS.............................................33
Section 8.1 Continuation of Business........................................33
Section 8.2 No Solicitation.................................................34
Section 8.3 Harvest Stock Option Plan.......................................34
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ARTICLE IX. TERMINATION.......................................................34
ARTICLE X. INDEMNIFICATION; REMEDIES.........................................34
Section 10.1 Indemnification by Harvest.....................................34
Section 10.2 Indemnification by TRC.........................................34
Section 10.3 Defense........................................................35
Section 10.4 Remedies Non-Exclusive.........................................36
ARTICLE XI. CONDITIONS TO THE MERGER..........................................36
Section 11.1 Conditions Precedent to Performance by Harvest.................36
11.1.1 Board and Stockholder Approval.................................36
11.1.2 Representations................................................36
11.1.3 No Litigation Affecting Merger.................................36
11.1.4 Securities Laws................................................36
11.1.5 Regulatory Compliance, Approvals and Consents..................36
11.1.6 Filings........................................................37
Section 11.2 Conditions Precedent to Performance by TRC.....................37
11.2.1 Board Approval.................................................37
11.2.2 Representations True and Covenants Performed...................37
11.2.3 No Litigation Affecting Merger.................................37
11.2.4 Securities Laws................................................37
11.2.5 Regulatory Compliance, Approvals and Consents..................37
11.2.6 Filings........................................................37
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...................................................40
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
Section 13.13 Disparagement.................................................41
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SCHEDULES
SCHEDULE 1 TANNER'S RESTAURANTS
SCHEDULE 2 STATEMENT OF RESOLUTION OF HARVEST SERIES D PREFERRED STOCK
SCHEDULE 1.2 BUSINESS TERMS
SCHEDULE 1.2.2 BOARD OF DIRECTORS
SCHEDULE 1.2.3 EMPLOYMENT AGREEMENTS
SCHEDULE 5.1 TRC DISCLOSURES
SCHEDULE 7.1 HARVEST DISCLOSURES
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER is made and entered
into as of this 27th day of December, 1998, by and among HARVEST RESTAURANT
GROUP, INC., a Texas corporation ("Harvest"), HARTAN, INC, a Texas corporation
and a wholly-owned subsidiary of Harvest ("Hartan"), and TRC ACQUISITION
CORPORATION, a Georgia corporation ("TRC"), referred to jointly as the
"Parties".
RECITALS
(1) TRC has 2,625,000 issued and outstanding shares of common stock ""("TRC
Common Stock"); 1,103,463 outstanding options ("TRC Options"); and 409,682
outstanding warrants ("TRC Warrants"); and 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 and rights to acquire capital
stock of TRC.
(2) The principal assets and business of TRC are the operation of eleven
Tanner's restaurants and the franchise of two Tanner's restaurants, which are
described by name and location on Schedule "1" ("Tanner's Restaurant(s)").
(3) Harvest is a public corporation that formerly operated quick service
restaurants under the name Harvest Rotisserie and Harvest Food Court, including
the brand names of Red Line Burgers and Old San Antonio Taco Factory, but which
no longer conducts any business operations.
(4) On July 9, 1998, Harvest and TRC entered into a Share Exchange
Agreement (the "Original Agreement') providing for the exchange of TRC common
stock for Harvest common stock in a transaction to be effected pursuant to
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"), which Original Agreement was subsequently amended to, among other
things, restructure the transaction as a forward triangular merger.
(5) The Original Agreement was amended six times, and the Parties have
decided to enter into this Amended and Restated Agreement and Plan of Merger in
order to amend, restate and supersede the Original Agreement, as so amended, in
its entirety.
(6) A third party investor has invested and agreed to invest an aggregate
of $6,000,000 in Harvest contingent on the Parties consummating the transactions
described herein, which amount has been invested or is to be invested as
follows: (i) $2,000,000 having been invested in July 1998; (ii) $1,000,000 to be
funded upon filing by Harvest of a preliminary proxy statement (the "Preliminary
Proxy Statement") with the United States Securities and Exchange Commission
("SEC"), one of the purposes of which will be to solicit shareholder approval of
an amendment to the Articles of Incorporation of Harvest to increase its number
of authorized shares of common stock to not less than 100,000,000; (iii) another
$1,000,000 to be funded upon mailing of the definitive proxy statement (the
"Definitive Proxy Statement") to the shareholders of Harvest; and, (iv) the
final $2,000,000 to be funded upon the effective date of a registration
statement (the "Registration Statement") filed by Harvest to register, among
other things, the shares of common stock reasonably anticipated to be issuable
upon conversion of the Series D Preferred Stock issued to the third party
investor as described below.
1
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(7) It is understood and agreed that prior to the effective date of the
merger contemplated herein (the "Effective Date"), the outstanding capital stock
of Harvest, and outstanding rights to acquire capital stock of Harvest, shall
not exceed the following share amounts: 4,106,861 shares of Common Stock (the
"Harvest Common Stock"), 500,124 shares of Series A Convertible Preferred Stock
(the "Harvest Series A Preferred Stock"), 133.2 shares of Series B Convertible
Preferred Stock (the "Harvest Series B Preferred Stock"), 200 shares of Harvest
Series C Convertible Preferred Stock (the "Harvest Series C Preferred Stock"),
and 3,233,000 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 200,000 shares of Common Stock and 300,000 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, Harvest Series B Preferred Stock and Harvest Series C Preferred Stock are
sometimes collectively referred to herein as "Harvest Capital Stock"). It is
expected that the Series B Preferred Stock and Series C Preferred Stock will be
exchanged for 9,198 shares of Series D Preferred Stock on the Effective Date.
Except to the extent of the number of shares of Harvest Series D Preferred Stock
issued in connection with the financing described in paragraph 1.2.1 below, and
stock dividends issued on any of the above-referenced stock, 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.
(8) The Parties intend for TRC to merge into Hartan, a new, wholly-owned
subsidiary of Harvest, as part of a forward triangular merger and for Harvest to
issue shares of Harvest Common Stock as provided in this Agreement in exchange
for 100% of the TRC Common Stock.
(9) It is understood and agreed that the TRC Options and the TRC Warrants
shall be converted into and become options and warrants with respect to Harvest
Common Stock, with the terms of such options to be proportionately adjusted to
reflect the aggregate number of shares of Harvest Common Stock a holder of such
securities would have received had such holder exercised such security
immediately prior to the merger contemplated herein.
(10) 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 E Preferred Stock"). In addition, the employment agreement of Rick Tanner
shall be cancelled in exchange for shares of Harvest Series E Preferred Stock.
Harvest Series E Preferred Stock shall accrue dividends at the annual rate of
8%. The stated value of the Series E Preferred Stock is $10.00 per share, and
each share of Series E Preferred Stock 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 four shares of Common Stock for each share of Series E
Preferred Stock. Harvest Series E 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 OTC Bulletin Board or such other exchange or quotation system on which
the Harvest Common Stock is traded or quoted, respectively, averages at least
$3.50 per share for a period of twenty (20) consecutive trading days, if such
holder does not convert after receiving notice of such redemption. Harvest
Series E Preferred Stock shall have the rights, preferences, privileges and
restrictions as are specified in the Statement of Resolution attached hereto as
Schedule 2. A total of 744,503 shares of Series E Preferred Stock will be issued
in the merger.
(11) The third party investor which has agreed to invest in the Harvest
Series D Preferred Stock is affiliated with the investors which have invested in
the Harvest Series B Preferred Stock and the Harvest Series C Preferred Stock
(with all such investors being collectively referred to as the "Investors").
2
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(12) The Investors have agreed that upon the Effective Date they will
exchange their Harvest Series B Preferred Stock and Harvest C Preferred Stock
for shares of Harvest Series D Preferred Stock, and invest an additional $4.0
million in Harvest at certain specified dates in the future upon Harvest meeting
certain conditions as specified in Recital (6) above.
(13) The Parties intend this transaction to qualify as a "tax-free
reorganization" pursuant to Section 368(a)(1)(A) within the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), by virtue of the
provisions of Section 368(a)(2)(D) of the Code, and agree that TRC shall have
the authority to make any amendments and modifications to this Agreement as it
may deem appropriate to ensure that this transaction qualifies as a tax-free
reorganization under the Code.
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 merger 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. One or more of the Investors shall make a financing
commitment of $6,000,000.00, to be funded as follows:
(a) $2,000,000 previously funded in July 1998;
(b) $1,000,000 funded upon the filing with the SEC of the
Preliminary Proxy Statement;
(c) $1,000,000 funded upon the mailing to Harvest's shareholders
of the Definitive Proxy Statement;
(d) and the final $2,000,000 funded upon the effectiveness of
the Registration Statement.
Such financing shall be on terms approved by the Parties.
3
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1.2.2 New Board of Directors and Executive Officers. A new Board of
Directors of Harvest composed of William Gallagher, a current director of
Harvest who shall serve as a director of Harvest for a period of six months from
the date hereof, Clyde Culp III, Richard Tanner, and James R. Walker, who are
current directors of TRC, shall be implemented upon the Effective Date by virtue
of resignations of the other previous Harvest directors and the filling of three
vacancies by action of Mr. Gallagher. The existing executive officers of Harvest
shall resign from such offices, and the new Board of Directors, effective upon
the Effective Date, shall elect Clyde Culp III as Harvest's Chairman of the
Board of Directors, President and Chief Executive Officer; Robert J. Hoffman as
Senior Vice President of Operations; and Timothy R. Robinson as Chief Financial
Officer and Secretary.
1.2.3 Employment and Severance Agreements. Clyde Culp shall have
executed an employment agreement with Harvest, and William Gallagher shall have
executed a Severance Agreement with Harvest, the essential and principal terms
of each of which are set out and attached hereto as Schedule 1.2.3 and made a
part hereof. In addition, Richard Tanner shall have executed a Severance
Agreement with TRC.
1.2.4 Settlement of Liabilities. Except as set forth in the Harvest
and Hartan Disclosures attached hereto, Harvest shall obtain settlement
agreements from all creditors with known, actual or contingent outstanding
liabilities in excess of $10,000.00. The total amount permitted to be paid in
order to obtain the settlement agreements (the "Settlement Payment") shall be
approximately $550,000.00, but shall not exceed $1,000,000.00. In calculating
the amount of the Settlement Payment, Harvest shall have the right to credit any
proceeds received by Harvest in connection with such disputed matters, or
liquidation of its assets, against amounts paid to obtain the settlement
agreements.
1.2.5 Amendment or Correction of Harvest Articles of Incorporation.
Harvest shall amend or correct its Articles of Incorporation to reflect that the
prior amendment thereto which increased its authorized shares of Common Stock
from 10,000,000 to 20,000,000 received the affirmative vote of two-thirds of the
outstanding shares of Common Stock.
ARTICLE II.
FEASIBILITY PERIOD
Section 2.1 Feasibility Study. [Intentionally omitted, as it has already
been completed.]
Section 2.2 Pre-Closing Documents to be Delivered. Each party shall deliver
to the other party copies of the following on or before the Effective Date.
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 for the period from January 1, 1998 through
the end of the most recent fiscal quarter.
2.2.2 Asset List. A detail of inventory of all equipment, furnishings,
fixtures, and inventories as of October 4, 1998.
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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.
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 mutually acceptable to the Parties (the "Closing Date") which shall be no
later than January 15, 1999 . Concurrent with or as soon as practicable after
the Closing, the Articles of Merger 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.
3.1.2 Actions of Harvest at Closing. At the Closing, Harvest shall
deliver to TRC the following:
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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; (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:
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. Contemporaneous with or immediately following
the Closing, the parties shall cause a certificate and/or articles of merger
(the "Certificate of Merger") to be executed, delivered and filed with the
Secretaries of State of Georgia and Texas in accordance with the provisions of
the Georgia Business Corporation Code (the "GBCC") and the Texas Business
Corporation Act (the "TBCA"). The Merger shall become effective on the date on
which the Certificate of Merger is filed with the Secretaries of State of
Georgia and Texas, unless a different effective date is specified in the
Certificate of Merger pursuant to the GBCC and the TBCA (the "Effective Date").
Notwithstanding the foregoing, the Merger shall be effective as of December 27,
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1998 to the full extent legally permissible for all accounting and financial
reporting purposes. 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.
3.1.5 Actions of Hartan at Closing. At the Closing, Hartan shall
deliver to TRC the following:
3.1.5.1 Resignations. Hartan shall deliver to Harvest the written
and executed resignations of the directors of Hartan and termination of any such
executed employment agreements, if any, dated as of the Effective Date, as
called for in this Agreement.
3.1.5.2 Certificate of Hartan. Hartan shall deliver to TRC a
certificate, which shall be dated as of Closing and which shall be signed by
Hartan's Chief Executive Officer, certifying: (i) the authority of Hartan to
enter into and consummate the transactions contemplated by this Agreement; (ii)
the authority of the officers of Hartan to execute and deliver any document
contemplated by this Agreement on behalf of Hartan; (iii) that the
representations and warranties of Hartan 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 Hartan specifically relates to an
earlier date); and (iv) that each and every covenant and agreement of Hartan
contained in the Agreement to be performed by Hartan on or prior to Closing has
been performed by Hartan.
3.1.5.3 Corporate Resolutions. Hartan shall deliver to TRC
certified copies of the resolutions of the Board of Directors of Hartan and
shareholder approval of Hartan authorizing the execution, delivery and
performance of this Agreement and the transaction contemplated 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, each
share of TRC Common Stock issued and outstanding immediately prior to the
Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive a number of fully paid and non-assessable
shares (the "Exchange Ratio") of Harvest Common Stock (the "Merger Shares")
equal to the quotient obtained by dividing 6,500,000 by the sum of (x) the
number of shares of TRC Common Stock issued and outstanding immediately prior to
the Effective Time; (y) the number of TRC Options issued and outstanding
immediately prior to the Effective Time; and (c) the number of TRC Warrants
issued and outstanding immediately prior to the Effective Time. Based on the
amounts specified in the Recitals to this Agreement, the Exchange Ratio is
1.57075.
4.1.2 Exchange of TRC Options. At the Effective Time, each TRC Option
which is outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to Harvest Common Stock, and
Harvest shall assume each TRC Option, in accordance with the terms of the TRC
stock option plan and stock option agreement by which it is evidenced
(collectively, "TRC Stock Plan"), except that from and after the Effective Time,
(i) Harvest and its Stock Option Committee shall be substituted for TRC and the
Committee of TRC's Board of Directors (including, if applicable, the entire
Board of Directors of TRC) administering such TRC Stock Plan, (ii) each TRC
Option assumed by Harvest may be exercised solely for shares of Harvest Common
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Stock, (iii) the number of shares of Harvest Common Stock subject to such TRC
Option shall be equal to the number of shares of TRC Common Stock subject to
such TRC Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, and (iv) the per share exercise price under each such TRC Option
shall be adjusted by dividing the per share exercise price under each such TRC
Option by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the provisions of clause (iii) of the preceding sentence,
Harvest shall not be obligated to issue any fraction of a share of Harvest
Common Stock upon exercise of TRC Options In addition, notwithstanding clauses
(iii) and (iv) of the first sentence of this Section 4.1.2, each TRC Option
which is an "incentive stock option" (if any) shall be adjusted as required by
Section 424 of the Internal Revenue Code, and the regulations promulgated
thereunder, so as not to constitute a modification, extension or renewal of the
option, within the meaning of Section 424(h) of the Internal Revenue Code. TRC
and Harvest agree to take all necessary steps to effectuate the foregoing
provisions of this Section 4.1.2, including using its reasonable efforts to
obtain from each holder of a TRC Option any consent that may be deemed necessary
or advisable in order to effect the transactions contemplated by this Section
4.1.2. As soon as practicable after the Effective Time, Harvest shall deliver to
the participants in each TRC Stock Plan an appropriate notice setting forth such
participant's rights pursuant thereto, and the grants subject to such TRC Stock
Plan shall continue in effect on the same terms and conditions (subject to the
adjustments required by Section 4.1.2 after giving effect to the merger), and
Harvest shall comply with the terms of each TRC Stock Plan to ensure, to the
extent required by, and subject to the provisions of, such TRC Stock Plan, that
TRC Options which qualified as incentive stock options prior to the Effective
Time (if any) continue to qualify as incentive stock options after the Effective
Time. At or prior to the Effective Time, Harvest shall take all corporate action
necessary to reserve for issuance sufficient shares of Harvest Common Stock for
delivery upon exercise of TRC Options assumed by it in accordance with this
Section 4.1.2 (subject, to the extent required, to the amendment of Harvest's
Articles of Incorporation to increase the number of authorized shares of Common
Stock to not less than 100,000,000).
4.1.3 Exchange of TRC Warrants. At the Effective Time, each TRC
Warrant which is outstanding at the Effective Time, whether or not exercisable,
shall be converted into and become rights with respect to Harvest Common Stock,
and Harvest shall assume each TRC Warrant, in accordance with the terms of the
warrant agreement by which it is evidenced, except that from and after the
Effective Time, (i) each TRC Warrant assumed by Harvest may be exercised solely
for shares of Harvest Common Stock, (ii) the number of shares of Harvest Common
Stock subject to such TRC Warrant shall be equal to the number of shares of TRC
Common Stock subject to such TRC Warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, and (iii) the per share exercise price under
each such TRC Warrant shall be adjusted by dividing the per share exercise price
under each such TRC Warrant by the Exchange Ratio and rounding up to the nearest
cent. Notwithstanding the provisions of clause (iii) of the preceding sentence,
Harvest shall not be obligated to issue any fraction of a share of Harvest
Common Stock upon exercise of TRC Warrants. TRC and Harvest agree to take all
necessary steps to effectuate the foregoing provisions of this Section 4.1.3,
including using its reasonable efforts to obtain from each holder of a TRC
Warrant any consent that may be deemed necessary or advisable in order to effect
the transactions contemplated by this Section 4.1.3. As soon as practicable
after the Effective Time, Harvest shall deliver to the holders of TRC Warrants
an appropriate notice setting forth such holder's rights pursuant thereto, and
the warrant shall continue in effect on the same terms and conditions (subject
to the adjustments required by Section 4.1.3 after giving effect to the merger).
At or prior to the Effective Time, Harvest shall take all corporate action
necessary to reserve for issuance sufficient shares of Harvest Common Stock for
delivery upon exercise of TRC Warrants assumed by it in accordance with this
Section 4.1.3 (subject, to the extent required, to the amendment of Harvest's
Articles of Incorporation to increase the number of authorized shares of Common
Stock to not less than 100,000,000).
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4.1.4 Exchange of Rick Tanner Note and TRC Class A Preferred Stock.
The Rick Tanner Note, including the principal balance and all interest accrued
thereon, valued in an amount of approximately $3,235,000.00, the Rick Tanner
employment agreement, valued in an amount of approximately $547,000.00, and the
TRC Class A Preferred Stock, valued in an amount of approximately $3,663,000.00,
shall be exchanged for 744,500 shares of Harvest Series E Preferred Stock at a
value of $10.00 per share in accordance with the provisions of Section 4.2.
4.1.5 Exchange of Santa Cruz Squeeze, Inc. Note. [Intentionally
omitted, as this debt has already been paid.]
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 converted pursuant to Section 4.1 shall surrender to
Harvest the certificate for such shares. Following the receipt of each TRC
Common Stock certificate, Harvest shall cause its transfer agent to issue, or
Harvest 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 4.1.4 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
representing the number of shares of Harvest Series E Preferred Stock into which
such TRC Class A 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 E 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.
Section 4.4 Merger Procedure.
4.4.1 Upon Effective Date, TRC shall be merged with and into Hartan in
accordance with this Agreement. Upon the Effective Date, Hartan shall be the
surviving corporation of the merger by and between TRC and Hartan. Upon the
Effective Date, the separate existence and corporate organization of TRC shall
cease, except insofar as it may be continued by statute. The identity,
existence, powers, rights and immunities of Hartan shall continue unaffected.
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4.4.2 On the Effective Date, the Articles of Incorporation and Bylaws
of Hartan shall become the Articles of Incorporation and Bylaws of the surviving
corporation and shall thereafter continue to be Hartan's Articles of
Incorporation and Bylaws until changed as provided by law and in accordance with
said documents.
4.4.3 The new directors and officers of Harvest (required pursuant to
this Agreement) shall become the directors and officers of Hartan as of the
Effective Date.
4.4.4 Except as otherwise provided herein, upon the Effective Date,
Hartan shall be obligated to perform and/or pay all obligations and liabilities
of TRC which obligations and liabilities Hartan expressly assumes and agrees to
perform or pay, subject to the effectuation of the merger contemplated herein.
Also, upon the Effective Date, Hartan will possess all property, real, personal
and otherwise, owned by TRC (in addition to any such property owned by Hartan
immediately prior to the Effective Date).
ARTICLE V.
TRC REPRESENTATIONS AND WARRANTIES
Section 5.1 TRC's Representations and Warranties. TRC makes the following
representations and warranties to Harvest and Hartan as a material inducement
for Harvest and Hartan to enter into this Agreement subject only to such
disclaimers, 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 2,625,000 shares of TRC
Common Stock and 2,000 shares of TRC Class A Preferred Stock issued and
outstanding, 1,103,463 outstanding TRC Options; and 409,682 outstanding TRC
Warrants. All of the outstanding shares of TRC Common Stock and TRC Class A
Preferred Stock are owned beneficially and of record by the listed shareholders.
All such issued and outstanding shares of TRC capital 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 TRC or any
preemptive rights or rights of first refusal, and were issued in compliance with
all of its charter documents and applicable law.
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.
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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. TRC has provided to Harvest the
financial statements set forth in Section 5.1.19. Except as and to the extent
reflected or disclosed (or adequately reserved for or against) in such financial
statements or in Schedule 5.1, 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 of such 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.
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.
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
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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 orders and other commitments are legal, valid and binding and
in full force and effect, and there are no defaults thereunder; provided,
however, that in light of the accelerated closing schedule and at the request of
Harvest, TRC has not obtained the consent of its landlords, lenders or other
creditors (other than Sirrom Capital Corporation). 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; provided, however, that in light
of the accelerated closing schedule and at the request of Harvest, TRC has not
obtained the consent of its landlords, lenders or other creditors (other than
Sirrom Capital Corporation). 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; provided, however, that in
light of the accelerated closing schedule and at the request of Harvest, TRC has
not obtained the consent of its landlords, lenders or other creditors (other
than Sirrom Capital Corporation).
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; provided, however, that in light of the accelerated closing schedule
and at the request of Harvest, TRC has not obtained the consent of its
landlords, lenders or other creditors (other than Sirrom Capital Corporation).
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; provided,
however, that in light of the accelerated closing schedule and at the request of
Harvest, TRC has not obtained the consent of its landlords, lenders or other
creditors (other than Sirrom Capital Corporation).
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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.
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; provided, however, that in light of the accelerated closing
schedule and at the request of Harvest, TRC has not obtained the consent of its
landlords, lenders or other creditors (other than Sirrom Capital Corporation),
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 July 12, 1998, respectively, and the
statement of income presents fairly the results of operations and changes in
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financial position of TRC for the periods ended December 28, 1997, and July 12,
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.
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
other than Richard Tanner that such employee has terminated, or
intends to terminate, such employee's employment with TRC;
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(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;
(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
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(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.
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
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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.
(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
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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.
(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
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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:
(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")
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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.
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.
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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.
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ARTICLE VII.
HARVEST'S AND HARTAN'S REPRESENTATIONS AND WARRANTIES
Section 7.1 Harvest's and Hartan's Representations and Warranties. Harvest
and/or Hartan make the following representations and warranties to TRC as a
material inducement for TRC to enter into this Agreement subject only to such
disclaimers, 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 and/or Hartan Directors and officers. Further,
immaterial breaches of these representations and warranties are specifically
agreed to not comprise actionable breaches. All of Harvest's and/or Hartan's
warranties and representations herein are modified to the extent needed to take
into account Harvest's and/or Hartan's disclosures set forth or identified in
the attachment hereto entitled Schedule 7.1 - Harvest and Hartan 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 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, 1,000
shares have been designated as Series B Preferred Stock, and 1,000 shares have
been designated as Series C Preferred Stock.
7.1.1.2 Issued Common Stock. There are 4,106,861 shares of
Harvest Common Stock issued and outstanding. (A total of 6,500,000 shares of
Harvest Common Stock will either be issued or reserved for issuance in the
merger.) 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 500,124 shares of
Harvest Series A Preferred Stock, 133.2 shares of Harvest Series B Preferred
Stock, and 200 shares of Harvest Series C Preferred Stock issued and
outstanding. The Series B Preferred Stock and Series C Preferred Stock will be
exchanged for 9,198 shares of Series D Preferred Stock on the Effective Date.
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. Each of Harvest and Hartan is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, and each is qualified to do business where the failure to
be so qualified would materially and adversely affect its condition, properties,
assets or operations. Harvest and Hartan have 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 Hartan 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 and/or Hartan have no subsidiaries other
than those listed on Schedule 7.1.
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7.1.4 Title to Assets. Each of Harvest and/or Hartan 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 and/or Hartan may
be a party or to which Harvest and/or Hartan may be bound on each Closing Date.
7.1.5 Other Relationships. No affiliate, director, officer, principal
executive, or employee of or consultant to Harvest and/or Hartan owns, directly
or indirectly, in whole or in part, any property, asset or right, tangible or
intangible relating to or affecting either Harvest and/or Hartan.
7.1.6 Other Transactions. No affiliate, director, officer, principal
executive or employee of Harvest and/or Hartan, has, directly or indirectly,
engaged in any transaction with Harvest and/or Hartan outside of the ordinary
course of business.
7.1.7 Financial Information. Harvest has provided to TRC the financial
statements set forth in subsection 7.1.19. Except as and to the extent reflected
or disclosed (or adequately reserved for or against) in such financial
statements or in Schedule 7.1, Harvest and/or Hartan 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, pension plan obligations, and there is no
known basis for the assertion of such against Harvest or Hartan?
7.1.8 Absence of Certain Changes, or Events. The business of Harvest
and/or Hartan 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 and/or Hartan are in
good operating condition for the purposes of conducting the business of Harvest
and/or Hartan on the Effective Date as such business has been or is being
conducted. Each of Harvest and/or Hartan 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. Each of Harvest and/or Hartan 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. Each of Harvest and/or Hartan 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 and/or Hartan, 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 and/or Hartan. Each of Harvest and/or
Hartan has valid business licenses to carry on its operations.
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7.1.11 Contracts and Commitments. All of Harvest's and/or Hartan'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 and/or Hartan
thereunder shall be impaired by the consummation of the transactions
contemplated by this Agreement, and all of the rights of Harvest and/or Hartan
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/or Hartan
and are true and complete and include all amendments and supplements thereto and
modifications thereof.
7.1.12 Permits, Licenses, Consents. Each of Harvest and/or Hartan 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 and/or Hartan. No proceeding is pending or, to the best of Harvest's
and/or Hartan'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 and/or Hartan has complied in all
material respects with all present and, to the best of Harvest's and/or Hartan'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, neither Harvest nor Hartan is, nor is either of them 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 and/or
Hartan 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 and/or Hartan's
knowledge, threatened against Harvest and/or Hartan or any of the properties,
assets, business or prospects of Harvest and/or Hartan or to which Harvest
and/or Hartan is or might become a party, and to the best of Harvest's and/or
Hartan'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 and/or Hartan.
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7.1.15 No Breach or Violation of Law. The execution and delivery of
this Agreement by Harvest and/or Hartan 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 and/or
Hartan or any contract, agreement, commitment, indenture, mortgage, deed of
trust, lease, pledge agreement, note, bond, license or other instrument or
obligation to which Harvest and/or Hartan is now a party or by which Harvest
and/or Hartan or any of the properties or assets of Harvest and/or Hartan 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.
7.1.16 Validity and Authorization. This Agreement has been duly
authorized by all necessary corporate action and upon approval of Hartan
shareholders is duly and validly executed and delivered by Harvest and/or Hartan
and is legally binding on Harvest and/or Hartan 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 and/or Hartan, or any
representatives of either of them are complete and correct as of the date
hereof. The representations and warranties made by Harvest and/or Hartan 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 and/or Hartan 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
and/or Hartan in the event of a breach of any such representation or warranty.
7.1.18 Tax Matters. Harvest and/or Hartan 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. Neither Harvest nor Hartan is 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 July 12, 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 July
12, 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:
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7.1.20.1 Any material adverse change in the financial condition,
results of operation, assets, liabilities or prospects of Harvest and/or Hartan,
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 and/or
Hartan, or the assets of Harvest and/or Hartan which was entered into or carried
out by Harvest and/or Hartan other than for fair consideration in the ordinary
course of business;
7.1.20.3 Any change by Harvest and/or Hartan 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;
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 and/or Hartan, 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 and/or Hartan (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 and/or Hartan;
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 and/or Hartan that such employee has terminated, or intends to
terminate, such employee's employment with Harvest and/or Hartan;
7.1.20.10 Any adverse relationship or condition with suppliers or
vendors that may have an adverse effect on Harvest and/or Hartan;
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 and/or Hartan, the properties (whether leased or owned), or
any such event which could be expected to have an adverse effect on Harvest
and/or Hartan, the properties (whether leased or owned), or the assets of
Harvest and/or Hartan;
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
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instrument to which Harvest and/or Hartan is a party and relating to or
affecting Harvest and/or Hartan 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 and/or Hartan, other than waivers having no material adverse effect on
Harvest and/or Hartan;
7.1.20.15 Any issuance of equity securities of Harvest and/or
Hartan or any issuance of warrants, calls, options or other rights calling for
the issuance, sale, or delivery of Harvest's and/or Hartan'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;
7.1.20.17 Any amendment, or agreement to amend, Harvest's and/or
Hartan'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 and/or Hartan, 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 and/or Hartan;
7.1.20.20 Any revaluation by Harvest and/or Hartan of any of its
assets;
7.1.20.21 Any loan by Harvest and/or Hartan to any person or
entity, or any guaranty by Harvest and/or Hartan 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 and/or Hartan or the properties (whether leased or owned) of
Harvest and/or Hartan.
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
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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 Each of Harvest and/or Hartan 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 and/ or
Hartan 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.
7.1.21.3 With respect to all amounts in respect of Taxes imposed
upon Harvest and/or Hartan, or for which Harvest and/or Hartan 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 and/or Hartan to taxing authorities or others on or before
the Closing have been paid, and all such amounts required to be paid by Harvest
and/or Hartan to taxing authorities or others after the Closing which have not
been paid are reflected on the financial statements of Harvest and/or Hartan.
7.1.21.4 No notices raising tax issues have been received by
Harvest and/or Hartan 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 and/or Hartan. 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 and/or Hartan.
7.1.21.6 Neither Harvest nor Hartan is a party to or bound by
(nor will Harvest and/or Hartan become a party to or become bound by) any tax
indemnity, tax sharing or tax allocation agreement.
7.1.21.7 Neither Harvest nor Hartan has ever been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code.
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7.1.21.8 Neither Harvest nor Hartan has 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 and/or Hartan 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 and/or Hartan is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
7.1.21.11 Neither Harvest nor Hartan has made or will 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 Neither Harvest nor Hartan has 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.
7.1.21.13 Neither Harvest nor Hartan is 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 and/or Hartan's book basis of each of its
assets is reflected in Harvest's (?) 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. Each of Harvest and/or Hartan 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. Each of Harvest and/or Hartan 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 and/or Hartan, 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 and/or Hartan. Each of Harvest and/or
Hartan has valid business licenses to carry on its operations.
7.1.23 Intellectual Property.
7.1.23.1 Harvest and/or Hartan and their 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 and/or Hartan. Each item of Intellectual Property owned or used by
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any of Harvest and/or Hartan and their subsidiaries immediately prior to the
closing hereunder will be owned or available for use by Harvest and/or Hartan,
their subsidiaries, or its subsidiaries on identical terms and conditions
immediately subsequent to the closing hereunder. Each of Harvest and/or Hartan
and their 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/or Hartan and their subsidiaries has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and none of
Harvest and/or Hartan shareholders and the directors and officers (and employees
with responsibility for Intellectual Property matters) of Harvest and/or Hartan
and their 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/or Hartan and their
subsidiaries must license or refrain from using any Intellectual Property rights
of any third party). Harvest and/or Hartan and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Harvest
and/or Hartan and their 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/or Hartan and their
subsidiaries.
7.1.23.3 Schedule 7.1 identifies each patent or registration
which has been issued to any of Harvest and/or Hartan and their subsidiaries
with respect to any of their Intellectual Property, identifies each pending
patent application or application for registration which any of Harvest and/or
Hartan and their subsidiaries has made with respect to any of their Intellectual
Property, and identifies each license, agreement, or other permission which any
of Harvest and/or Hartan and their subsidiaries has granted to any third party
with respect to any of their Intellectual Property (together with any
exceptions). Each of Harvest and/or Hartan 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/or Hartan and their subsidiaries in connection with any of its businesses.
With respect to each item of Intellectual Property required to be identified in
Schedule 7.1:
(a) Harvest and/or Hartan and their 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/or Hartan and their 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/or Hartan and
their subsidiaries uses pursuant to license, sublicense, agreement, or
permission. Harvest and/or Hartan has delivered to TRC correct and complete
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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;
(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/or Hartan and their
subsidiaries, is threatened which challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property; and
(h) none of Harvest and/or Hartan and their 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/or Hartan and the directors and
officers (and employees with responsibility for Intellectual Property matters)
of Harvest and/or Hartan and their 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/or Hartan and their subsidiaries.
7.1.24 Books and Records. The books and records of Harvest and/or
Hartan to which TRC and their accountants and attorneys have been given access
are the true books and records of Harvest and/or Hartan 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 and/or Hartan in connection with the business (the
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"Leased Properties") and the aggregate annual rent or other fees payable under
all such leases. Each of Harvest and/or Hartan 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, neither
Harvest nor Hartan is 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. Neither Harvest nor Hartan is 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"), each of Harvest and/or Hartan 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, each of Harvest and/or Hartan 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/or Hartan 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.
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 and/or Hartan 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
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(d) Neither Harvest nor Hartan has incurred any liability under
Section 4062 of ERISA.
7.1.26.4 Neither Harvest nor Hartan has 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 and/or Hartan's welfare benefit plans or which would
have any effect on Harvest's and/or Hartan's ability to terminate retiree or any
other benefits to all current or former employees.
7.1.26.5 Neither Harvest nor Hartan has 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 and/or
Hartan.
7.1.27 Compensation. Each of Harvest and/or Hartan 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/or Hartan 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 and/or Hartan maintains policies of
insurance covering the assets of Harvest and/or Hartan, properties, and business
in types and amounts as set forth in Schedule 7.1. Harvest and/or Hartan is in
compliance with each of such policies such that none of the coverage provided
under such policies has been invalidated and neither Harvest nor Hartan has
received any written notice of cancellation of any such policies. Schedule 7.1
lists and describes all Harvest and/or Hartan 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 and/or Hartan.
7.1.29 Full Disclosure. Each of Harvest and/or Hartan has disclosed to
TRC all material facts relating to Harvest and/or Hartan and its operations and
has not knowingly omitted to disclose to TRC any material fact relating to
Harvest and/or Hartan, or its operations necessary to make the statements made
herein not misleading.
7.1.30 Securities and Nasdaq Listing. Quotations for the Harvest
Common Stock and certain other Harvest securities are published on the OTC
Bulletin Board. Harvest is subject to the reporting requirements of the
Securities Exchange Act of 1934 (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.
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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 Harvest Stock Option Plan. As of the Closing, the amount
outstanding under the Stock Option Plan shall not exceed 483,000 shares at a
$1.00 strike price.
ARTICLE IX.
TERMINATION
[Intentionally omitted, as this Agreement is being signed at the Closing.]
ARTICLE X.
INDEMNIFICATION; REMEDIES
Section 10.1 Indemnification by Harvest. Harvest and its successors and
assigns hereby agree that notwithstanding any investigation which may have been
made by or on behalf of TRC prior to the Closing, Harvest shall indemnify,
defend and hold harmless TRC (and any affiliated party, officer, director or
employee of TRC) at any time after consummation of the Closing from and against
all demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses including, subject to this Article, interest,
penalties, court costs and reasonable attorneys' fees and expenses asserted
against, imposed upon or incurred by TRC or any affiliated party, directly or
indirectly, caused (a) by reason of or resulting from or arising out of any
material misrepresentation or any material breach or nonfulfillment of any
representation, covenant, warranty or agreement of Harvest or Hartan contained
in or made pursuant to this Agreement, and (b) by any obligation of TRC, to the
extent disclosed to Harvest in this Agreement, for which TRC (and any affiliated
party of TRC) is or may become personally liable.
Section 10.2 Indemnification by TRC. TRC and its successors and assigns
hereby agree that notwithstanding any investigation which may have been made by
or on behalf of Harvest prior to the Closing, TRC shall indemnify, defend and
hold harmless Harvest (and any affiliated party, officer, director or employee
of Harvest) at any time after consummation of the Closing from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, subject to this Article, interest,
penalties, court costs and reasonable attorneys' fees and expenses asserted
against, imposed upon or incurred by Harvest or any affiliated party, directly
or indirectly, caused (a) by reason of or resulting from or arising out of any
material misrepresentation or any material breach or nonfulfillment of any
representation, warranty, covenant and/or agreement of TRC contained in or made
pursuant to this Agreement, and (b) by any obligation of Harvest, to the extent
disclosed to TRC in this Agreement, for which Harvest (and any affiliated party
of Harvest) is or may become personally liable.
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Section 10.3 Defense
10.3.1 Promptly after the receipt by any person entitled to
indemnification under this Article X of notice of (i)
any claim or (ii) the commencement of any action or
proceeding, such party (the "Aggrieved Party") will, if
claim with respect thereto is made against any party
obligated to provide indemnification pursuant to this
Article X (the "Indemnifying Party"), give such
Indemnifying Party written notice of such claim or the
commencement of such action or proceeding and shall
permit the Indemnifying Party to assume the defense of
any such claim or any proceeding or litigation
resulting from such claim, unless the action or
proceeding seeks an injunction or other similar relief
against the Aggrieved Party or there is a conflict of
interest between it and the Indemnifying Party in the
conduct of the defense of such action. Failure by the
Indemnifying Party to notify the Aggrieved Party of its
election to defend any such proceeding or action within
a reasonable time, but in no event more than fifteen
(15) days after written notice thereof shall have been
given to the Indemnifying Party, shall be deemed a
waiver by the Indemnifying Party of its right to defend
such action.
10.3.2 If the Indemnifying Party assumes the defense of any
such claim or litigation resulting therefrom with
counsel reasonably acceptable to the Aggrieved Party,
the obligations of the Indemnifying Party as to such
claim shall be limited to taking all steps necessary in
the defense or settlement of such claim or litigation
resulting therefrom and to holding the Aggrieved Party
harmless from and against any losses, damages and
liabilities caused by or arising out of any settlement
of, or any judgment entered in connection with, such
claim or litigation. The Aggrieved Party may
participate, at its expense, in the defense of such
claim or litigation provided that the Indemnifying
Party shall direct and control the defense of such
claim or litigation. The Aggrieved Party shall
cooperate and make available all books and records
reasonably necessary and useful in connection with the
defense. The Indemnifying Party shall not, in the
defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment, except
with the written consent of the Aggrieved Party, or
enter into any settlement, except with the written
consent of the Aggrieved Party.
10.3.3 If the Indemnifying Party shall not assume the
defense of any such claim or litigation resulting
therefrom, the Aggrieved Party may defend against such
claim or litigation in such manner as it may deem
appropriate and reasonably satisfactory to the
Aggrieved Party. The Indemnifying Party shall promptly
reimburse the Aggrieved Party for the amount of all
expenses, legal or otherwise, as incurred by the
Aggrieved Party in connection with the defense against
or settlement of such claim or litigation. No
settlement of claim or litigation shall be made without
the consent of the Indemnifying Party, which consent
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shall not be unreasonably withheld. If no settlement of
the claim or litigation is made, the Indemnifying Party
shall promptly reimburse the Aggrieved Party for the
amount of any judgment rendered with respect to such
claim or in such litigation and of all expenses, legal
or otherwise, as incurred by the Aggrieved Party in the
defense against such claim or litigation.
10.3.4 Notwithstanding anything to the contrary herein
contained, TRC shall be entitled to control any
cleanup, containment, remediation, related proceeding,
or other action or proceeding arising from or in
connection with any environmental, health or safety
liability or any hazardous materials or activities.
Section 10.4 Remedies Non-Exclusive. The remedies provided in this Article
X shall not be exclusive of or limit any other remedies that may be available to
either party in the event of a breach of this Agreement.
ARTICLE XI.
CONDITIONS TO THE MERGER
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 shareholders of TRC in accordance with applicable law.
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
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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.
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 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 Boards of Directors of Harvest and Hartan, respectively,
and the shareholders of Hartan in accordance with applicable law, and Harvest
and Hartan shall have delivered such certificates and evidence of the same as
reasonably requested by TRC. Those matters include, without limitation, 'the
approval of the Hartan shareholder on the merger contemplated herein, and
approval of a change of management, as required by this Agreement..
11.2.2 Representations True and Covenants Performed. The
representations and warranties of Harvest and Hartan 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 and Hartan 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 and Hartan 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 and Hartan 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 or Hartan 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 and
Hartan 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
or Hartan is a party or may be bound, shall have been obtained on terms
reasonably satisfactory to TRC.
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
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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 Hartan: Hartan, Inc.
c/o 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 &
Rodriguez P.C.
140 E. Houston Street, 2nd Floor
San Antonio, Texas 78205
Attention: Timothy N. Tuggey, Esq.
Telecopy: (210) 255-1800
If to TRC: TRC Acquisition Corporation
2662 Holcomb Bridge Rd., Suite 320
Alpharetta, Georgia 30022
Attention: Clyde Culp III
Telecopy: (770) 518-1443
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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.
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 amends and restates the
Original Agreement, as previously amended, in its entirety. Any provision in the
Original Agreement, as so amended, that conflicts with this Agreement shall be
deemed to be superseded in its entirety and of no effect, and in such event the
provisions of this Agreement shall control. This Agreement, as so amended and
restated, and the Recitals and 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
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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.
Section 13.9 Remedies of the Parties. TRC acknowledges that, in addition to
all other remedies to which Harvest and Hartan are entitled, Harvest and Hartan
shall have the right to enforce the terms of this Agreement by a decree of
specific performance, provided Harvest and Hartan are not in material default
hereunder. Harvest and Hartan acknowledge 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.
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Section 13.13 Disparagement. At no time shall Harvest, TRC or Hartan or any
of their officers, directors or other representatives, disparage, denigrate or
otherwise defame any other or the business, services, properties or assets, or
any of the officers, directors, employees, agents or other representatives of
Harvest, TRC or Hartan provided, however, that the foregoing shall in no way
limit or preclude obligations of any party to comply with applicable law, and
any disclosures required thereunder. The foregoing sentence shall create no
liability on the part of any party to this Agreement or its officers, directors
or other representatives due to unsubstantiated statements attributed to such
party or its officers, directors or other representatives by a third party.
[the remainder of this page has been left blank intentionally]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first above written.
TRC ACQUISITION CORPORATION
/s/ Clyde Culp III
-------------------------------------------
By: Clyde Culp III
Title: Chief Executive Officer
HARVEST RESTAURANT GROUP, INC.
/s/ William J. Gallagher
-------------------------------------------
By: William J. Gallagher
Title: Chairman & Chief Executive Officer
HARTAN, INC.
/s/ William J. Gallagher
-------------------------------------------
By: William J. Gallagher
Title: Chief Executive Officer
42
EXHIBIT 99.1
------------
Thursday January 14, 8:03 am Eastern Time
Company Press Release
Tanner's Completes Merger With Harvest Restaurant Group
$6 Million in Equity to Fund Chain's Growth
ATLANTA--Jan. 14, 1999-- Harvest Restaurant Group, Inc. (OTC BB: ROTI, ROTIW,
ROTIP, ROTIZ) today announced the completion of a merger with TRC Acquisition
Corporation (TRC), the operator of eleven Rick Tanner's Original Grill
restaurants in Atlanta.
The principal business of the company will be the development, operation, and
franchising of Rick Tanner's Original Grill restaurants. Under the terms of the
merger, the company's headquarters will immediately move to Atlanta. TRC's
shareholders own a majority of Harvest's common stock, and TRC designated three
of the four post-merger directors. Harvest shareholders will retain the same
number of shares they currently own.
The newly merged company has received a commitment from an investor group for $4
million of new equity funding in addition to $2 million funded to Harvest in
July, 1998. The equity funding will be used primarily to grow the Tanner's
concept.
Tanner's annualized system sales are approximately $15 million. There are
currently eleven company owned Tanner's restaurants and two franchised
restaurants. Two new company owned stores will open in the first quarter of
1999. A new franchise restaurant is currently under construction in Anniston,
Ala.
All stores feature chicken fingers, BBQ ribs and pork, salads, shrimp,
sandwiches and fifteen freshly prepared vegetables. Large portions, served at
reasonable prices, appeal to a broad range of customers. Twenty-five percent of
Tanner's business is take-out.
The newly merged company is led by Clyde E. Culp, III as Chairman and CEO. Mr.
Culp has held several executive positions in the hospitality industry over his
29 year career. Bob Hoffman, Vice President of Operations for TRC, retains the
same position in the new company. Mr. Hoffman has held executive operations
positions with Miami Subs and Ponderosa Steakhouses over his 33 years in the
industry. Tim Robinson, TRC's CFO, becomes the CFO of the new group.
NOTE TO EDITORS: This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Although the
company believes the expectations reflected in the forward-looking statements
are based on reasonable assumptions, the company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference include, but are not limited to, the
following: construction of new restaurants may not be completed on schedule, or
the opening of such restaurants may be delayed due to other factors such as
staffing shortages or delays in the delivery or installation of equipment.
Contact:
Harvest Restaurant Group, Inc.
Tim Robinson, 770/518-1444 x213
770/518-1443 (fax)
