Exhibit 10.34
OVERHILL FARMS, INC.
EQUITY REPURCHASE OPTION AGREEMENT
THIS EQUITY REPURCHASE OPTION AGREEMENT is entered into as of the 11/th/
day of September 2002 (this "Agreement"), by and between OVERHILL FARMS, INC., a
Nevada corporation (the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS II,
L.P., a California limited partnership ("LLCP").
R E C I T A L S
A. The Company, OVERHILL CORPORATION (formerly known as Polyphase
Corporation), a Nevada corporation, OVERHILL L.C. VENTURES, INC. and LLCP
entered into that certain Securities Purchase Agreement dated as of November 24,
1999, as amended by a Consent and First Amendment to Securities Purchase
Agreement dated as of August 23, 2000, and as further amended by a Second
Amendment to Securities Purchase Agreement dated as of January 11, 2002, a
Consent and Third Amendment dated as of January 31, 2002, and a Fourth Amendment
to Securities Purchase Agreement dated as of June 28, 2002 (as so amended, the
"Original Securities Purchase Agreement").
B. Pursuant to Sections 3.2 through 3.4 of that certain Warrant No. LL-1
to Purchase 166.04 Shares of Common Stock dated November 24, 1999 (the "November
1999 Warrant"), the Company has the right to repurchase the shares of Common
Stock issuable upon exercise of the November 1999 Warrant (the "November 1999
Warrant Shares"), all on the terms and subject to the conditions set forth
therein.
C. Concurrently herewith, the parties to the Original Securities Purchase
Agreement are entering into a Fifth Amendment to Securities Purchase Agreement
dated as of September 11, 2002, pursuant to which, among other things, the
parties thereto are further amending the Original Securities Purchase Agreement.
The Original Securities Purchase Agreement, as amended by such Fifth Amendment
and as further amended from time to time, is referred to herein as the
"Securities Purchase Agreement." Unless otherwise indicated, all capitalized
terms used and not otherwise defined herein have the meanings ascribed to them
in the Securities Purchase Agreement.
D. It is a condition precedent to the effectiveness of the Fifth
Amendment that the parties enter into and deliver this Agreement.
E. It is the intention of the parties that the terms and other provisions
of this Agreement supersede those contained in Sections 3.2 through 3.4 of the
November 1999 Warrant, provided that LLCP, as the Holder (as defined in the
November 1999 Warrant), shall continue to be entitled to the other rights and
benefits contained in the November ▇▇▇▇ ▇▇▇▇▇▇▇ (including those with respect to
the November 1999 Warrant Shares).
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following capitalized
terms have the following meanings:
"Current Market Price" per share of Common Stock means, as of any
specified date on which the Common Stock is publicly traded, the average of
the daily market prices of the Common Stock over the twenty (20)
consecutive trading days immediately preceding (and not including) such
date. The "daily market price" for each such trading day shall be (i) the
closing sales price on such day on the principal securities exchange on
which the Common Stock is then listed or admitted to trading or on Nasdaq,
as applicable, (ii) if no sale takes place on such day on any such
securities exchange or system, the average of the closing bid and asked
prices, regular way, on such day for the Common Stock as officially quoted
on any such securities exchange or system, (iii) if the Common Stock is not
then listed or admitted to trading on any securities exchange or system,
the last reported sale price, regular way, on such day for the Common
Stock, or if no sale takes place on such day, the average of the closing
bid and asked prices for the Common Stock on such day, as reported by
Nasdaq or the National Quotation Bureau, and (iv) if the Common Stock is
not then listed or admitted to trading on any securities exchange and if no
such reported sale price or bid and asked prices are available, the average
of the reported high bid and low asked prices on such day, as reported by a
reputable quotation service, or a newspaper of general circulation in the
City of Los Angeles, State of California, customarily published on each
Business Day. If the daily market price cannot be determined for the twenty
(20) consecutive trading days immediately preceding such date in the manner
specified in the foregoing sentence, then the Common Stock shall not be
deemed to be publicly traded as of such date.
"Dispute Notice" has the meaning set forth in Section 2.1(c).
"Formula-Based Repurchase Price" means, for purposes of calculating
the Repurchase Option Price, a repurchase price per share equal to:
(i) (a) 6.50 times EBITDA for the twelve (12) month period ending
on the last day of the calendar month immediately preceding the
calendar month in which the Repurchase Option Notice Date occurs (the
"Measurement Date"), minus (c) all Indebtedness of the Company
(excluding Indebtedness described under clauses (iii), (vi) and (ix)
of the definition of Indebtedness and excluding indebtedness under the
Company's then existing revolving or working capital credit
facilities) existing on the Measurement Date, plus (c) all cash and
cash equivalents of the Company and its Subsidiaries existing on the
Measurement Date (but only to the extent that such cash and cash
equivalents exceed the then outstanding balance under the Company's
revolving or working capital credit facilities), plus
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(d) the aggregate exercise or conversion prices for the shares of
Capital Stock of the Company issuable upon exercise or conversion
of all "in-the-money" Options Rights outstanding (the "Option
Rights Shares") as of the Measurement Date; divided by
(ii) the number of shares of Capital Stock of the Company
outstanding as of the Measurement Date, plus the number of Option
Rights Shares as of the Measurement Date. (For purposes of
clarification only, the November 1999 Warrant, the shares of
Series A Preferred Stock issued to LLCP prior to the date hereof
and the Fifth Amendment Warrant are deemed to be Option Rights.)
"LLCP Equity Securities" means, collectively, without
duplication: (i) the November ▇▇▇▇ ▇▇▇▇▇▇▇ and the November 1999
Warrant Shares; (ii) the Fifth Amendment Warrant and the Fifth
Amendment Warrant Shares; (iii) the shares of Series A Preferred Stock
issued to LLCP prior to the date hereof, and all shares of Common
Stock issuable upon conversion thereof; and (iv) all shares of Capital
Stock of the Company issued or issuable to LLCP pursuant to Section 7
of the Fifth Amendment (as the terms of such Section may be amended
from time to time).
"Repurchase Option" has the meaning set forth in Section 2.1(a).
"Repurchase Option Closing Date" has the meaning set forth in
Section 2.1(b).
"Repurchase Option Effective Date" means the earlier to occur of
(i) with respect to an event described under clause (i) of the
definition of Repurchase Option Trigger Event, the date upon which
LLCP provides written notice to the Company as provided therein, and
(ii) with respect to an event described under clause (ii) of the
definition of Repurchase Option Trigger Event, the date upon which
LLCP provides written notification to the Company as provided therein.
"Repurchase Option Exercise Notice" has the meaning set forth in
Section 2.1(b).
"Repurchase Option Notice Date" means the date upon which LLCP
actually receives the Repurchase Option Exercise Notice furnished to
it by the Company pursuant to Section 2.1(b).
"Repurchase Option Price" means the aggregate repurchase price
for the LLCP Equity Securities, payable in cash on the Repurchase
Option Closing Date, equal to the sum of:
(i) With respect to shares of Common Stock (including any
November 1999 Warrant Shares and any Fifth Amendment Warrant
Shares) to be repurchased by the Company, a dollar amount equal
to the number of such shares of Common Stock being repurchased,
multiplied by:
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(a) if the Common Stock is publicly traded on the Repurchase
Option Notice Date, the greater of:
(x) the Current Market Price per share as of such Date;
and
(y) the Formula-Based Repurchase Price; or
(b) if the Common Stock is not publicly traded on the
Repurchase Option Notice Date, the Formula-Based Repurchase
Price; plus
(ii) With respect to shares of Series A Preferred Stock to be
repurchased by the Company, a dollar amount equal to the greater of
(a) the number of shares of Common Stock (or portion thereof) issuable
upon exercise of such shares of Series A Preferred Stock being
repurchased, multiplied by the applicable per share amount determined
under clause (i) above, and (b) $540,000.
"Repurchase Option Trigger Event" means the occurrence of either of
the following events:
(i) If a Default or Event of Default shall have occurred and be
continuing and LLCP provides written notice to the Company (a)
requesting that the Company make any payments in addition to those
which the Company is then obligated to make under the then existing
Investment Documents (e.g., interest payments calculated at the
Default Rate) or LLCP provides written notice to the Company or (b)
declaring all Obligations to Purchaser to be immediately due and
payable pursuant to Section 10.2 of the Securities Purchase Agreement;
or
(ii) If the Company notifies LLCP in writing that it intends in
good faith to (a) (y) enter into a bona fide transaction with a third
party to merge, consolidate, amalgamate or otherwise combine, or to
sell, lease, transfer or otherwise dispose of, in any transaction or
series of transactions, all or a significant portion of its assets or
properties (whether now owned or hereafter acquired) or (z) reorganize
or recapitalize, or (b) enter into a bona fide transaction with a
third party which is valued at more than $8.0 million and, in the case
of either of clause (ii)(a) or (ii)(b) above, LLCP notifies the
Company in writing, within ten (10) days following LLCP's receipt of
the Company's written notification of such intent, that it does not
consent to any such transaction, reorganization or recapitalization,
as the case may be.
2. REPURCHASE OPTION.
2.1 Right to Repurchase Equity Securities.
(a) On the terms and subject to the conditions set forth in this
Agreement, if a Repurchase Option Trigger Event occurs at any time after
the date hereof, the
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Company shall have the right to repurchase all, but not less than all (the
"Repurchase Option"), of the LLCP Equity Securities beneficially owned by
LLCP on the Repurchase Option Closing Date at the Repurchase Option Price;
provided, however, that the Company must pay and perform all other
Obligations to Purchaser outstanding as of the Repurchase Option Closing
Date simultaneously with, or prior to, the closing of the Repurchase
Option.
(b) The Repurchase Option may be exercised by the Company during the
twenty (20)-day period immediately following the Repurchase Option
Effective Date by furnishing to LLCP a written notice of exercise (a
"Repurchase Option Exercise Notice") prior to the close of business on the
last day of such twenty (20)-day period. The Repurchase Option Exercise
Notice shall (i) affirmatively state that the Company is exercising the
Repurchase Option, (ii) set forth the good faith determination by the Board
of Directors of the Company (the "Board") of the Repurchase Option Price
and be accompanied by a written calculation of such determination, prepared
in reasonable detail, and (iii) specify a Business Day occurring not later
than sixty (60) days immediately following the Repurchase Option Effective
Date as the closing date for repurchase (or such later date as may be
agreed upon by LLCP in writing) (as such date may be reduced or extended as
provided below, the "Repurchase Option Closing Date"). The Company may
exercise the Repurchase Option only once, and a Repurchase Option Exercise
Notice, once given, shall be irrevocable.
(c) LLCP shall have the right to challenge or otherwise dispute the
Repurchase Option Price set forth in the Repurchase Option Exercise Notice
by furnishing a written notice to the Company to such effect (a "Dispute
Notice") within five (5) days following the Repurchase Option Notice Date.
(i) If LLCP timely delivers a Dispute Notice to the Company
and, thereafter, the Company and LLCP cannot resolve the dispute
within ten (10) days after delivery of the Dispute Notice to the
Company, the Repurchase Option Price shall be determined in accordance
with the accounting procedures set forth in Section 2.2. In the event
of such dispute, the Repurchase Option Closing Date shall occur on the
later of (x) five (5) Business Days immediately following the final
determination of the Repurchase Option Price pursuant to such
accounting procedures and (y) the Repurchase Option Closing Date set
forth in the Repurchase Option Exercise Notice; or
(ii) If LLCP does not deliver a Dispute Notice to the
Company or otherwise notifies the Company that it does not intend to
challenge or dispute the Board's determination of the Repurchase
Option Price, the Repurchase Option Price set forth in the Repurchase
Option Exercise Notice shall be final and binding on the parties, and
the Repurchase Option Closing Date shall occur on the date specified
in the Repurchase Option Exercise Notice (or as may be otherwise
agreed in writing by the parties).
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(d) At the closing of the Repurchase Option, LLCP will deliver to the
Company any original stock certificates and other instruments in its
possession (or within its control) representing the LLCP Equity Securities
to be repurchased by the Company against delivery by the Company of the
Repurchase Option Price, together with the payment of all other Obligations
to Purchaser then outstanding, by wire transfer in immediately available
funds. In no event shall LLCP be required or otherwise obligated to
exercise or convert any Option Rights (including the November 1999 Warrant,
the shares of Series A Preferred Stock or the Fifth Amendment Warrant) in
connection with the exercise or consummation of the Repurchase Option.
(e) The parties expressly acknowledge and agree that LLCP may, in a
bona fide transaction, freely sell, assign, transfer or otherwise dispose
of any or all LLCP Equity Securities beneficially owned or held by it at
any time prior to the Repurchase Option Notice Date, and this Agreement
shall not limit or otherwise restrict LLCP from doing so in any manner
whatsoever. Without limiting the generality of the foregoing, the parties
acknowledge and agree that any LLCP Equity Securities so sold, assigned,
transferred or otherwise disposed of shall thereafter be free of the
Repurchase Option, which shall terminate as of the effective date of any
such sale, assignment, transfer or other disposition with respect to such
LLCP Equity Securities and shall not be binding upon any subsequent owner
or holder thereof.
2.2 If LLCP challenges or otherwise disputes the Board's determination of
the Repurchase Option Price pursuant to Section 2.1(c) and, thereafter, the
Company and LLCP cannot resolve the dispute within ten (10) days after delivery
of the Dispute Notice, the Repurchase Option Price shall be determined by an
independent certified public accounting firm of recognized national standing
selected by the mutual written agreement of the Company and LLCP; provided,
however, that if the Company and LLCP are unable to mutually select such
accounting firm within ten (10) days after the date upon which the right or
obligation to select an accounting firm arises, each of the Company and LLCP
shall, within three (3) Business Days thereafter, select one accounting firm,
and the two (2) selected firms shall, within three (3) Business Days after their
selection, select a third accounting firm which shall make the relevant
determination (which determination shall be final and binding upon the parties).
Within thirty (30) days after its selection, the third accounting firm shall
conduct a review of the books and records of the Company and its Subsidiaries
for purposes of determining the Repurchase Option Price and shall deliver to the
Company and LLCP in writing its determination of the Repurchase Option Price,
prepared in reasonable detail, and, if requested by either party, the workpapers
prepared in completing its review and determination of the Repurchase Option
Price.
2.3 Payment of Fees. The Company shall bear all fees, costs and expenses
incurred by the Company and LLCP in connection with the determination of the
Repurchase Option Price and any challenge or dispute thereof, including all fees
and expenses of any investment banking, valuation or accounting firm(s) engaged
by the Company or LLCP and of attorneys in connection with such calculation.
Notwithstanding the foregoing, the Company and LLCP shall share equally all such
fees, costs and expenses if, after LLCP delivers a Dispute Notice to the
Company, the difference between (a) the Repurchase Option Price as determined
pursuant to the accounting procedures contemplated by Section 2.2 and
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(b) the Repurchase Option Price set forth in the Repurchase Option Exercise
Notice, is less than five percent (5.0%) of the Repurchase Option Price set
forth in the Repurchase Option Exercise Notice.
2.4 No Representations. In no event shall LLCP be obligated to make any
representations or warranties as to any LLCP Equity Securities being repurchased
by the Company other than with respect to LLCP's organization and authority,
title to such shares and the absence of conflicts with organizational documents
and material agreements.
2.5 Superseding Rights. The Company and LLCP hereby acknowledge and agree
that the provisions of this Section 2 shall supersede Sections 3.2 through 3.4
of the November 1999 Warrant.
3. MISCELLANEOUS.
3.1 Notices. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if transmitted by telecopier with receipt
acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as provided in Section 12.6 of the
Securities Purchase Agreement (as such addresses have been previously updated or
at such other address or addresses as LLCP or the Company, as the case may be,
may specify in the future by written notice given in accordance with this
Section 3.1).
3.2 Assignment. The rights and obligations of LLCP under this Agreement
shall be freely assignable or delegable, as the case may be. The rights and
obligations of the Company may not be assigned or delegated, as the case may be,
without LLCP's prior written consent.
3.3 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the Company's right to
repurchase any LLCP Equity Securities and supersedes any prior oral or written,
or any contemporaneous oral, agreements or understandings with respect thereto,
including Sections 3.2 through 3.4 of the November 1999 Warrant. Nothing
contained in this Agreement, whether expressed or implied, is intended to confer
upon any person other than the parties any rights, remedies, or liabilities
under or by reason of this Agreement.
3.4 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future Applicable Laws
during the term thereof, such provision shall be fully severable, this Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part thereof, and the remaining provisions
thereof shall remain in fill force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance therefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable provision there
shall be added automatically as a part of this Agreement a legal, valid, and
enforceable provision as similar in terms to the illegal, invalid, or
unenforceable provision as may be possible.
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3.5 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile transmission, each of which shall be an original,
but all of which together shall constitute one instrument.
3.6 Headings; Construction and Interpretation. The headings in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement and are not to be considered in construing or interpreting this
Agreement. All section, preamble, recital, exhibit, schedule, clause and party
references contained in this Agreement are to this Agreement unless otherwise
stated. Unless the context of this Agreement or any other Investment Document
clearly requires otherwise, the use of the word "including" is not limiting and
the use of the word "or" has the inclusive meaning represented by the phrase
"and/or." References in this Agreement to any agreement, other document or law
"as amended" or "as amended from time to time," or amendments of any agreement,
document or law, shall include any amendments, supplements, restatements,
replacements, renewals, refinancings, waivers or other modifications.
3.7 Amendments and Waivers; Successors and Assigns. This Agreement may be
amended, supplemented or otherwise modified only by a writing signed by the
Company and LLCP. No waiver of any term hereunder shall be effective unless
waived in a writing signed by the waiving party. This Agreement shall be binding
upon, and inure to the benefit of, the Company, LLCP and their respective
successors and permitted assigns, except as otherwise provided for herein.
3.8 Remedies. If any party does not observe or perform any of its
covenants or agreements contained in this Agreement, the other party may proceed
to protect and enforce its rights by suit in equity or action at law, whether
for specific performance of any term contained herein or other injunctive relief
against the breach of any such term. None of the rights, powers or remedies
conferred under this Agreement shall be mutually exclusive, and each such right,
power or remedy shall be cumulative and in addition to any other right, power or
remedy whether conferred by this Agreement or any other Investment Document or
now or hereafter available under Applicable Law.
3.9 Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED
IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES REGARDING CHOICE OF LAW OR CONFLICTS
OF LAWS.
3.10 WAIVER OF JURY TRIAL. EACH PARTY HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES
AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER
PROCEEDING BASED UPON, ARISING OUT OF OR IN ANY WAY RELATING TO (a) THIS
AGREEMENT, THE SECURITIES PURCHASE AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT,
INCLUDING ANY PRESENT OR FUTURE AMENDMENT THEREOF, OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY
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OR RELATED THERETO, OR (b) ANY CONDUCT, ACT OR OMISSION OF THE PARTIES OR THEIR
AFFILIATES (OR ANY OF THEM) WITH RESPECT TO THIS AGREEMENT, THE SECURITIES
PURCHASE AGREEMENT OR ANY OTHER INVESTMENT DOCUMENTS, INCLUDING ANY PRESENT OR
FUTURE AMENDMENT THEREOF, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE,
REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION, SUIT OR OTHER PROCEEDING; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH ACTION, SUIT OR OTHER
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF ANY RIGHT THEY
MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
3.11 Investment Document. This Agreement shall constitute an Investment
Document.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives as of the date first
written above.
COMPANY
OVERHILL FARMS, INC., a Nevada corporation
By: ______________________________________
▇▇▇▇▇ ▇▇▇▇▇
President and Chief Executive Officer
By: ______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President and Chief
Financial Officer
LLCP
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS II,
L.P.,California limited partnership
By: LLCP California Equity Partners II,
L.P., a California limited
partnership, its General Partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Capital Partners,
Inc., a California corporation, its
General Partner
By:_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
ACKNOWLEDGED:
OVERHILL CORPORATION (formerly known
as Polyphase Corporation), a Nevada corporation
By: _________________________________________
▇▇▇▇▇ ▇▇▇▇▇
President and Chief Executive Officer
OVERHILL L.C. VENTURES, INC., a California corporation
By:__________________________________________
▇▇▇▇▇ ▇▇▇▇▇
President
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