EXHIBIT 10.1
Exhibit B
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SECURITIES EXCHANGE AND PURCHASE AGREEMENT
by and among
FRESH AMERICA CORP.,
NORTH TEXAS OPPORTUNITY FUND LP
and each of
▇▇▇▇ ▇▇▇▇▇▇▇ LIFE INSURANCE COMPANY,
▇▇▇▇ ▇▇▇▇▇▇▇ VARIABLE LIFE INSURANCE COMPANY,
SIGNATURE 1A (CAYMAN), LTD.,
SIGNATURE 3 LIMITED
and
INVESTORS PARTNER LIFE INSURANCE COMPANY
August 14, 2001
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TABLE OF CONTENTS
Page
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Article I - Definitions .............................................................................................. 2
Article II - The Series D Preferred Stock ............................................................................ 13
2.01 Sale of Series D Preferred Stock to NTOF .............................................................. 13
2.02 Exchange of Series C Preferred Stock for Series D Preferred Stock by ▇▇▇▇▇▇▇ Entities ................. 13
2.03 Legend ................................................................................................ 13
2.04 Transfer and Exchange ................................................................................. 14
2.05 Lost, Stolen, Mutilated or Destroyed Certificate ...................................................... 14
2.06 Series D Preferred Stock Dilution Fee ................................................................. 14
Article III - The Warrants ........................................................................................... 15
3.01 Sale of Series C Warrants to NTOF ..................................................................... 15
3.02 Exchange of Series A Warrants, Series B Warrants and Notes for Series C Warrants by ▇▇▇▇▇▇▇ Entities... 15
3.03 Legend ................................................................................................ 15
3.04 Exercise Price ........................................................................................ 16
3.05 Exercise .............................................................................................. 16
3.06 Taxes ................................................................................................. 17
3.07 Warrant Register ...................................................................................... 17
3.08 Transfer and Exchange ................................................................................. 17
3.09 Adjustments to Number of Shares of Common Stock Purchasable ........................................... 18
3.10 Lost, Stolen, Mutilated or Destroyed Warrants ......................................................... 21
3.11 Legend ................................................................................................ 21
Article IV - Closing ................................................................................................. 22
Article V - Put Option ............................................................................................... 23
5.01 Grant of Option ....................................................................................... 23
5.02 Put Price ............................................................................................. 24
5.03 Exercise of Put Option ................................................................................ 24
5.04 Certain Remedies ...................................................................................... 25
5.05 Put Option Closing .................................................................................... 25
5.06 Put Price Upon Failure to Receive Requisite Shareholder Approval ...................................... 25
Article VI - Registration Rights; Exchange Rights .................................................................... 25
6.01 Required Registration ................................................................................. 25
6.02 Incidental Registration ............................................................................... 26
6.03 Form S-3 Registrations ................................................................................ 27
6.04 Rule 144 Availability ................................................................................. 27
6.05 Registration Procedures ............................................................................... 28
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6.06 Allocation of Expenses ............................................... 30
6.07 Listing on Securities Exchange ..................................... 30
6.08 Holdback Agreements ................................................ 30
6.09 Rule 144 ........................................................... 31
6.10 Rule 144A .......................................................... 31
6.11 Limitations on Subsequent Registration Rights ...................... 32
6.12 Exchange Rights .................................................... 32
6.13 Other Rights ....................................................... 33
Article VII - Representations and Warranties ....................................... 33
7.01 Representations and Warranties of the Company and its Subsidiaries.. 33
7.02 Representations and Warranties of the Purchasers ................... 43
Article VIII - Covenants ........................................................... 44
8.01 Financial Statements and Reporting Information ..................... 44
8.02 Laws ............................................................... 45
8.03 Inspection ......................................................... 45
8.04 Certain Actions .................................................... 46
8.05 Records ............................................................ 49
8.06 Accountants ........................................................ 49
8.07 Existence .......................................................... 49
8.08 Notice ............................................................. 49
8.09 Taxes .............................................................. 50
8.10 Warrant Rights ..................................................... 51
8.11 Reservation of Warrant Shares ...................................... 51
8.12 Insurance .......................................................... 51
8.13 Prohibition on Conflicting Agreements .............................. 51
8.14 Transactions with Affiliates ....................................... 52
8.15 Use of Proceeds .................................................... 52
8.16 Bylaws ............................................................. 52
8.17 Subsidiaries ....................................................... 52
8.18 Certain Other Agreements ........................................... 52
8.19 Advice of Changes; Supplemental Schedules .......................... 52
8.20 Preparation and Filing of Sec Documents ............................ 53
8.21 Preparation of Proxy Statement; Company Shareholders Meeting ....... 53
8.22 Public Announcements ............................................... 54
8.22 Shareholder Litigation ............................................. 54
8.24 Officers and Directors Indemnification ............................. 54
Article IX - Conditions ............................................................ 54
9.01 Purchasers Conditions .............................................. 54
9.02 Company Conditions ................................................. 56
Article X - Miscellaneous .......................................................... 57
10.01 Indemnification .................................................... 57
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10.02 Equitable Relief .............................................. 58
10.03 Integration and Amendments .................................... 58
10.04 Headings ...................................................... 59
10.05 Severability................................................... 59
10.06 Notices ....................................................... 59
10.07 Successors .................................................... 61
10.08 Remedies ...................................................... 61
10.09 Survival ...................................................... 61
10.10 Fees and Expenses ............................................. 61
10.11 Counterparts .................................................. 63
10.12 Other Business ................................................ 63
10.13 Choice of Law ................................................. 63
10.14 Duties Among Holders .......................................... 63
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SECURITIES EXCHANGE AND PURCHASE AGREEMENT
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This SECURITIES EXCHANGE AND PURCHASE AGREEMENT (this "Agreement") is
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made as of August 14, 2001, by and among FRESH AMERICA CORP., a Texas
corporation (the "Company"), NORTH TEXAS OPPORTUNITY FUND LP, a Texas limited
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partnership ("NTOF"), and each of ▇▇▇▇ ▇▇▇▇▇▇▇ LIFE INSURANCE COMPANY ("JH
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Life"), ▇▇▇▇ ▇▇▇▇▇▇▇ VARIABLE LIFE INSURANCE COMPANY ("JH Variable"), SIGNATURE
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1A (CAYMAN), LTD. ("Cayman"), SIGNATURE 3 LIMITED ("Signature 3") and INVESTORS
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PARTNER LIFE INSURANCE COMPANY ("Investors" and, together with JH Life, JH
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Variable, Cayman and Signature 3, individually a "▇▇▇▇▇▇▇ Entity" and
collectively, the "▇▇▇▇▇▇▇ Entities"). NTOF and the ▇▇▇▇▇▇▇ Entities are at
times herein referred to individually as a "Purchaser" and collectively as the
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"Purchasers".
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W I T N E S S E T H:
WHEREAS, pursuant to that certain Securities Purchase Agreement dated
as of May 4, 1998 (as amended from time to time, the "Initial Securities
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Purchase Agreement"), the Company sold to JH Life, JH Variable and Cayman (i) an
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aggregate of 155,483 warrants to purchase Common Stock (the "Initial Warrants")
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and (ii) twenty million dollars ($20,000,000) in aggregate principal amount of
the Company's 12% Senior Subordinated Notes due May 1, 2003 (the "Initial
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Notes");
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WHEREAS, pursuant to that certain Amended and Restated Warrant
Agreement With Respect to Warrant Agreement dated as of May 4, 1998, dated as of
April 15, 2000 (the "Amended and Restated Warrant Agreement"), the Company and
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JH Life, JH Variable, Cayman and Investors agreed, among other things, to amend
and to restate the terms and conditions of the Initial Warrants, to re-designate
such Initial Warrants as Series A Warrants (as so designated, the "Series A
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Warrants") and to specify the rights attendant to the Series B Warrants to
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purchase common Stock (the "Series B Warrants");
WHEREAS, pursuant to that certain Amended and Restated Note Agreement
dated as of April 15, 2000 (the "Amended and Restated Note Agreement"), the
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Company, JH Life, JH Variable and Cayman agreed, among other things, to amend
and to restate the terms and conditions of the Initial Notes (as so amended and
restated, the "Notes") and to extend the maturity date of the Initial Notes to
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May 1, 2007;
WHEREAS, pursuant to that certain Securities Purchase Agreement dated
as of April 15, 2000 (the "Additional Securities Purchase Agreement"), the
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Company sold to JH Life, JH Variable and Investors (i) an aggregate of 420,651
Series B Warrants and (ii) an aggregate of 50,000 shares of Series C Cumulative
Redeemable Preferred Stock (the "Series C Preferred Stock");
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WHEREAS, the ▇▇▇▇▇▇▇ Entities desire to exchange with the Company, and
the Company desires to exchange with the ▇▇▇▇▇▇▇ Entities, all of the issued and
outstanding Series A Warrants, Series B Warrants, Series C Preferred Stock and
Notes (including, in each case, any and all accrued and unpaid dividends, fees
(excluding any and all fees which constitute ▇▇▇▇▇▇▇
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Closing Expenses (as hereinafter defined)) or interest related thereto) owned by
them for an aggregate of twenty-seven thousand (27,000) shares of Series D
Preferred Stock (as defined below) and warrants to purchase, subject to
adjustment pursuant to the terms of this Agreement, an aggregate of forty-five
million four hundred fourteen thousand five hundred twenty-nine (45,414,529)
shares of Common Stock (all such warrants issued to any ▇▇▇▇▇▇▇ Entity shall be
referred to herein, collectively, as the "▇▇▇▇▇▇▇ Warrants"), in each case on
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the terms and conditions set forth herein;
WHEREAS, the Company also desires to sell to NTOF, and NTOF desires to
purchase from the Company, an aggregate of fifty thousand (50,000) shares of
Series D Preferred Stock and a warrant (the "NTOF Warrant" and, together with
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the ▇▇▇▇▇▇▇ Warrants, the "Series C Warrants") to purchase, subject to
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djustment pursuant to the terms of this Agreement, an aggregate of eighty-four
million one hundred thousand nine hundred eighty (84,100,980) shares of Common
Stock, in each case on the terms and conditions set forth herein; and
WHEREAS, the Series D Preferred Stock will have the rights, preferences
and designations set forth herein and in the Certificate of Designation;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Purchasers, intending to be legally bound, hereby agree as
follows:
Article I
Definitions
As used in this Agreement, the following terms have the meanings
indicated:
Accelerated Put Event. This term is defined in Section 5.01.
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Additional Securities Purchase Agreement. This term is defined in the
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recitals.
Affiliate. With respect to any Person, (a) a Person (other than in the
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case of the Company, a Purchaser) that, directly or indirectly or
through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person; (b) any Person of which such
Person or such Person's spouse is an officer, director, security
holder, partner, or, in the case of a trust, the beneficiary or
trustee, and (c) any Person that is an officer, director, security
holder, partner, or, in the case of a trust, the beneficiary or trustee
of such Person. The term "control" as used with respect to any Person,
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means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by contract, or
otherwise. Except as otherwise provided herein, the term "Affiliate"
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shall include any and all members of a Person's immediate family.
Agreement. This term is defined in the preamble and includes all
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amendments, modifications and restatements thereof.
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Amended and Restated Articles. The Amended and Restated Articles of
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Incorporation of the Company, in the form attached hereto as Annex A,
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to be filed by the Company with the Secretary of State of Texas in
connection with the transactions contemplated hereby upon receipt of
requisite shareholder approval.
Amended and Restated Note Agreement. This term is defined in the
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recitals.
Amended and Restated Warrant Agreement. This term is defined in the
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recitals.
Appraised Value. The value determined in accordance with the following
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procedures. For a period of thirty (30) days after the date of a
Valuation Event (the "Negotiation Period"), each party to this
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Agreement agrees to negotiate in good faith to reach agreement upon the
Appraised Value of the securities or property at issue, as of the date
of the Valuation Event, which will be the fair market value of such
securities or property, without premium for control or discount for
minority interests, illiquidity, or restrictions on transfer. If the
parties are unable to agree upon the Appraised Value of such securities
or other property by the end of the Negotiation Period, then the
Appraised Value of such securities or property will be determined for
purposes of this Agreement by a recognized appraisal or investment
banking firm (an "Appraiser") mutually agreeable to the Holders and the
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Company. If the Holders and the Company cannot agree on an Appraiser
within fifteen (15) days after the end of the Negotiation Period, then
the Company, on the one hand, and the Holders, on the other hand, shall
each select an Appraiser within twenty-one (21) days after the end of
the Negotiation Period and those two Appraisers shall select within
twenty-five (25) days after the end of the Negotiation Period an
independent Appraiser to determine the fair market value of such
securities or property, without premium for control or discount for
minority interests, illiquidity or minority restrictions on transfer.
Such independent Appraiser shall be directed to determine fair market
value of such securities or property as soon as practicable, but in no
event later than thirty (30) days from the date of its selection. The
determination by an Appraiser of the fair market value will be
conclusive and binding on all parties to this Agreement. The Appraised
Value of each share of Common Stock at a time when (a) the Company is
not a reporting company under the Exchange Act and (b) the Common Stock
is not traded in the organized securities markets, will, in all cases,
be calculated by determining the Appraised Value of the entire Company
taken as a whole, and dividing that value by the sum of (x) the number
of shares of Common Stock then outstanding, plus (y) the number of
shares of Common Stock Equivalents, without premium for control or
discount for minority interests, illiquidity, or restrictions on
transfer. The costs of the Appraiser or Appraisers, as the case may be,
will be borne solely by the Company. In no event will the Appraised
Value of the Common Stock or Other Securities be less than the per
share consideration received or receivable with respect to the Common
Stock or securities or property of the same class as the Other
Securities, as the case may be, in connection with a pending
transaction involving a sale, merger, recapitalization, reorganization
or consolidation of, or share exchange involving, the Company, a
dissolution of the Company, a sale or transfer of all or a majority of
its assets or revenue or income
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generating capacity, or any similar transaction. The prevailing market
prices for any security or property will not be dispositive of the
Appraised Value thereof.
Appraiser. This term is defined in the definition of Appraised Value.
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Average Market Value. The average of the Closing Prices for the
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security in question for the thirty (30) trading days immediately
preceding the date of determination.
Benefit Arrangement. Each material employment, severance or other
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similar contract, arrangement or policy (written or oral) and each plan
or arrangement (written or oral) providing for severance benefits,
insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights or
other forms of incentive compensation or post-retirement insurance,
compensation or benefits, in each case that (a) is not an Employee Plan
and (b) covers any employee or former employee of the Company.
Board of Directors. The board of directors of the Company. Unless the
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context requires otherwise, the term "Board of Directors" includes any
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and all committees of such Board of Directors.
Business Day. Each day of the week except Saturdays, Sundays and days
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on which banking institutions are authorized by law to close in the
State of Texas.
Capital Stock. As to any Person, its common stock and any membership
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interests, general or limited partnership interests, units or common or
preference stock or other capital stock of such Person authorized from
time to time, and any other units, shares, options, interests,
participations, or other equivalents (however designated) of or in such
Person, whether voting or nonvoting, including, without limitation,
units, common stock, options, warrants, preferred stock, phantom stock,
stock appreciation rights, convertible notes or debentures, stock
purchase rights, and all agreements, instruments, documents, and
securities convertible, exercisable, or exchangeable, in whole or in
part, into any one or more of the foregoing.
Cayman. This term is defined in the preamble.
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Certificate of Designation. The Series D Preferred Stock Certificate of
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Designation of the Company (a) dated of even date herewith, (b) to be
filed by the Company with the Secretary of State of Texas on or before
the Closing Date, (c) setting forth the rights and preferences of
Series D Preferred Stock and (d) in substantially the form attached
hereto as Annex B.
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Change in Control. The occurrence of either of the following: (a) the
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Holders shall cease to have the ability to elect, directly, a majority
of the members of the Board of Directors; or (b) the Holders shall
cease to own and to control, directly or indirectly, at least
4
seventy-five percent (75%) of the issued and outstanding shares of
Capital Stock of the Company (in either case, other than as a result of
a transaction approved by the Holders or solely as a result of the
voluntary sale by any Holder of all or any part of its Capital Stock;
provided, however, that, upon the consummation of any such sale, the
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percentage of Capital Stock of the Company set forth in clause (b)
above shall be automatically reduced by the percentage of Capital Stock
of the Company so transferred).
Closing. This term is defined in Article IV.
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Closing Date. This term is defined in Article IV.
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Closing Fee. This term is defined in Section 10.10(b).
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Closing Price. For any given trading day:
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(a) If the primary market for the security in question is a
national securities exchange registered under the Exchange Act, the
National Association of Securities Dealers Automated Quotation System
-- National Market System, or other market or quotation system in which
last sale transactions are reported on a contemporaneous basis, then
the last reported sales price, regular way, of such security for such
day, or, if there has not been a sale on such trading day, then the
highest closing or last bid quotation therefor on such trading day
(excluding, in any case, any price that is not the result of bona fide
arm's length trading); or
(b) If the primary market for such security is not an exchange
or quotation system in which last sale transactions are
contemporaneously reported, then the highest closing or last bona fide
bid or asked quotation by disinterested Persons in the over-the-counter
market on such trading day as reported by the National Association of
Securities Dealers through its Automated Quotation System or its
successor or such other generally accepted source of publicly reported
bid quotations as the Holders designate.
Code. The Internal Revenue Code of 1986, as amended and in effect from
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time to time, regulations promulgated thereunder.
Comfort Letter. This term is defined in Section 6.05(h).
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Commission. The Securities and Exchange Commission and any successor
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federal agency having similar powers.
Common Stock. The common stock, $.01 par value per share, of the
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Company; provided, however, that upon the approval and filing of the
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Amended and Restated Articles, the par value of the Common Stock shall
be reduced to $.0001 per share.
Common Stock Equivalent. Any option, warrant, right or similar
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security exercisable into, exchangeable for, or convertible to Common
Stock.
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Company. This term is defined in the preamble and includes any
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successor or assign of the Company. Unless the context requires
otherwise, the term "Company" includes any and all Subsidiaries.
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Contracts. This term is defined in Section 7.01(l).
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Employee Plan. Each "employee benefit plan" (as such term is defined in
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Section 3(3) of ERISA) that (a) is subject to any provision of ERISA
and (b) is maintained or contributed to by the Company or any ERISA
Affiliate of the Company.
Employment Agreements. The Employment Agreements and/or Consulting
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Agreements by and between the Company and each Management Employee, in
each case (a) dated as of the Closing Date, (b) in form and substance
satisfactory to each of the Purchasers (in each such Purchaser's sole
and absolute discretion) and (c) as amended, modified or restated from
time to time after the Closing Date in accordance with the provisions
hereof.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
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ERISA Affiliate. With respect to any Person, any other Person that,
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together with such Person, would be treated as a single employer under
Section 414 of the Code.
Exchange Act. The Securities Exchange Act of 1934, as amended, and the
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rules and regulations thereunder.
Exchange Common Stock. This term is defined in Section 6.12.
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Exchange Company. This term is defined in Section 6.12.
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Exchange Notice. This term is defined in Section 6.12.
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Exercise Price. The price per share specified in Section 3.04 as
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adjusted from time to time pursuant to the provisions of this
Agreement.
Fair Market Value.
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(a) As to securities regularly traded in the organized securities
markets, the Average Market Value; and
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(b) as to all securities not regularly traded in the securities
markets and other property, the fair market value of such securities or
property as determined in good faith by the Board of Directors, without
premium for control or discount for minority interests, illiquidity, or
restrictions on transfer, at the time it authorizes the transaction (a
"Valuation Event") requiring a determination of Fair Market Value under
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this Agreement; provided, however, that, at the election of the
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Holders, the Fair Market Value of such securities and other property
will be the Appraised Value.
Financial Statements. This term is defined in Section 7.01(s).
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GAAP. The generally accepted accounting principles, applied on a
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consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or
in statements of the Financial Accounting Standards Board and/or their
respective successors and that are applicable in the circumstances as
of the date in question; provided, however, that the Company may not
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change the use or application of any material accounting method,
practice or principle without the prior written consent of the Holders.
Accounting principles are applied on a "consistent basis" when the
accounting principles observed in a current period are comparable in
all material respects to those accounting principles applied in a
preceding period.
Governmental Entity. This term is defined in Section 7.01(i).
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▇▇▇▇▇▇▇ Entities. This term is defined in the preamble and includes any
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successors or assigns of each such ▇▇▇▇▇▇▇ Entity.
▇▇▇▇▇▇▇ Closing Expenses. This term is defined in Section 10.10(d).
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▇▇▇▇▇▇▇ Expense Deposit. This term is defined in Section 10.10(d).
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▇▇▇▇▇▇▇ Warrants. This term is defined in the recitals.
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Holder Representatives. This term is defined in Article I of the
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Shareholders Agreement.
Holders. The Purchasers, and all other Persons holding Registrable
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Securities, except that neither the Company (nor any Affiliate of the
Company) will at any time be a Holder. Unless otherwise provided in
this Agreement, in each instance that the Holders are required to
request, approve or consent in concert to an action, the Holders will
be deemed to have requested, approved or consented to such action if
the Holders of a majority-in-interest of the Registrable Securities so
request or consent.
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Indebtedness. For any Person: (a) all indebtedness, whether or not
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represented by bonds, debentures, notes, securities, or other evidences
of indebtedness, for the repayment of money borrowed, (b) all
indebtedness representing deferred payment of the purchase price of
property or assets, (c) all indebtedness under any lease that, in
conformity with GAAP, is required to be capitalized for balance sheet
purposes and leases of property or assets made as a part of any sale
and lease-back transaction if required to be capitalized, (d) all
indebtedness under guaranties, endorsements, assumptions, or other
contractual obligations, including any letters of credit, or the
obligations in respect of, or to purchase or otherwise acquire,
indebtedness of others, (e) all indebtedness secured by a Lien existing
on property owned, subject to such Lien, whether or not the
indebtedness secured thereby shall have been assumed by the owner
thereof, (f) trade accounts payable more than ninety (90) days past
due, (g) all amendments, renewals, extensions, modifications and
refinancings of any indebtedness or obligations referred to in clauses
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(a), (b), (c), (d), (e) or (f) above.
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Indemnified Party. This term is defined in Section 10.01.
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Initial Holders. The Purchasers and any Affiliate of the Purchasers to
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which any of the Series D Preferred Stock or Warrants or any part of or
interest in the Series D Preferred Stock or Warrants is assigned.
Initial Notes. This term is defined in the recitals.
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Initial Securities Purchase Agreement. This term is defined in the
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recitals.
Initial Warrants. This term is defined in the recitals.
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Intellectual Property. This term is defined in Section 7.01(f).
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Investors. This term is defined in the preamble.
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Issuable Warrant Shares. Shares of Common Stock or Other Securities
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issuable on exercise of the Warrants.
Issued Warrant Shares. Shares of Common Stock or Other Securities
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issued upon exercise of the Warrants.
JH Life. This term is defined in the preamble.
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JH Variable. This term is defined in the preamble.
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Key Employee. Any employee of the Company holding the position of Vice
------------
President or higher.
Lien. Any lien, mortgage, security interest, tax lien, pledge,
----
encumbrance, financing statement, or conditional sale or title
retention agreement, or any other interest in property
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designed to secure the repayment of Indebtedness or any other
obligation, whether arising by agreement, operation of law, or
otherwise.
Management Employee. Each of ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
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▇▇▇▇▇ ▇▇▇▇▇▇▇ and Colon ▇▇▇▇▇▇▇▇.
▇▇▇▇▇▇ Purchase Agreement. That certain Stock Purchase Agreement among
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the Company, Hereford Haven, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇ dated December 19,
1997, as amended and in effect on the Closing Date, and otherwise in
form and substance satisfactory to each of the Purchasers (in each
Purchaser's sole and absolute discretion).
Material Adverse Effect. Any event, development or circumstance that
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has had or could reasonably be expected to have a material adverse
effect on (a) the business, assets, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole, (b)
the ability of the Company to perform its obligations under this
Agreement and the Other Agreements, or (c) the validity or
enforceability of (i) this Agreement or any of the Other Agreements or
(ii) the rights and remedies of the Purchasers under this Agreement or
any of the Other Agreements, in each case as compared to that existing
as of the Closing Date and (if applicable) as represented herein or
therein.
Monitoring Agreement. That certain Monitoring Agreement by and between
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the Company and North Texas Investment Advisors LLC, a Delaware limited
liability company, (a) dated as of the Closing Date, (b) in the form
attached hereto as Annex C and (c) as the same may be modified or
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amended from time to time in accordance with the terms hereof.
Negotiation Period. This term is defined in the definition of Appraised
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Value.
Notes. This term is defined in the recitals.
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NTOF. This term is defined in the preamble.
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NTOF Warrants. This term is defined in the recitals.
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Original Issue Price of a share of Series D Preferred Stock. One
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hundred dollars ($100).
Other Agreements. Each of (a) the Shareholders Agreement, (b) the
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Certificate of Designation, (c) the Employment Agreements, (d) the
▇▇▇▇▇▇ Purchase Agreement, (e) the Monitoring Agreement and (f) all
other agreements, instruments and documents (including, without
limitation, powers of attorney, consents, assignments, contracts,
notices and all other written matter), and all renewals, modifications
and extensions thereof, whether heretofore, now or hereafter executed
by or on behalf of the Company and delivered to and for the benefit of
the Purchasers or any Person participating with the Purchasers with
respect to this Agreement or any of the transactions contemplated by
this Agreement.
9
Other Securities. Any stock, membership interests, other securities,
----------------
property, or other property or rights (other than Common Stock) that
the Holders become entitled to receive upon exercise of the Warrants.
Permits. This term is defined in Section 7.01(i).
------- ---------------
Permitted Acquisitions. This term is defined in Section 2.04 of the
---------------------- ------------
Shareholders Agreement.
Permitted Stock. The aggregate of (a) any and all Common Stock issued
---------------
to, or reserved for issuance for, any Person in connection with the
exercise of any options or warrants to acquire Common Stock (other than
the Warrant Shares) that are outstanding as of the Closing Date and set
forth on Schedule 7.01(d), plus (b) any and all Warrant Shares, plus
---------------- ---- ----
(c) Common Stock, or options or warrants to acquire Common Stock,
constituting, in the aggregate, 29,513,560 shares of Common Stock of
the Company (including any Common Stock deemed outstanding pursuant to
Section 3.09(d)), issued to, or reserved for issuance for, the present
----------------
and future employees and management of the Company pursuant to an
Employee Plan or other Benefit Arrangement approved by the Board of
Directors. Unless otherwise agreed to by all Holders, the number of
shares of Permitted Stock issued or reserved for issuance under clauses
(a) and (c) above shall not exceed, in the aggregate, 30,276,353
shares.
Person. This term will be interpreted broadly to include any
------
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, company, limited
liability company, institution, entity, party, or government (whether
national, federal, state, county, city, municipal, or otherwise,
including, without limitation, any instrumentality, division, agency,
body, or department of any of the foregoing).
Property. Property or assets of all kinds, real, personal or mixed,
--------
tangible or intangible (including, without limitation, all rights
relating thereto), whether owned or acquired on or after the Closing
Date.
Proxy Statement. This term is defined in Section 8.21(a).
--------------- ---------------
Purchaser and Purchasers. These terms are defined in the preamble.
--------- ----------
Put Option. This term is defined in Section 5.01.
---------- ------------
Put Option Closing. This term is defined in Section 5.05.
------------------ ------------
Put Option Period. This term is defined in Section 5.01.
----------------- ------------
Put Price. This term is defined in Section 5.02.
--------- ------------
10
Put Shares. The Series D Preferred Stock and any other shares of
----------
Capital Stock owned from time to time by a Holder as a result of such
Holder's ownership of Series D Preferred Stock. Notwithstanding
anything contained or implied herein to the contrary, the term "Put
---
Shares" shall not include the Warrant Shares.
------
Qualified Private Financing. Any private equity offering (excluding any
---------------------------
issuance of Permitted Stock) in which the Company receives at least
twenty million dollars ($20,000,000) in net cash proceeds.
Qualified Public Offering. A firm underwritten public offering of the
-------------------------
Company's Common Stock under the Securities Act completed by the
Company and resulting in gross cash proceeds (before underwriting
discounts and commissions) of at least twenty million dollars
($20,000,000).
Register, registered, and registration refer to a registration effected
-------- ---------- ------------
by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of
such registration statement.
Registrable Securities. (a) The Issuable Warrant Shares, (b) the Issued
----------------------
Warrant Shares and (c) any other Capital Stock owned from time to time
by a Holder that have not been previously sold to the public
(including, without limitation, the Series D Preferred Stock).
Requisite Shareholder Approval. This term is defined in Section 1 of
------------------------------
the Certificate of Designation.
SEC Documents. This term is defined in Section 7.01(w).
------------- ---------------
Senior Loan Documents. That certain Restated Business Loan Agreement
---------------------
dated February 2, 1998, among the Company, Bank of America, N.A. and
the other parties named therein, as amended, extended, renewed or
restated from time to time, including, without limitation, as amended
by the Thirteenth Amendment.
Series A Warrants. This term is defined in the recitals.
-----------------
Series B Warrants. This term is defined in the recitals.
-----------------
Series C Preferred Stock. This term is defined in the recitals.
------------------------
Series C Warrants. This term is defined in the recitals.
-----------------
Series D Preferred Stock. The Series D Cumulative Redeemable Preferred
------------------------
Stock, $1.00 par value per share, of the Company.
Series D Preferred Stock Dilution Fee. This term is defined in
-------------------------------------
Section 2.06.
------------
11
Securities Act. The Securities Act of 1933, as amended, and the rules
--------------
and regulations thereunder.
Shareholders Agreement. The Shareholders Agreement by and among the
----------------------
Company and the Purchasers (a) dated as of the date hereof, (b) in the
form attached hereto as Annex D and (c) as amended, modified or
-------
restated from time to time.
Shareholders Meeting. This term is defined in Section 8.21(b).
-------------------- ---------------
Signature 3. This term is defined in the preamble.
-----------
Subsidiary. Each Person of which or in which the Company or its other
----------
Subsidiaries own directly or indirectly fifty-one percent (51%) or more
of (a) the combined voting power of all classes of securities having
general voting power under ordinary circumstances to elect a majority
of the board of directors or equivalent body of such Person, if it is a
corporation or similar person; (b) the capital interest or profits
interest of such Person, if it is a partnership, limited liability
company, joint venture, or similar entity; or (c) the beneficial
interest of such Person, if it is a trust, association, or other
unincorporated organization.
Supplemental Disclosure Schedules. This term is defined in Section
--------------------------------- -------
8.19.
----
TBCA. The Texas Business Corporation Act, as amended from time to time.
----
Termination Fee. This term is defined in Section 10.10(c).
--------------- ----------------
Thirteenth Amendment. That certain Thirteenth Amendment to Restated
--------------------
Business Loan Agreement by and among the Company, Bank of America, N.A.
and the other parties named therein and dated as of the Closing Date.
Transaction Fees. This term is defined in Section 10.10(a).
---------------- ----------------
Valuation Event. This term is defined in the definition of Fair Market
---------------
Value.
Warrants. The Series C Warrants, dated as of the Closing Date and
--------
issued to the Initial Holders, and all Warrants issued upon the
transfer or division of, or in substitution for, such Warrants.
Warrant Shares. The Issued Warrant Shares and the Issuable Warrant
--------------
Shares, collectively.
Article II
The Series D Preferred Stock
2.01 Sale of Series D Preferred Stock to NTOF.
----------------------------------------
12
(a) Sale of Series D Preferred Stock. On the Closing Date, NTOF
--------------------------------
agrees to purchase from the Company, and the Company agrees to issue to
NTOF, the aggregate number of shares of Series D Preferred Stock set
forth beneath NTOF's name on the signature page of this Agreement, all
subject to and in accordance with the terms and conditions of this
Agreement. The Series D Preferred Stock issued to NTOF pursuant to the
terms hereof shall have the rights, restrictions, privileges and
preferences set forth in the Certificate of Designation.
(b) Purchase Price. In consideration of the Company's issuance of
--------------
the Series D Preferred Stock to NTOF, NTOF shall pay to the Company, on
the Closing Date, the aggregate purchase price set forth beneath NTOF's
name on the signature page to this Agreement, all subject to and in
accordance with the terms and conditions of this Agreement.
2.02 Exchange of Series C Preferred Stock for Series D Preferred Stock
-----------------------------------------------------------------
by ▇▇▇▇▇▇▇ Entities. On the Closing Date and subject to the terms and conditions
-------------------
of this Agreement, JH Life, Investors and JH Variable agree to deliver to the
Company, and the Company agrees to accept from such ▇▇▇▇▇▇▇ Entities, an
aggregate of 50,000 shares of Series C Preferred Stock, and, in exchange
therefor and for any and all accrued and unpaid dividends, fees (excluding any
and all fees which constitute ▇▇▇▇▇▇▇ Closing Expenses) or interest related
thereto, the Company agrees to issue to JH Life, Investors and JH Variable, and
each such ▇▇▇▇▇▇▇ Entity hereby agrees to accept from the Company, the number of
shares of Series D Preferred Stock set beneath each such ▇▇▇▇▇▇▇ Entity's name
on the signature page of this Agreement. The Series D Preferred Stock issued to
JH Life, Investors and JH Variable pursuant to the terms hereof shall have the
rights, restrictions, privileges and preferences set forth in the Certificate of
Designation.
2.03 Legend. The Company will deliver to each Purchaser on the Closing
------
Date one or more certificates representing the Series D Preferred Stock to be
issued to such Purchaser in such denominations as such Purchaser requests. Such
certificates will be issued in each Purchaser's name or in the name or names of
its designee or designees, as the case may be. It is understood and agreed that
all of the certificates evidencing the Series D Preferred Stock will bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL
APPLICABLE STATE SECURITIES LAWS, AND (B) ARE SUBJECT TO THE
TERMS OF AND PROVISIONS OF (I) A SECURITIES EXCHANGE AND
PURCHASE AGREEMENT, DATED AS OF AUGUST 14, 2001, BY AND AMONG
FRESH AMERICA CORP. (THE "COMPANY") AND THE PURCHASERS NAMED
-------
THEREIN AND (II) A SHAREHOLDERS AGREEMENT, DATED AS OF AUGUST
14, 2001, BY AND AMONG THE COMPANY AND THE PURCHASERS NAMED
THEREIN (AS SUCH AGREEMENTS MAY BE
13
SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO
TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE
----------
AVAILABLE AT THE OFFICES OF THE COMPANY."
2.04 Transfer and Exchange. Subject to the terms of Section 10.07 and
--------------------- -------------
the Shareholders Agreement, the Series D Preferred Stock is transferable, as to
all or any part of the Series D Preferred Stock, by the Holders of the Series D
Preferred Stock, in person or by duly authorized attorney, on the books of the
Company upon surrender of certificates representing the Series D Preferred Stock
at the principal offices of the Company, together with a transfer authorization
duly executed, provided, in each case, that the applicable transferee first
represents and warrants, pursuant to a written instrument in form and substance
reasonably satisfactory to the Company, as to the matters set forth in Section
-------
7.02. Absent any such transfer, the Company may deem and treat the registered
----
Holders of the Series D Preferred Stock at any time as the absolute owners of
the Series D Preferred Stock for all purposes and will not be affected by any
notice to the contrary. If any Series D Preferred Stock is transferred in part,
then the Company will, at the time of surrender of certificates representing the
Series D Preferred Stock, issue to the transferee certificates representing the
Series D Preferred Stock transferred and to the transferor certificates
representing the Series D Preferred Stock not transferred.
2.05 Lost, Stolen, Mutilated or Destroyed Certificate. If any
------------------------------------------------
certificate representing the Series D Preferred Stock is lost, stolen, mutilated
or destroyed, then the Company will issue a new certificate of like
denomination, tenor and date as the certificate so lost, stolen, mutilated or
destroyed upon its receipt of an affidavit including notice of ownership from
the Holder of the lost, stolen, mutilated or destroyed Series D Preferred Stock
certificate.
2.06 Series D Preferred Stock Dilution Fee. If, while any Holder
-------------------------------------
beneficially owns any Series D Preferred Stock, Common Stock or Other
Securities, the Company pays any dividend or makes any distribution to any
holder of any class of its Capital Stock with respect to such Capital Stock
(other than (a) a distribution of Common Stock or Other Securities made to the
Purchasers upon exercise of the Warrants or (b) a dividend or other distribution
made pursuant to a transaction approved by the Holders), then each Holder will
be entitled to receive in respect of such Series D Preferred Stock, Common Stock
or Other Securities a dilution fee in cash (the "Series D Preferred Stock
------------------------
Dilution Fee") on the date of payment of such dividend or distribution, which
------------
Series D Preferred Stock Dilution Fee will be equal to (a) the product of (i)
the highest amount per share paid to any class of Capital Stock of the Company
multiplied by (ii) the aggregate number of shares of Series D Preferred Stock,
-------------
Common Stock and/or Other Securities of the Company then owned by such Holder,
less (b) the amount of such dividend or distribution otherwise paid to such
----
Holder as a result of its ownership of any Series D Preferred Stock, Common
Stock and/or Other Securities of the Company.
Article III
The Warrants
3.01 Sale of Series C Warrants to NTOF.
---------------------------------
14
(a) Sale of Series C Warrants. On the Closing Date, NTOF agrees
-------------------------
to purchase from the Company, and the Company agrees to issue to NTOF,
Warrants, in each case in substantially the form attached to this
Agreement as Annex E and incorporated in this Agreement by reference,
-------
to purchase the aggregate number of shares of Common Stock set forth
beneath NTOF's name on the signature page of this Agreement, all
subject to and in accordance with the terms and conditions of this
Agreement.
(b) Purchase Price. In consideration for the Company's issuance
--------------
of the Warrants to NTOF, NTOF shall pay to the Company, on the Closing
Date, the aggregate purchase price set forth beneath NTOF's name on the
signature page to this Agreement, all subject to and in accordance with
the terms and conditions of this Agreement.
3.02 Exchange of Series A Warrants, Series B Warrants and Notes for
--------------------------------------------------------------
Series C Warrants by ▇▇▇▇▇▇▇ Entities. On the Closing Date, each of the ▇▇▇▇▇▇▇
-------------------------------------
Entities agrees to deliver to the Company, and the Company agrees to accept from
the ▇▇▇▇▇▇▇ Entities, all of the issued and outstanding Series A Warrants,
Series B Warrants and Notes owned by each such ▇▇▇▇▇▇▇ Entity and, in exchange
therefor and for any and all accrued and unpaid dividends, fees (excluding any
and all fees which constitute ▇▇▇▇▇▇▇ Closing Expenses) or interest related
thereto, the Company agrees to issue to each such ▇▇▇▇▇▇▇ Entity, and each such
▇▇▇▇▇▇▇ Entity hereby agrees to accept from the Company, Warrants, in each case
in substantially the form attached to this Agreement as Annex E and incorporated
-------
in this Agreement by reference, to purchase the aggregate number of shares of
Common Stock set forth beneath such ▇▇▇▇▇▇▇ Entity's name on the signature pages
of this Agreement, all subject to and in accordance with the terms and
conditions of this Agreement
3.03 Legend. The Company will deliver to each Purchaser on the Closing
------
Date one or more certificates representing the Warrants to be issued to such
Purchaser in such denominations as such Purchaser requests. Such certificates
will be issued in each Purchaser's name or in the name or names of its designee
or designees, as the case may be. It is understood and agreed that all of the
certificates evidencing the Warrants will bear the following legend:
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF (A) HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES
LAWS, AND (B) ARE SUBJECT TO THE TERMS AND PROVISIONS OF (I) A
SECURITIES EXCHANGE AND PURCHASE AGREEMENT, DATED AS OF AUGUST 14,
2001, BY AND AMONG FRESH AMERICA CORP. (THE "COMPANY") AND THE
-------
PURCHASERS NAMED THEREIN AND (II) A SHAREHOLDERS AGREEMENT, DATED AS OF
AUGUST 14, 2001, BY AND AMONG THE COMPANY AND THE PURCHASERS NAMED
THEREIN (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR
RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS
----------
ARE AVAILABLE AT THE OFFICES OF THE COMPANY."
15
3.04 Exercise Price. The Exercise Price per share will be $0.0001 for
--------------
each share of Common Stock represented by the Warrants; provided, however, that
-------- -------
in no event will the aggregate Exercise Price for all of the shares of Common
Stock covered by all Warrants owned by a particular Holder exceed one hundred
dollars ($100) per Holder, whether as a result of any change in the par value of
the Common Stock or Other Securities, as a result of any change in the number of
shares purchasable as provided in this Article III, or otherwise; provided,
----------- --------
further, that such limitation of the aggregate Exercise Price will have no
-------
effect whatsoever upon the amount or number of Warrant Shares for which the
Warrants may be exercised.
3.05 Exercise.
--------
(a) Subject to the provisions of Article V, each of the
---------
Warrants may be exercised by the applicable Purchaser, or such
Purchaser's successor Holders, at any time or from time to time after
the Closing Date and prior to 12:00 p.m. midnight (Dallas, Texas time)
on the tenth (10th) anniversary of the date of this Agreement;
provided, however, that as a condition to the expiration of any Warrant
-------- -------
exercise rights, the Company shall be required to give each Holder not
more than ninety (90) and not less than sixty (60) days' prior written
notice of such expiration. Each of the Warrants may be exercised on any
day that is a Business Day, for all or any part of the number of
Issuable Warrant Shares purchasable upon its exercise. In order to
exercise any Warrant, in whole or in part, the Holder will deliver to
the Company at the address designated by the Company pursuant to
Section 10.06, (i) a written notice of such Holder's election to
-------------
exercise its Warrant, which notice will specify the number of Issuable
Warrant Shares to be purchased pursuant to such exercise, (ii) payment
of the Exercise Price, in an amount equal to the aggregate purchase
price for all Issuable Warrant Shares to be purchased pursuant to such
exercise, and (iii) the Warrant. Such notice will be substantially in
the form of the Subscription Form appearing at the end of the Warrants.
Upon the receipt of such notice, the Company will, as promptly as
practicable, and in any event within three (3) Business Days, execute,
or cause to be executed, and deliver to such Holder a certificate or
certificates representing the aggregate number of full shares of Common
Stock and Other Securities issuable upon such exercise, as provided in
this Agreement. The certificate or certificates so delivered will be in
such denominations as may be specified in such notice or by such Holder
and will be registered in the name of such Holder, or such other name
as designated in such notice or by such Holder. A Warrant will be
deemed to have been exercised, such certificate or certificates will be
deemed to have been issued, and such Holder or any other Person so
designated or named in such notice will be deemed to have become a
holder of record of shares for all purposes, as of the date that
payment of the Exercise Price and the applicable Warrant are received
by the Company. If the Warrant has been exercised in part, then the
Company will, at the time of delivery of such certificate or
certificates, deliver to such Holder a new Warrant evidencing the
rights of such Holder to purchase a number of Issuable Warrant Shares
with respect to which the Warrant has not been exercised, which new
Warrant will, in all other respects, be identical with the Warrants,
or, with the consent of such Holder, appropriate notation may be made
on the Warrant and the Warrant returned to such Holder.
16
(b) Payment of the Exercise Price will be made, at the option of
the Holder, (i) in cash, (ii) by certified or official bank check,
(iii) by cancellation of any debt owed by the Company to the Holder or
(iv) by cancellation of Warrant Shares, valued at Fair Market Value. If
the Holder surrenders a combination of cash or cancellation of any debt
owed by the Company to the Holder or Warrant Shares, then the Holder
will specify the respective number of shares of Common Stock to be
purchased with each form of consideration, and the foregoing provisions
will be applied to each form of consideration with the same effect as
if the Warrant were being separately exercised with respect to each
form of consideration; provided, however, that a Holder may designate
-------- -------
that any cash to be remitted to a Holder in payment of debt be applied,
together with other monies, to the exercise of the portion of the
Warrant being exercised for cash.
3.06 Taxes. The issuance of any Common Stock or Other Securities upon
-----
the exercise of the Warrants will be made without charge to any Holder for any
tax, other than income taxes assessed against such Holder, in respect of such
issuance.
3.07 Warrant Register. The Company will, at all times while any of the
----------------
Warrants remain outstanding and exercisable, keep and maintain at its principal
office a register in which the registration, transfer, and exchange of the
Warrants will be evidenced. The Company will not at any time, except upon the
dissolution, liquidation, or winding up of the Company, close such register so
as to result in preventing or delaying the exercise or transfer of any Warrant.
3.08 Transfer and Exchange. Subject to the terms of Section 10.07 and
--------------------- -------------
the Shareholders Agreement, the Warrants and all options and rights under the
Warrants are transferable, as to all or any part of the Issuable Warrant Shares
purchasable upon the exercise thereof, by the Holders of the Warrants, in person
or by duly authorized attorney, on the books of the Company upon surrender of
the Warrants at the principal offices of the Company, together with the form of
transfer authorization attached to the Warrants duly executed. Absent any such
transfer and subject to the Shareholders Agreement, the Company may deem and
treat the registered Holders of the Warrants at any time as the absolute owners
of the Warrants for all purposes and will not be affected by any notice to the
contrary. If any Warrant is transferred in part, then the Company will, at the
time of surrender of such Warrant, issue to the transferee a Warrant covering
the number of Issuable Warrant Shares transferred and to the transferor a
Warrant covering the number of Issuable Warrant Shares not transferred.
3.09 Adjustments to Number of Shares of Common Stock Purchasable.
-----------------------------------------------------------
(a) The Warrants will be exercisable for the number of shares of
Common Stock in such manner that, following the complete and full
exercise of the Warrant of each Holder, the amount of Common Stock
issued to all Holders will equal the aggregate number of shares of
Common Stock set forth beneath the name of the Purchasers on the
signature pages of this Agreement, as adjusted, to the extent
necessary, to give effect to the following events:
(i) In case at any time or from time to time, the holders of
any class of Common Stock or Common Stock Equivalent have received, or
(on or after the
17
record date fixed for the determination of shareholders eligible to
receive) have become entitled to receive, without payment therefor:
(A) consideration (other than cash) by way of dividend or
distribution; or
(B) consideration (including cash) by way of spin-off, split-up,
reclassification (including any reclassification in connection with a
consolidation or merger in which the Company is the surviving
corporation), recapitalization, combination of shares into a smaller
number of shares, or similar corporate restructuring;
other than Common Stock issued as a stock dividend or in a stock split
(adjustments in respect of which are provided for in Sections 3.09(a)(ii)
--------------------
and (iii)), then, and in each such case, each Holder, upon the exercise of
-----
any Warrants held thereby, will be entitled to receive, for each Issuable
Warrant Share to which such Holder is entitled as of the record date fixed
for such distribution, the greatest per share amount of consideration
received by any holder of any class of Common Stock or Common Stock
Equivalent or to which such holder is entitled. All such consideration
receivable upon exercise of the Warrant with respect to such a distribution
will be deemed to be outstanding and owned by such Holder for purposes of
determining the amount of consideration to which such Holder is entitled
upon exercise of the Warrant with respect to any subsequent distribution.
(ii) If at any time there occurs any stock split, stock dividend,
reverse stock split, or other subdivision of the Common Stock, then the
number of shares of Common Stock to be received by the Holder of the
Warrant and the Exercise Price, subject to the limitations set forth in
this Agreement, will be proportionately adjusted.
(iii) Upon any reclassification or change of outstanding shares of any
class of Common Stock or Common Stock Equivalent (other than a change in
par value, or from par value to no par value, or from no par value to par
value), or upon any consolidation of the Company with, or merger or share
exchange of the Company with or into, another Person, or in the case of any
sale of all or a majority of the property, assets, business, income or
revenue generating capacity, or goodwill of the Company (other than a
Permitted Acquisition), the Company, or such successor or other Person, as
the case may be, will provide in writing that the Holder of the Warrant
will thereafter be entitled to receive the highest per share kind and
amount of consideration received or receivable (including cash) upon such
reclassification, change, consolidation, merger, share exchange, or sale by
any holder of any class of Common Stock or Common Stock Equivalent that the
Warrant entitles the Holder to receive immediately prior to such
reclassification, change, consolidation, merger, share exchange, or sale
(as adjusted pursuant to this Agreement). Any such successor Person will
thereafter be deemed to be the Company for purposes of the Warrants and
will provide for
18
adjustments that are as nearly equivalent as may be possible to the
adjustments provided for by this Section 3.09.
------------
(iv) If at any time the Company issues or sells any shares of Common
Stock (other than Permitted Stock or pursuant to a Permitted Acquisition)
or any Common Stock Equivalent at a per unit or share consideration (which
consideration will include the price paid upon issuance plus the minimum
amount of any exercise, conversion, or similar payment made upon exercise
or conversion of any Common Stock Equivalent) less than the then current
Fair Market Value per share of Common Stock immediately prior to the time
such Common Stock or Common Stock Equivalent is issued or sold, then:
(A) the Exercise Price will be reduced to the lower of the prices
calculated by:
(I) dividing (x) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding on a fully diluted
basis immediately prior to such issuance or sale multiplied by
the then existing Exercise Price, plus (2) the aggregate
----
consideration, if any, received by the Company upon such issuance
or sale, by (y) the total number of shares of Common Stock
outstanding immediately after such issuance or sale on a fully
diluted basis; and
(II) multiplying the then existing Exercise Price by a
fraction, the numerator of which is (x) the sum of (1) the number
of shares of Common Stock outstanding on a fully diluted basis
immediately prior to such issuance or sale, multiplied by the
-------------
Fair Market Value per share of Common Stock immediately prior to
such issuance or sale, plus (2) the aggregate consideration
----
received by the Company upon such issuance or sale, divided by
----------
(y) the total number of shares of Common Stock outstanding on a
fully diluted basis immediately after such issuance or sale, and
the denominator of which is the Fair Market Value per share of
Common Stock immediately prior to such issuance or sale (for
purposes of this subsection (II), the date as of which the Fair
---------------
Market Value per share of Common Stock will be computed will be
the earlier of the date upon which the Company (aa) enters into a
firm contract for the issuance of such shares, or (bb) issues
such shares); and
(B) the number of shares of Common Stock for which any of the
Warrants may be exercised at the Exercise Price resulting from the
adjustment described in subsection (A) above will be equal to the
--------------
product of the number of shares of Common Stock purchasable under such
Warrants immediately prior to such adjustment multiplied by a
fraction, the numerator of which is the Exercise Price in effect
immediately prior to
19
such adjustment and the denominator of which is the Exercise
Price resulting from such adjustment.
(v) If any event occurs as to which the preceding Sections
--------
3.09(a)(i) through (iv) are not strictly applicable, but as to which
---------- ----
the failure to make any adjustment would not fairly protect the
purchase rights represented by the Warrants in accordance with the
essential intent and principles of this Agreement, then, in each such
case, the Holder may appoint an independent investment bank or firm of
independent public accountants, which will give its opinion as to the
adjustment, if any, on a basis consistent with the essential intent
and principles established in this Agreement, necessary to preserve
the purchase rights represented by the Warrants. Upon receipt of such
opinion, the Company will promptly deliver a copy of such opinion to
the Holder and will make the adjustments described in such opinion.
The fees and expenses of such investment bank or independent public
accountants will be borne by the Company.
(b) The Company will not by any action, including, without limitation,
amending, or permitting the amendment of, the charter documents, bylaws,
or similar instruments of the Company or through any reorganization,
reclassification, transfer of assets, consolidation, merger, share
exchange, dissolution, issue or sale of securities, or any other similar
voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Agreement or the Warrants, but will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect
the rights of the Holders against impairment or dilution. Without limiting
the generality of the foregoing, the Company will (i) take all such action
as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock and
Other Securities, free and clear of all liens, encumbrances, equities, and
claims, and (ii) use its best efforts to obtain all such authorizations,
exemptions, or consents from any public regulatory body having
jurisdiction as may be necessary to enable the Company to perform its
obligations under the Warrants. Without limiting the generality of the
foregoing, the Company represents and warrants that the Board of Directors
has agreed that the Exercise Price will be adequate and has determined the
issuance of the Warrants to be in the best interests of the Company.
(c) Any calculation under this Section 3.09 will be made to the
------------
nearest one ten-thousandth of a share and the number of Issuable Warrant
Shares resulting from such calculation will be rounded up to the next
whole share of Common Stock or Other Securities comprising Issuable
Warrant Shares.
(d) For purposes of the computations to be made pursuant to (i) this
Section 3.09 and (ii) the definition of "Permitted Stock", there shall be
------------
deemed to be outstanding the maximum number of shares of Common Stock
issuable upon exercise or conversion of all Common Stock Equivalents then
outstanding.
20
(e) Except as otherwise contemplated by this Agreement or the Other
Agreements, the Company will not, and will not permit any Subsidiary to,
issue any Capital Stock other than (i) Common Stock or Common Stock
Equivalents or (ii) with respect to the Company, the Series D Preferred
Stock to be issued to Purchasers on the Closing Date.
3.10 Lost, Stolen, Mutilated or Destroyed Warrants. If any Warrant is lost,
---------------------------------------------
stolen, mutilated, or destroyed, then the Company will issue a new Warrant of
like denomination, tenor and date as the Warrant so lost, stolen, mutilated or
destroyed upon the receipt by the Company of an affidavit and notice of
ownership from the Holder of the lost, stolen, mutilated or destroyed Warrant.
Any such new Warrant will constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant is at any time enforceable by any Person; provided, however, that the
-------- -------
Company shall not honor any original Warrant if it has received an affidavit of
loss from any Holder as contemplated herein and has issued to such Holder a new
Warrant as contemplated herein.
3.11 Legend. The Warrants and the Warrant Shares have not been registered
------
under the Securities Act or qualified under applicable state securities laws.
Accordingly, unless there is an effective registration statement and
qualification respecting the Warrants and the Warrant Shares under the
Securities Act or under applicable state securities laws at the time of exercise
of a Warrant, any stock certificate issued pursuant to the exercise of a Warrant
will bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION
FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS AND (B) ARE SUBJECT
TO THE TERMS OF AND PROVISIONS OF (I) A SECURITIES EXCHANGE AND PURCHASE
AGREEMENT, DATED AS OF AUGUST 14, 2001, BY AND AMONG FRESH AMERICA CORP.
(THE "COMPANY") AND THE PURCHASERS NAMED THEREIN AND (II) A SHAREHOLDERS
-------
AGREEMENT, DATED AS OF AUGUST 14, 2001, BY AND AMONG THE COMPANY AND THE
PURCHASERS NAMED THEREIN (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED,
AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE
----------
AGREEMENTS ARE AVAILABLE AT THE OFFICES OF THE COMPANY."
Article IV
Closing
The closing of the transactions contemplated hereby shall take place at
10:00 a.m., Dallas, Texas time on a date to be specified by the parties, which
date (the "Closing Date") shall be (i) no earlier than ten (10) Business Days
------------
after the date hereof and (ii) no later than three (3) Business Days after the
waiver or satisfaction of all of the conditions precedent set forth in
21
Article IX, at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
----------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at such other time and/or place as the parties hereto
shall agree (the "Closing"). At the Closing, each of the parties hereto shall
-------
execute and deliver each of the Other Agreements to which it is a party (other
than the Shareholders Agreement, which shall be executed and delivered by each
of the parties thereto simultaneously with the execution and delivery of this
Agreement) and shall have otherwise satisfied or fulfilled all conditions
precedent to the consummation of the transactions contemplated hereby and
thereby. At the Closing, the Company shall issue and deliver to each Purchaser
one or more stock certificates or warrants, in each case in definitive form and
registered in the name of such Purchaser (or such other party as such Purchaser
may designate), representing the shares of Series D Preferred Stock and the
Warrants being purchased by it. As payment in full for the shares of Series D
Preferred Stock and the Warrants being purchased by NTOF at the Closing, and
against delivery of the stock certificates or warrants therefor, NTOF shall
deliver to the Company by certified check or by wire transfer of immediately
available funds the aggregate purchase price set forth beneath NTOF's name on
the signature page to this Agreement. As payment in full for the shares of
Series D Preferred Stock and the Warrants being purchased by the ▇▇▇▇▇▇▇
Entities at the Closing, and against delivery of the stock certificates or
warrants therefor, the ▇▇▇▇▇▇▇ Entities shall deliver to the Company all shares
of Series C Preferred Stock and all Series A Warrants, Series B Warrants and
Notes.
Article V
Put Option
5.01 Grant of Option. Subject to the provisions of Section 5.03, the
--------------- ------------
Company hereby grants to each Holder an option to sell to the Company, and the
Company is obligated to purchase from each Holder under such option (the "Put
---
Option"), all (or such portion as is designated by any such Holder pursuant to
------
Section 5.03 below) of the Put Shares held by such Holder. The Put Option will
------------
be effective at any time or times after the earlier to occur of (i) the third
(3rd) anniversary of the date of this Agreement or (ii) at any time or times
after the occurrence of any of the events listed in any of clauses (a), (b),
------- --- ---
(c), (d) or (e) below (each, an "Accelerated Put Event") (the "Put Option
--- --- --- --------------------- ----------
Period"):
------
(a) any failure of the Company in any material respect to perform any
of its obligations under the Amended and Restated Articles (other than the
failure of the Company to pay any dividends when due with respect to the
Series D Preferred Stock); provided, however, that the Put Option Period
-------- -------
will continue with respect to any such failure, even after the same has
been cured, if notice of exercise of the Put Option by such Holder is
provided pursuant to this Article V during the continuance of any such
---------
failure; provided, further, that any such Put Option Period will cease to
-------- -------
continue with respect to any such failure if all Initial Holders have
waived in writing such failure;
(b) any failure of the Company in any material respect to perform any
of its obligations under this Agreement or the Shareholders Agreement;
provided, however, that the Put Option Period will continue with respect to
-------- -------
any such failure, even after the same has been cured, if notice of exercise
of the Put Option by such Holder is provided pursuant to this Article V
---------
during the continuance of any such failure; provided, further,
-------- -------
22
that any such Put Option Period will cease to continue with respect to any
such failure if all Initial Holders have waived in writing such failure;
(c) (i) a merger, consolidation, share exchange or similar transaction
involving the Company and one or more Persons in which the Company is not
the surviving or resulting Person, (ii) a merger, consolidation, share
exchange or similar transaction involving the Company and one or more
Persons in which the Company is the surviving or resulting Person in such
transaction but as a result of which the beneficial owners of the shares of
Capital Stock of the Company immediately prior to such transaction will,
immediately after such transaction, beneficially own less than a majority
of the shares of Capital Stock of the Company, (iii) a sale in one or more
related transactions of all or substantially all of the assets, business,
or revenue or income generating operations of the Company or (iv) any
substantial change in the type of business conducted by the Company;
(d) a Change in Control; or
(e) the consummation of either a Qualified Public Offering or a
Qualified Private Financing.
5.02 Put Price. Subject to the provisions of Section 5.06, if any Holder
--------- ------------
exercises the Put Option, then the price to be paid to each such Holder pursuant
to this Agreement will be the aggregate price determined in accordance with the
following provisions (collectively, the "Put Price"):
---------
(a) With respect to any shares of Series D Preferred Stock included within
the Put Shares, the price to be paid to each such Holder pursuant to this
Agreement will be cash (denominated in U.S. Dollars) in an amount equal to the
product of (i) the number of shares of Series D Preferred Stock for which the
Put Option is being exercised by such Holder, times (ii) the sum of (A) the
-----
Original Issue Price of a share of Series D Preferred Stock, plus (B) any and
----
all accrued and unpaid dividends with respect to such share of Series D
Preferred Stock (whether or not declared and computed to the date payment
thereof is made available), plus (C) any and all accrued interest payable with
----
respect to any such accrued and unpaid dividends.
(b) With respect to any Capital Stock of the Company (other than Series D
Preferred Stock) included within the Put Shares, the price to be paid to each
such Holder pursuant to this Agreement will be cash (denominated in U.S.
Dollars) in an amount equal to the product of (i) the Fair Market Value per
share of such Capital Stock as of the end of the month immediately preceding the
date notice is given of the exercise of the Put Option pursuant to Section 5.03,
------------
multiplied by (ii) the number of shares of Capital Stock of the Company (other
-------------
than Series D Preferred Stock) for which the Put Option is being exercised by
such Holder.
(c) If, upon any exercise of the Put Option, the assets of the Company
shall be insufficient to permit the payment in full to the applicable Holders of
the Put Price or if all or any portion of the Put Price is not permitted to be
paid to one or more of the applicable Holders pursuant to the provisions of the
TBCA or the Senior Loan Documents, then the full amount of
23
the Put Price that is permitted to be paid shall be distributed ratably among
the Holders exercising the applicable Put Option.
5.03 Exercise of Put Option. The Put Option may be exercised during the Put
----------------------
Option Period with respect to all or any portion of the Put Shares by such
Holder giving notice to the Company and each other Holder during the Put Option
Period of the Holder's election to exercise the Put Option, and the date of the
Put Option Closing, which will be not less than fifteen (15) nor more than
thirty (30) days after the date of such notice. The Company will provide each
Holder desiring to exercise its Put Option the name and address of each other
Holder. Notwithstanding the foregoing, if a Holder receives such notice of
another Holder's exercise of such other Holder's Put Option, then the Holder
receiving such notice may elect to exercise its Put Option and designate a Put
Option Closing simultaneous and pari passu with that of such other Holder.
Notwithstanding anything contained or implied herein to the contrary, no Holder
shall have the right to exercise its Put Option unless and until such exercise
has been approved by all Initial Holders; provided, however, that any Holder
-------- -------
shall have the individual right, in its sole and absolute discretion, to execute
its Put Option upon the occurrence of any of the events listed in any of clauses
(c), (d) or (e) of Section 5.01.
--- --- --- ------------
5.04 Certain Remedies. If the Company defaults in its obligation to
----------------
purchase all or any portion of the Put Shares upon exercise of the Put Option or
if any Holder exercises the Put Option at a time when all or any portion of the
Put Price is not permitted to be paid in cash to such Holder pursuant to the
provisions of the TBCA or the Senior Loan Documents, then, in addition to any
other rights or remedies of each Holder (but subject to the following sentence),
the Company shall pay such amount of the Put Price as is permitted pursuant to
the provisions of the TBCA or the Senior Loan Documents, as applicable, and any
unpaid portion of the Put Price will bear interest at the lesser of (i) eighteen
percent (18%) per annum or (ii) the highest rate permitted by applicable law,
--- -----
and the Company will, upon the request of any Holder, execute and deliver to
such Holder a promissory note, in form and substance satisfactory to such
Holder, evidencing the obligation of the Company to pay any such unpaid portion
of the Put Price.
5.05 Put Option Closing. The closing for any purchase and sale of all or
------------------
any portion of the Put Shares will take place at the office of the Company on
the date specified in such notice of exercise (each, a "Put Option Closing"). At
------------------
any Put Option Closing, to the extent applicable, the Holder of the Put Shares
will deliver the certificate or certificates evidencing the Put Shares being
purchased, duly endorsed in blank. In consideration therefor, the Company will
deliver to the Holder the Put Price, which will be payable in cash.
5.06 Put Price Upon Failure to Receive Requisite Shareholder Approval.
----------------------------------------------------------------
Notwithstanding anything contained or implied herein to the contrary, if, for
any reason, the Company shall fail to receive Requisite Shareholder Approval on
or before December 31, 2001, then, from and after January 1, 2002, the aggregate
Put Price to be paid to each Holder upon exercise of the Put Option shall be the
product of (i) the Put Price otherwise payable to such Holder pursuant to the
provisions of Section 5.02, multiplied by (ii) three (3).
------------ -------------
24
Article VI
Registration Rights; Exchange Rights
6.01 Required Registration. At any time following one hundred eighty (180)
---------------------
days after the Closing Date, a majority of the Holders may, upon not more than
two (2) occasions, make a written request to the Company requesting that the
Company effect the registration of Registrable Securities (provided, however,
-------- -------
that from and after the third (3rd) anniversary of the Closing Date, any Holder
(as opposed to a majority of the Holders) shall have the individual right to so
request the Company to effect the registration of Registrable Securities).
Within thirty (30) days after receipt of such a request, the Company will notify
all Holders of such request and use its commercially reasonable best efforts to
effect the registration of all Registrable Securities that the Company has been
so requested to register by any Holder for sale, all to the extent required to
permit the disposition (in accordance with the intended method or methods
thereof) of the Registrable Securities so registered. In no event will any
Person other than a Holder be entitled to include any shares of Capital Stock in
any registration statement filed pursuant to this Section 6.01. Notwithstanding
------------
the foregoing, the Company shall not be required to effect a registration
pursuant to this Section 6.01 (i) during the period starting with the date of
------------
filing of, and ending on the date one hundred and eighty (180) days following
the effective date of the registration statement pertaining to a Qualified
Public Offering, (ii) if within thirty (30) days of receipt of a written request
from the Holders pursuant to this Section 6.01, the Company gives notice to such
------------
Holders of the Company's intention to file a registration statement for a
Qualified Public Offering within ninety (90) days, (iii) if the Company shall
furnish to the Holders requesting a registration statement pursuant to this
Section 6.01, a certificate signed by the Chairman of the Board of Directors
------------
stating that in the good faith judgment of the Board of Directors, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be effected at such time, in which event the Company shall have the
right to defer such filing for a period of not more than one hundred and twenty
(120) days after receipt of the request of the applicable Holders, or (iv) if
the Holders propose to dispose of shares of Registrable Securities that may be
immediately registered on Form S-3 pursuant to a request made pursuant to
Section 6.03.
------------
6.02 Incidental Registration. If the Company at any time proposes to file
-----------------------
on its behalf or on behalf of any of its security holders a registration
statement under the Securities Act on any form (other than a registration
statement on Form S-4 or S-8 or any successor form unless such forms are being
used in lieu of or as the functional equivalent of, registration rights) for any
class that is the same or similar to Registrable Securities, then it will give
written notice setting forth the terms of the proposed offering and such other
information as any Holder may reasonably request to all Holders at least thirty
(30) days before the initial filing with the Commission of such registration
statement, and offer to include in such filing such Registrable Securities as
any Holder may request. Each Holder desiring to have Registrable Securities
registered under this Section 6.02 will advise the Company in writing within
------------
twenty (20) days after the date of receipt of such notice from the Company,
setting forth (i) the amount of such Registrable Securities for which
registration is requested and (ii) the intended disposition of such Registrable
Securities. The Company will thereupon include in such filing the number of
Registrable Securities for which registration is so requested, and will use its
best efforts to effect registration under the Securities Act of such Registrable
Securities.
25
Notwithstanding the foregoing, if the managing underwriter or underwriters,
if any, of such offering deliver a written opinion to each Holder of such
Registrable Securities that the success of the offering would be materially and
adversely affected by the inclusion of the Registrable Securities requested to
be included, then the amount of securities to be offered for the accounts of all
Holders will be reduced pro rata (based on the ratio that each such Holder's
requested securities bears to the total number of shares requested to be
included in such registration statement) to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; provided, however,
-------- -------
that if securities are being offered for the account of other Persons as well as
the Company, then with respect to the Registrable Securities intended to be
offered to all Holders, the proportion by which the amount of such class of
securities intended to be offered by all Holders is reduced will not exceed the
proportion by which the amount of such class of securities intended to be
offered by such other Persons (other than the Company) is reduced; provided,
--------
further, that in no event shall the amount of Registrable Securities intended to
-------
be offered by all Holders be reduced below twenty-five percent (25%) of the
total amount of securities to be offered.
6.03 Form S-3 Registrations. In addition to the registration rights
----------------------
provided in Sections 6.01 and 6.02 above, if at any time the Company is eligible
------------- ----
to use Form S-3 (or any successor form) for registration of secondary sales of
Registrable Securities, any Holder may request in writing that the Company
register shares of Registrable Securities on such form. Upon receipt of such
request, the Company will promptly notify all Holders in writing of the receipt
of such request, and each such Holder may elect (by written notice sent to the
Company within thirty (30) days of receipt of the Company's notice) to have its
Registrable Securities included in such registration pursuant to this Section
-------
6.03. Thereupon, the Company will, as soon as practicable, use its commercially
----
reasonable best efforts to effect the registration on Form S-3 of all
Registrable Securities that the Company has so been requested to register by
such Holder for sale. The Company will use its commercially reasonable best
efforts to qualify and maintain its qualification for eligibility to use Form
S-3 for such purposes. Notwithstanding the foregoing, the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 6.03 (i) if Form S-3 is not available for such offering by the
------------
Holders, or (ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than one million dollars ($1,000,000), or (iii) if,
within thirty (30) days of receipt of a written request from any Holder or
Holders pursuant to this Section 6.03, the Company gives notice to such Holder
------------
or Holders of the Company's intention to make a public offering with respect to
which such Holder will have incidental registration rights pursuant to Section
-------
6.02 within ninety (90) days, or (iv) if the Company shall furnish to the
----
Holders a certificate signed by the Chairman of the Board of Directors stating
that in good faith judgment of the Board of Directors, it would be seriously
detrimental to the Company and its shareholders for such Form S-3 registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than one hundred twenty (120) days after receipt of the request of the Holder or
Holders under this Section 6.03, or (v) if the Company has, already effected
------------
three (3) registrations on Form S-3 for the Holders pursuant to this Section
-------
6.03.
----
26
6.04 Rule 144 Availability. Notwithstanding the foregoing, the Company will
---------------------
not be obligated to register any Registrable Securities as to which counsel
acceptable to the Holders renders an opinion in form and substance satisfactory
to the Holders to the effect that such Registrable Securities are freely
saleable without limitation as to volume, manner of sale, or otherwise under
Rule 144 promulgated under the Securities Act.
6.05 Registration Procedures. In connection with any registration of
-----------------------
Registrable Securities under this Article VI, the Company will, as soon as
----------
reasonably practicable:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use its commercially reasonable
best efforts to cause such registration statement to become and remain
effective until the earlier of such time as all Registrable Securities
subject to such registration statement have been disposed of or the
expiration of one hundred eighty (180) days; provided, however, that:
-------- -------
(i) before the initial filing of any registration statement, the
Company will furnish to all Holders covered by such registration
statement, their counsel, and the underwriters, if any, and their
counsel, copies of all such documents proposed to be filed at least
ten (10) days prior thereto, which documents will be subject to the
reasonable review, within such ten (10) day period, of such Holders,
their counsel and the underwriters; and
(ii) before filing any prospectus or any amendments or supplements
to any registration statement or prospectus, the Company will furnish
to all Holders covered by such registration statement, their counsel,
and the underwriters, if any, and their counsel, copies of all such
documents proposed to be filed a reasonable period of time (in light
of the nature of the amendments or changes contained therein, which
shall in every event be at least one (1) day and shall never be
required to be more than ten (10) days) prior thereto, which documents
will be subject to the reasonable review, within such period, of such
Holders, their counsel and the underwriters;
(b) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Registrable Securities covered by such registration
statement until the earlier of such time as all of such Registrable
Securities have been disposed of or the expiration of one hundred eighty
(180) days (except with respect to registrations effected on Form S-3 or
any successor form, as to which no such period shall apply);
(c) furnish to each Holder such number of copies of the registration
statement and prospectus (including, without limitation, a preliminary
prospectus) in conformity with the requirements of the Securities Act (in
each case including all exhibits) and each
27
amendment or supplement thereto, together with such other documents as any
Holder may reasonably request;
(d) use its commercially reasonable best efforts to register or to qualify
the Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions within the United States
and Puerto Rico as each Holder reasonably requests, and do such other acts and
things as may be reasonably required of it to enable such Holder to consummate
the disposition in such jurisdiction of the securities covered by such
registration statement;
(e) otherwise use its commercially reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its securities holders, as soon as practicable, an earnings statement covering
the period of at least twelve (12) months beginning with the first month after
the effective date of such registration statement, which earnings statement will
satisfy the provisions of Section 11(a) of the Securities Act;
(f) provide and cause to be maintained a transfer agent and registrar for
Registrable Securities covered by such registration statement from and after a
date not later than the effective date of such registration statement;
(g) if requested by the underwriters for any underwritten offering or
Registrable Securities on behalf of a Holder pursuant to a registration
requested under Section 6.01, then (i) the Company will enter into an
------------
underwriting agreement with such underwriters for such offering, such agreement
to contain such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
provisions with respect to indemnities and contribution as are reasonably
satisfactory to such underwriters and the Holders; (ii) the Holders on whose
behalf Registrable Securities are to be distributed by such underwriters will be
parties to any such underwriting agreement and (iii) the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters, will also be made to and for the benefit of
such Holders; and no Holder will be required by the Company to make any
representations or warranties to or agreements with the Company or the
underwriters other than reasonable and customary representations, warranties or
agreements regarding such Holder, such Holder's Registrable Securities, such
Holder's intended method or methods of disposition, and any other representation
required by law;
(h) furnish, at the written request of any Holder, on the date that such
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration, or, if such Registrable Securities are not being sold through
underwriters, on the date that the registration statement with respect to such
Registrable Securities becomes effective, (i) an opinion, in form and substance
reasonably satisfactory to such Holders and addressing matters customarily
addressed in underwritten public offerings, of the counsel representing the
Company for the purposes of such registration (who will
28
not be an employee of the Company and who will be satisfactory to such
Holders), which opinion will be addressed to the underwriters, if any, and
to the selling Holders; and (ii) a letter (the "Comfort Letter"), in form
--------------
and substance reasonably satisfactory to such Holders, from the independent
certified public accountants of the Company, addressed to the underwriters,
if any, and to the selling Holders making such request (and, if such
accountants refuse to deliver the Comfort Letter to such Holders, then the
Comfort Letter will be addressed to the Company and accompanied by a letter
from such accountants addressed to such Holders stating that they may rely
on the Comfort Letter addressed to the Company); and
(i) during the period when the registration statement is required to
be effective, notify each selling Holder of the happening of any event as a
result of which the prospectus included in the registration statement
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
It will be a condition precedent to the obligation of the Company to take
any action pursuant to this Article VI in respect of the Registrable Securities
----------
that are to be registered at the request of any Holder that such Holder furnish
to the Company such information regarding the Registrable Securities held by
such Holder and the intended method of disposition thereof as is legally
required in connection with the action taken by the Company. The managing
underwriter or underwriters, if any, for any offering of Registrable Securities
to be registered pursuant to Section 6.01 or 6.03 will be selected by the
------------ ----
Holders of a majority of the Registrable Securities being so registered.
6.06 Allocation of Expenses. Except as provided in the following sentence,
----------------------
the Company will bear all expenses arising or incurred in connection with any of
the transactions contemplated by this Article VI, including, without limitation,
----------
(a) all expenses incident to filing with the National Association of Securities
Dealers, Inc., (b) registration fees, (c) printing and copying expenses, (d)
fees and expenses for any Persons retained by the Company, including accountant,
counsel and other special experts, (e) expenses of any special audits or comfort
letters incident to or required by any such registration or qualification, (f)
expenses of complying with the securities or blue sky laws of any jurisdictions
in connection with such registration or qualification, (g) reasonable fees and
expenses of counsel for each of the ▇▇▇▇▇▇▇ Entities and NTOF, (h) messenger and
delivery expenses and (i) all expenses in connection with any registration not
effected by the Company. Each Holder will severally bear the expense of its
underwriting fees, discounts or commissions relating to its sale of Registrable
Securities.
6.07 Listing on Securities Exchange. If the Company lists any shares of
------------------------------
Capital Stock on any securities exchange or on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar system, then it
will, at its expense, list thereon, maintain and, when necessary, increase such
listing of, all Registrable Securities.
29
6.08 Holdback Agreements.
-------------------
(a) If any registration pursuant to Section 6.02 is in
------------
connection with an underwritten public offering, then each Holder of
Registrable Securities agrees, if so required by the managing
underwriter, not to effect any public sale or distribution of
Registrable Securities (other than as part of such underwritten public
offering) during the period beginning seven (7) days prior to the
effective date of such registration statement and ending on the one
hundred eightieth (180th) day after the effective date of such
registration statement, provided that each Management Employee and each
Person that is an officer, director or beneficial owner of five percent
(5%) or more of the outstanding shares of any class of Capital Stock of
the Company enters into an agreement obligating such Person to comply
with the provisions of this Section 6.08(a).
---------------
(b) The Company agrees (i) not to effect, and to use its
commercially reasonable best efforts to cause each holder of its equity
securities or any securities convertible into or exchangeable or
exercisable for any of such securities not to effect, any public sale
or distribution during the period seven (7) days (or such longer period
as may be prescribed by Regulation M) prior to the effective date of
the registration statement employed in any underwritten public offering
and ending on the one hundred eightieth (180th) day after any such
registration statement contemplated by Sections 6.01 or 6.03 has become
------------- ----
effective, except as part of such underwritten public offering pursuant
to such registration statement and except pursuant to securities
registered on Forms S-4 or S-8 of the Commission or any successor
forms, and (ii) to use its commercially reasonable best efforts to
cause each holder of its equity securities or any securities
convertible into or exchangeable or exercisable for any of such
securities, in each case purchased from the Company at any time after
the date of this Agreement (other than in a public offering), to
agree not to effect any such public sale or distribution of such
securities during such period.
6.09 Rule 144. The Company will take such action as any Holder may
--------
reasonably request, at the expense of the Company, all to the extent required
from time to time to enable such Holder to sell shares of Registrable Securities
or any other applicable stock of the Company without registration pursuant to
and in accordance with (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation adopted by
the Commission. Upon the request of any Holder, the Company will deliver to such
Holder a written statement as to whether it has complied with such requirements.
6.10 Rule 144A. The Company agrees that, upon the request of any Holder
---------
or any prospective purchaser of any Series D Preferred Stock, Warrants or
Warrant Shares designated by a Holder, the Company will promptly provide (but in
any case within fifteen (15) days of a request) to such Holder or potential
purchaser, the following information:
(a) a brief statement of the nature of the business of the Company
and any Subsidiaries and the products and services they offer;
30
(b) the most recent consolidated balance sheets and profit and
losses and retained earnings statements, and similar financial
statements of the Company for such part of the two preceding fiscal
years prior to such request as the Company has been in operation (such
financial information will be audited, to the extent reasonably
available); and
(c) such other information about the Company, any
Subsidiaries, and their business, financial condition, and results of
operations as the requesting Holder or potential purchaser requests in
order to comply with Rule 144A, as amended, and the antifraud
provisions of the federal and state securities laws.
The Company hereby represents and warrants to any such requesting Holder and any
prospective purchaser of any Series D Preferred Stock, Warrants or Warrant
Shares from such Holder that the information provided by the Company pursuant to
this Section 6.10 will not contain any untrue statement of a material fact or
------------
omit to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading.
6.11 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement, the Company will not, without the prior written consent
of the Holders, enter into any agreement with any holder or prospective holder
of any securities of the Company that would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
-------
6.01, unless under the terms of such agreement, such holder or prospective
----
holder may include such securities in any such registration only to the extent
that the inclusion of its securities will not reduce the amount of the
Registrable Securities of the Holders that is included or (b) to make a demand
registration that could result in such registration statement being declared
effective prior to the effectiveness of the first registration statement
effected under Section 6.01 or within one hundred eighty (180) days of the
------------
effective date of any registration effected pursuant to Section 6.01.
------------
6.12 Exchange Rights. At the option of any Holder, any such Holder may
---------------
exchange all or any portion of its Registrable Securities for fully paid and
nonassessable shares (calculated as to each exchange to the nearest
one-thousandth (1/1000) of a share and rounded upward) of common stock of any
Affiliate or Subsidiary of the Company that on the date of receipt of the
Exchange Notice has a class of capital stock registered under Section 12 of the
Exchange Act or within four hundred eighty-five (485) days will have a class of
capital stock so registered (any such Affiliate or Subsidiary will be referred
to in this Agreement as the "Exchange Company" and such common stock of any such
----------------
Affiliate or Subsidiary will be referred to in this Agreement as "Exchange
--------
Common Stock"). Each $1,000 worth of Registrable Securities (valued in the same
------------
manner as set forth in Section 5.02 on the date that the Exchange Notice was
------------
sent), will be exchangeable for $1,000 worth of Exchange Common Stock (valued in
the same manner as set forth in Section 5.02 on the date that the Exchange
------------
Notice was sent). To exchange Registrable Securities into Exchange Common Stock,
the Holder will surrender at the principal office of the Exchange Company the
certificate or certificates evidencing such Registrable Securities duly endorsed
or assigned to the Company, and give written notice to the Company at such
office that it elects to exchange such Registrable Securities (the "Exchange
--------
Notice"). Registrable Securities will be deemed to have been exchanged
------
immediately prior to the close of business on the day of
31
the surrender for exchange in accordance with the foregoing provisions, and the
Person or Persons entitled to receive the Exchange Common Stock issuable upon
any such exchange will thereupon be treated for all purposes as the record
holder or holders of the Exchange Common Stock. As promptly as practicable on or
after the exchange date, the Exchange Company will issue and deliver a
certificate or certificates for the number of full shares of Exchange Common
Stock issuable upon exchange to the Person or Persons entitled to receive such
shares. Upon exchange of any Issued Warrant Shares, the Company will pay or make
with respect to Issued Warrant Shares any dividends or other distributions that
have been declared on the Warrant Shares in kind or cash, as the case may be. If
any Holder exchanges its Registrable Securities for shares of Exchange Common
Stock pursuant to this Section 6.12, then such Holder will have all of the
------------
rights set forth in this Article VI, except that, for the purposes of this
----------
Article VI, the term "Company" will refer instead to the Exchange Company and
---------- -------
the term "Registrable Securities" will refer to the shares of Exchange Common
----------------------
Stock held by such Holder.
6.13 Other Rights. Unless otherwise contemplated by this
------------
Article VI, the Company will not grant toany Person any registration rights
----------
without the consent of all Holders.
Article VII
Representations and Warranties
7.01 Representations and Warranties of the Company and its
-----------------------------------------------------
Subsidiaries. The Company hereby represents and warrants to each Purchaser
------------
that:
(a) Organization and Qualification. The Company is a
------------------------------
corporation duly organized and validly existing and in good standing
under the laws of its state of incorporation and is qualified or
licensed to do business in all other countries, states and
jurisdictions the laws of which require it to be so qualified or
licensed. Except as set forth on Schedule 7.01(a), the Company has no
---------------
Subsidiaries. Schedule 7.01(a) sets forth for each Subsidiary (i) its
---------------
full legal name, (ii) its jurisdiction of incorporation or
organization and (iii) the percentage of the voting stock of which is
held by the Company and each other Subsidiary. Except as set forth on
Schedule 7.01(a), no Person, other than the Purchasers, has any
----------------
rights, whether granted by the Company or any other Person, to acquire
any portion of the equity interest of the Company or the assets of the
Company other than the Permitted Stock.
(b) Authority; Binding Obligation. The Company has the right
-----------------------------
and power, and is duly authorized, (i) to enter into, to execute, to
deliver and to perform this Agreement and the Other Agreements and (ii)
to create, issue, offer, sell and deliver the Warrants and the Series D
Preferred Stock, and the officers of the Company executing and
delivering this Agreement, the Other Agreements, the Warrants and the
certificates representing the Series D Preferred Stock are duly
authorized to do so. This Agreement, the Other Agreements, the Warrants
and the Series D Preferred Stock, when duly and validly executed,
issued and delivered, will constitute the legal, valid and binding
obligations of Company, enforceable against the Company in accordance
with their respective terms.
32
(c) No Conflicts. The execution, delivery and performance of
------------
this Agreement, the Other Agreements, the Warrants and the Series D
Preferred Stock will not, by the lapse of time, the giving of notice,
or otherwise, constitute a violation of any applicable provision
contained in the articles of incorporation, as amended, bylaws or
organizational documents of the Company or contained in any agreement,
instrument or document to which the Company is a party or by which it
is bound and will not result in any breach of any of the provisions of,
or constitute a default under, or result in the creation of a Lien upon
any Property of the Company or any Subsidiary under the provisions of
such agreement, charter instrument, bylaw or other instrument or any
order, judgment, decree, or ruling of any court, arbitrator or
Governmental Entity applicable to the Company or any of its Property.
(d) Capitalization.
--------------
(i) Set forth on Schedule 7.01(d) is a listing of the
----------------
authorized Capital Stock, the par value per share of each
class of Capital Stock and the number of shares of each class
of Capital Stock issued and outstanding, in each case with
respect to each of the Company and its Subsidiaries on and as
of the date hereof; provided, however, that, notwithstanding
-------- -------
anything contained or implied herein to the contrary,
immediately prior and as a condition precedent to the Closing,
the Company shall be required to deliver to the Purchasers an
updated Schedule 7.01(d) listing the authorized Capital Stock,
----------------
the par value per share of each class of Capital Stock and the
number of shares of each class of Capital Stock issued and
outstanding, in each case with respect to each of the Company
and its Subsidiaries, (A) on and as of the Closing Date and
prior to giving effect to the transactions contemplated hereby
and (B) on and as of the Closing Date and after giving effect
to the transactions contemplated hereby. The Company owns all
of the issued and outstanding shares of Capital Stock of each
of its Subsidiaries. Upon approval and filing of the Amended
and Restated Articles, One Hundred Twenty-Nine Million Five
Hundred Fifteen Thousand Five Hundred and Nine (129,515,509)
shares of Common Stock will be reserved for issuance on
exercise of the Warrants. Except as set forth on Schedule
--------
7.01(d), all such issued and outstanding Capital Stock has
-------
been duly authorized and validly issued, is fully paid and
nonassessable and has been offered, issued, sold and delivered
by Company free from preemptive rights, rights of first
refusal or similar rights (other than such rights arising
under this Agreement or the Other Agreements or as otherwise
set forth on Schedule 7.01(d)) and in compliance with
----------------
applicable federal and state securities laws. Except pursuant
to this Agreement or the Other Agreements or as otherwise set
forth on Schedule 7.01(d) and except for the Permitted Stock,
----------------
the Company is not obligated to issue or to sell any Capital
Stock, and, except for this Agreement and the Other
Agreements, the Company is not a party to, or otherwise bound
by, any agreement affecting the voting of any Capital Stock.
Except for this Agreement, the Company is not, nor will it be,
a party to, or otherwise bound by, any agreement obligating it
to register any of its Capital Stock.
33
(ii) The Series D Preferred Stock and the Warrants
have been, in each case, duly and validly authorized and, when
issued in accordance with the terms of this Agreement, will be
validly issued, fully paid, nonassessable and free of
preemptive rights, rights of first refusal or similar rights
(other than such rights as arise pursuant to the terms of the
Other Agreements). Upon approval and filing of the Amended and
Restated Articles, the shares of Common Stock issuable on
exercise of the Warrants will be duly and validly authorized
and reserved for issuance and, when issued in accordance with
the terms of the Warrants, will be validly issued, fully paid,
nonassessable and free of preemptive rights, rights of first
refusal or similar rights (other than such rights as arise
pursuant to the terms of the Other Agreements);
(e) Title to Properties. Except as set forth on Schedule
------------------- --------
7.01(e), the Company has good title to its properties and assets, and
-------
none of such properties or assets is subject to any Lien, except for
(i) Liens for or current taxes not yet due and payable, (ii)
mechanics', carriers', repairers' and other similar Liens imposed by
law arising or incurred in the ordinary course of business for
obligations not yet due, (iii) landlords' Liens or other similar Liens
on leases of real estate arising from the provisions of such leases,
and (iv) imperfections of title, if any, not material in nature or
amount and not materially detracting from the value or impairing the
use of the property subject thereto or impairing the operations or
proposed operations of the Company. The Company has received no notice
of any special assessment or other regulatory proceedings which would
affect such properties and assets.
(f) Intellectual Property. Set forth on Schedule 7.01(f) is a
--------------------- ----------------
list and brief description of all domestic and foreign patents, patent
rights, patent applications, trademarks, trademark applications,
service marks, service ▇▇▇▇ applications, trade names, domain names and
registered copyrights, and all applications for such that are in the
process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee. Except as
set forth on Schedule 7.01(f), the Company owns or possesses adequate
----------------
licenses or other rights to use all patents, patent applications,
trademarks, trademark applications, service marks, service ▇▇▇▇
applications, trade names, domain names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know how
(collectively, "Intellectual Property") necessary to the conduct of its
---------------------
business as conducted and as proposed to be conducted, and no claim is
pending or, to the Company's knowledge, threatened to the effect that
the operations of the Company infringe upon or conflict with the
asserted rights of any other person under any Intellectual Property,
and, to the Company's knowledge, there is no basis for any such claim
(whether or not pending or threatened). Except as set forth on Schedule
--------
7.01(f), no claim is pending or, to the Company's knowledge, threatened
-------
to the effect that any such Intellectual Property owned or licensed by
the Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company, and, to the Company's
knowledge, there is no basis for any such claim (whether or not pending
or threatened). All material technical information developed by and
belonging to the Company that has not been patented has been kept
confidential. Except as set forth on Schedule 7.01(f) and except for
----------------
arrangements and agreements entered into in the
34
ordinary course of business, none of which individually or in the
aggregate have or will have a Material Adverse Effect, the Company has
not granted or assigned to any other Person any right to manufacture,
have manufactured, assemble or sell the products or proposed products,
or to provide the services or proposed services, of the Company.
(g) Proprietary Information of Third Parties. Except as set
----------------------------------------
forth on Schedule 7.01(g), no third party has claimed or, to the
----------------
Company's knowledge, has reason to claim that any person employed by or
affiliated with the Company has (i) violated or may be violating any of
the terms or conditions of his employment, non-competition,
non-solicitation or non-disclosure agreement with such third party,
(ii) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third
party or (iii) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. To the Company's knowledge, no person employed by or
affiliated with the Company has employed or proposes to employ any
trade secret or any information or documentation proprietary to any
former employer, and, to the Company's knowledge, no person employed by
or affiliated with the Company has violated any confidential
relationship that such person may have had with any third party, in
each case in connection with the development, manufacture or sale of
any product or proposed product or the development or sale of any
service or proposed service of the Company. The Company does not
believe it is or will be necessary to use any inventions of any of its
employees (or persons it currently intends to hire) made prior to their
employment by the Company in the Company's business as currently
conducted or as currently proposed to be conducted. To the Company's
knowledge, neither the execution and delivery of this Agreement nor
the conduct or proposed conduct of the business of the Company will
conflict with or result in a breach of the terms, conditions or
provisions of or constitute a default under any contract, covenant or
instrument under which any officer, director or employee of the
Company is obligated.
(h) No Voting Agreements. Except as set forth on Schedule
-------------------- --------
7.01(h), there is not now, and at no time during the term of this
-------
Agreement or the Other Agreements will there be, any agreement,
arrangement or understanding involving the Company, other than this
Agreement and the Other Agreements, modifying, restricting, or in any
way affecting the rights of any security holder to vote securities of
the Company or its Subsidiaries.
(i) Litigation; Compliance with Law. Except as set forth on
-------------------------------
Schedule 7.01(i), there is no (i) action, suit, claim, proceeding or
----------------
investigation pending or, to the Company's knowledge, threatened
against the Company, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign (each, a
"Governmental Entity"), (ii) arbitration proceeding relating to the
-------------------
Company pending under collective bargaining agreements or otherwise or
(iii) governmental inquiry pending or, to the Company's knowledge,
threatened against the Company (including, without limitation, any
inquiry as to the qualification of the Company to hold or to receive
any license or permit), in each case that could reasonably be expected
to result in a Material Adverse Effect in any
35
change in equity ownership of the Company or that questions the validity of
the this Agreement or the Other Agreements or the right of the Company to
enter into them or consummate the transactions contemplated hereby or
thereby, and there is no basis for any of the foregoing. The Company has
not received any opinion or written legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage that may be material to its business, financial condition,
operations, property or affairs. The Company is not subject to any order,
writ, injunction, judgment or decree known to or served upon the Company of
any Governmental Entity. Except as set forth on Schedule 7.01(i), there are
----------------
no actions or suits by the Company pending, threatened or contemplated
against others. The Company has complied, in all materials respects, with
all laws, rules, regulations and orders applicable to its business,
operations, properties, assets, products and services. The Company has all
material permits, franchises, licenses and other authorizations necessary
to conduct its business as conducted and as proposed to be conducted
(collectively, "Permits"), and, to the Company's knowledge, the Company has
-------
been operating its business pursuant to and in compliance with the terms of
all such Permits. There is no existing law, rule, regulation or order, and
the Company is not aware of any proposed law, rule, regulation or order,
whether federal, state, county or local, that would prohibit or restrict
the Company from conducting its business in any jurisdiction in which it is
now conducting business or in which it proposes to conduct business or that
would otherwise have a Material Adverse Effect.
(j) Disclosure. None of the documents, instruments, or other
----------
information furnished to the Purchasers by the Company contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make any statements made therein, in light of
circumstances under which they were made, not misleading. No
representation, warranty, or statement made by the Company in this
Agreement or the Shareholders Agreement, or in any document, certificate,
exhibit or schedule attached hereto or thereto or delivered in connection
herewith or therewith, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make any statements made herein or therein, in light of the circumstances
under which they were made, not misleading. To the Company's knowledge,
there is no fact that has or could reasonably be expected to have a
Material Adverse Effect that has not been disclosed in the documents
provided to the Purchasers.
(k) Leasehold Interests. Each lease or agreement to which the Company
-------------------
is a party under which it is a lessee of any property, real or personal, is
a valid agreement, binding upon the Company, without any default of the
Company thereunder. No event has occurred and is continuing that, with due
notice or lapse of time or both, would constitute a default or event of
default by the Company under any such lease or agreement. The Company's
possession of such property has not been disturbed and, to the Company's
knowledge, no claim has been asserted against the Company adverse to its
rights in such leasehold interests.
(l) Contracts. Set forth on Schedule 7.01(l) is a complete list of all
--------- ----------------
material agreements, understandings, instruments, contracts or other
documents to which the
36
Company is a party or by which it is bound (collectively, "Contracts"). The
---------
Company has performed in all material respects all the obligations required
be performed by it to date (or has received a valid, enforceable and
irrevocable written waiver with respect to its non-performance), has
received no notice of default and is not in default (with due notice or
lapse of time or both) under any Contract. The Company has no present
expectation or intention of not performing in all material respects its
obligations under each Contract, and the Company has no knowledge of any
breach by any other party to any Contract. The Company is in full
compliance with all of the terms and provisions of its articles of
incorporation, as amended, and bylaws.
(m) Governmental Approvals. Subject to the accuracy of the
----------------------
representations and warranties of the Purchasers set forth in Section 7.02,
------------
no registration or filing with, or consent or approval of or other action
by, any Governmental Entity is or will be necessary for the valid
execution, delivery and performance by the Company of this Agreement or the
Other Agreements or the issuance, sale and delivery of the Series D
Preferred Stock, the Warrant or the Warrant Shares, other than filings made
pursuant to federal or state securities laws in connection with the sale of
the Series D Preferred Stock.
(n) Conduct of Offering. Neither the Company nor any person authorized
-------------------
or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Series D Preferred Stock or
Warrants or any security of the Company similar to the Series D Preferred
Stock or Warrants has taken or will take any action (including, without
limitation, any offer, issuance or sale of any security of the Company
under circumstances that might require the integration of such security
with Series D Preferred Stock and/or Warrants under the Securities Act or
the rules and regulations of the Commission thereunder), in either case so
as to subject the offering, issuance or sale of the Series D Preferred
Stock or Warrants to the registration provisions of the Securities Act.
(o) No Brokers. Except as set forth on Schedule 7.01(o), the Company
---------- ----------------
has no contract, arrangement or understanding with any broker, finder or
similar agent with respect to the transactions contemplated by this
Agreement.
(p) Employee Matters. Set forth on Schedule 7.01(p) is a list of the
---------------- ----------------
names of the executive officers of the Company, together with the title or
job classification of each such person and the total compensation
anticipated to be paid to each such person by the Company and its
Subsidiaries during the current fiscal year. Except as set forth on
Schedule 7.01(p), none of such persons or any other employee of the Company
----------------
has an employment agreement or understanding, whether oral or written, with
the Company that is not terminable at will by the Company without cost or
other liability to the Company. Except as set forth on Schedule 7.01(p),
---------------
each officer, employee, independent contractor and/or consultant of the
Company that has had or will have access to confidential information or
Intellectual Property of the Company, or that has or will participate in
any material respect in the development of the Company's Intellectual
Property, has entered into a confidentiality and non-disclosure agreement
with the Company, and all such agreements are in full force and effect. No
officer of the Company has advised the
37
Company (orally or in writing) that he or she intends to terminate his or
her employment with the Company. The Company has complied in all material
respects with all applicable laws relating to the employment of labor,
including provisions relating to wages, hours, equal opportunity,
collective bargaining and the payment of Social Security and other taxes.
The Company is not bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or
implied, contract, commitment or arrangement with any labor union, and no
labor union has requested or, to the knowledge of the Company, has sought
to represent any of the employees, representatives or agents of the
Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, that could have a
Material Adverse Effect, nor is the Company aware of any labor organization
activity involving its employees.
(q) Transactions with Affiliates. Except as set forth on Schedule
---------------------------- --------
7.01(q), no director, officer, employee or shareholder of the Company, or
-------
Affiliate of any such Person, and no other Person in which any such Person,
or any Affiliate of any such Person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than five percent
(5%) of the outstanding Capital Stock thereof, is a party to any
transaction or agreement with the Company, including any contract,
agreement or other arrangement providing for the employment of, furnishing
of services by, rental of real or personal property from, loan of money
from, or otherwise requiring payments to any such Person. Except as set
forth on Schedule 7.01(q), to the Company's knowledge, none of the
---------------
Company's officers or directors, or any Affiliates thereof, are, directly
or indirectly, indebted to the Company (other than in connection with
purchases of the Company's stock) or have any direct or indirect ownership
interest in any Person that competes with the Company. Except as set forth
on Schedule 7.01(q), the Company is not a guarantor or indemnitor of any
----------------
indebtedness of any other Person. Set forth on Schedule 7.01(q) is a list
----------------
of the Company's Affiliates.
(r) ERISA. Set forth on Schedule 7.01(r) is a list and brief
----- ----------------
description of (i) each Employee Plan that covers any employee of the
Company and (ii) each Benefit Arrangement of the Company. No such Employee
Plan or Benefit Arrangement is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA. The Company and its ERISA Affiliates have
not incurred, nor do they expect to incur, any liability under Title IV of
ERISA arising in connection with the termination of any plan covered or
previously covered by Title IV of ERISA. Each Employee Plan and each
Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such Employee Plan or such
Benefit Arrangement. No material tax under Section 4980B of the Code has
been incurred in respect of any Employee Plan that is a group health plan,
as defined in Section 5000(b)(1) of the Code. With respect to the employees
and former employees of the Company, there are no employee post-retirement
medical or health plans in effect, except as required by Section 4980B of
the Code or other applicable law.
38
(s) Financial Statements. The Company has made available to the
--------------------
Purchasers a draft of its unaudited financial statements (including balance
sheet, income statement and statement of shareholders' equity) for the six
(6) month period ended June 29, 2001 and a draft of its audited financial
statements for the fiscal year ended December 29, 2000 (collectively, the
"Financial Statements"). The Financial Statements have been prepared in
--------------------
accordance with GAAP applied on a consistent basis throughout the periods
indicated, except that the Financial Statements may not contain all
footnotes required by GAAP and may be subject to year-end audit
adjustments. The Financial Statements fairly present the financial
condition and operating results of the Company in all material respects as
of the dates, and for the periods indicated therein, subject to normal
year-end audit adjustments. Except as set forth in the Financial
Statements, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to June 30, 2001 and (ii) obligations under the
contracts and commitments (A) incurred in the ordinary course of business,
(B) not required under GAAP to be reflected in the Financial Statements and
(C) that individually or in the aggregate, are not material to the
financial condition or operating results of the Company.
(t) Environmental Matters. The Company is not in violation of any
---------------------
applicable statute, law or regulation relating to the environment or
occupational health and safety, and no material expenditures are or will be
required in order to comply with any such existing statute, law or
regulation.
(u) Tax Returns and Payments. The Company has filed all tax returns
------------------------
and reports (including any extensions) as required by law. All such returns
and reports are true and correct in all material respects. Except as
disclosed on Schedule 7.01(u), the Company has timely paid any and all
----------------
taxes and other assessments when due (other than taxes and other
assessments that either alone or in the aggregate do not exceed $100,000).
The Company knows of no proposed additional tax assessment against it or
any Subsidiary that could reasonably be expected to be material.
(v) Absence of Changes. Except as set forth on Schedule 7.01(v) or as
------------------ ----------------
contemplated by this Agreement and the Other Agreements, since December 29,
2000, there has not been:
(i) any change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the
Financial Statements, except changes that, either alone or in the
aggregate, have not had a Material Adverse Effect;
(ii) any damage, destruction or loss of or with respect to any
of the Company's properties or assets, whether or not covered by
insurance, other than damage, destruction or loss that has not had a
Material Adverse Effect;
(iii) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
39
(iv) any satisfaction or discharge of any lien, claim,
or encumbrance or payment of any obligation by the Company, except in
the ordinary course of business and that is not material to the
business, properties or financial condition of the Company;
(v) any material modification, amendment or other
change to any Contract;
(vi) any change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(vii) any resignation or termination of employment of any
officer of the Company; or
(viii) any arrangement or commitment by the Company to do
any of the things described in this Section 7.01(v).
---------------
(w) SEC Documents. Except as set forth on Schedule 7.01(w),
------------- ----------------
the Company has filed, and as of the Closing Date the Company will
have filed, all required reports, schedules, forms, statements and
other documents with the Commission since June 3, 1994 (collectively,
the "SEC Documents"). As of their respective dates, (i) the SEC
-------------
Documents complied or will comply in all material respects with all
applicable requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the Commission
promulgated thereunder, and (ii) none of the SEC Documents contained
any untrue statement of a material fact or failed to state a material
fact required to be stated therein or otherwise necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Except to the extent that information
contained in any SEC Document has been revised or superseded by a
subsequently filed SEC Document, none of the SEC Documents contains,
and no SEC Document filed by the Company prior to the Closing Date
will contain, any untrue statement of a material fact or failed to
state a material fact required to be stated therein or otherwise
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
financial statements of the Company included within the SEC Documents
(including, in each case, any notes thereto) (i) comply or will comply
as to form in all material respects with the accounting requirements
of the Commission applicable thereto, (ii) have been prepared or will
be prepared in accordance with GAAP (as in effect as of the date
thereof) applied on a consistent basis during the periods involved,
except in the case of unaudited statements as permitted by Form 10-Q
of the Commission and other rules and regulations of the Commission,
and (iii) fairly present in all material respects, or will fairly
present in all material respects, the consolidated financial position
of the Company and its Subsidiaries (if any) as of the date thereof
and the consolidated results of their operations and cash flows for
the periods then ended, subject, in the case of any unaudited
statements, to normal year-end audit adjustments.
40
(x) Board of Directors Findings and Recommendations. The Board of
-----------------------------------------------
Directors (i) has unanimously approved and adopted this Agreement, each of
the Other Agreements and the Senior Loan Documents, and each of the
transactions contemplated hereby or thereby, (ii) has unanimously
determined that this Agreement, each of the Other Agreements and the Senior
Loan Documents, and each of the transactions contemplated hereby or
thereby, are fair to and in the best interests of the Company and its
shareholders and (iii) unanimously recommends that the shareholders of the
Company, to the extent required by law, approve and adopt this Agreement,
each of the Other Agreements and the Senior Loan Documents, and each of the
transactions contemplated hereby or thereby.
(y) Inapplicability of PART THIRTEEN of the TBCA. The Board of
--------------------------------------------
Directors has taken all actions necessary and appropriate to render the
limitations on "business combinations" contained in PART THIRTEEN of the
TBCA inapplicable to this Agreement and each of the Other Agreements and to
each of the transactions contemplated hereby or thereby.
(z) Voting Requirements. The affirmative vote of two-thirds of the
-------------------
outstanding shares of the Common Stock and the affirmative vote of
two-thirds of the outstanding shares of Series C Preferred Stock are the
only votes of the holders of any class or series of the Capital Stock of
the Company necessary or otherwise required to approve and to adopt this
Agreement and the Other Agreements or the transactions contemplated hereby
and thereby.
7.02 Representations and Warranties of the Purchasers. Each Purchaser
------------------------------------------------
(other than with respect to the representations and warranties set forth in
Section 7.02(e), which representations and warranties will be deemed to have
---------------
been made jointly and severally only by the ▇▇▇▇▇▇▇ Entities) hereby represents
and warrants to the Company that:
(a) Authority; Binding Obligation. Such Purchaser has the right and
-----------------------------
power and is duly authorized to enter into, to execute, to deliver and to
perform this Agreement and the Other Agreements to which it is a party, and
any partners, officers or agents executing and delivering this Agreement or
the Other Agreements to which it is a party are duly authorized to do so.
This Agreement and the Other Agreements to which it is a party, when duly
and validly executed and delivered, will constitute legal, valid and
binding obligations of such Purchaser, enforceable against such Purchaser
in accordance with their respective terms.
(b) Investor Status. Such Purchaser (i) is an "accredited investor",
---------------
as that term is defined in Regulation D promulgated under the Securities
Act, and (ii) has such knowledge, skill, and experience in business and
financial matters, based on actual participation, that (A) it is capable of
evaluating the merits and risks of an investment in the Company and the
suitability thereof as an investment for such Purchaser and (B) it is able
financially to bear the risks thereof.
41
(c) Investment Intent. Such Purchaser is acquiring the Series
-----------------
D Preferred Stock, the Warrants and the Warrant Shares for investment
for its own account and not with a view to any distribution thereof in
violation of applicable securities laws.
(d) Legends. Such Purchaser agrees that the certificates
-------
representing the Series D Preferred Stock, the Warrants and the Warrant
Shares will bear the legends referenced in this Agreement, and such
Series D Preferred Stock, such Warrants and such Warrant Shares, as the
case may be, will not be offered, sold or transferred in the absence of
registration or exemption under applicable federal and state securities
laws.
(e) Ownership of Capital Stock of the Company. The Series A
-----------------------------------------
Warrants, the Series B Warrants, the Series C Preferred Stock and the
Notes, in each case as described and set forth in the recitals to this
Agreement, represent all of the Capital Stock of the Company owned by
any ▇▇▇▇▇▇▇ Entity (or any Affiliate thereof) as of the date hereof and
without giving effect to the transactions contemplated hereby, and the
▇▇▇▇▇▇▇ Entities collectively represent each and every Affiliate of JH
Life owning any shares of Capital Stock of the Company.
Article VIII
Covenants
The Company hereby agrees, until such time as (i) the Company shall
have redeemed all of the Series D Preferred Stock and (ii) the Initial Holders
own less than twenty percent (20%) of the outstanding Capital Stock of the
Company (on a fully-diluted basis), as follows:
8.01 Financial Statements and Reporting Information. From and after the
----------------------------------------------
date of this Agreement, the Company will keep books of account and prepare
financial statements and will cause to be furnished to the Purchasers or other
Holder the items set forth below, all of the foregoing and following to be kept
and prepared in accordance with GAAP.
(a) As soon as available, and in any event within thirty (30)
days after the Closing Date, a copy of the final audited financial
statements of the Company for its fiscal year ended December 29, 2000,
together with the annual audit report prepared by the Company's
independent public accountants, which shall not be qualified or
limited.
(b) As soon as available, and in any event within one hundred
twenty (120) days after the end of each fiscal year of the Company,
beginning with the fiscal year ending December 29, 2001, (i) a copy of
the financial statements of the Company for such fiscal year containing
a consolidated and consolidating balance sheet, statement of income,
statement of shareholders' equity and statement of cash flows, each as
at the end of such fiscal year and for the period then ended and in
each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and audited and
certified by independent certified public accountants of recognized
standing selected by the Company and consented to by the Holders, (ii)
a comparison of the actual results during such fiscal year to those
originally budgeted by the Company and approved by the Board of
Directors prior to the beginning of such fiscal year, together with a
summary analysis of all variances
42
prepared by the Company's management. The annual audit report required by this
Agreement will not be qualified or limited. The Purchasers shall receive copies
of all reports and material correspondence sent to the Company's management by
the auditors concurrently with the delivery of the financial statements referred
to in this Section 8.01(b).
--------------
(c) As soon as available, and in any event within thirty (30) days after
the end of each calendar month, a copy of unaudited consolidated and
consolidating financial statements of the Company as of the end of such calendar
month and for the portion of the fiscal year then ended, containing a
consolidated and consolidating balance sheet, statement of income and statement
of cash flows, in each case setting forth in comparative form the figures for
the corresponding period of the preceding fiscal year, together with a
comparison of the actual results during such period to those originally budgeted
by the Company and approved by the Board of Directors for such period with
analysis of all material variances.
(d) On or before thirty (30) days prior to the beginning of each fiscal
year of the Company, an annual budget or business plan for the Company and its
Subsidiaries for such fiscal year on a monthly basis, including projected
consolidated and consolidating balance sheets, income statements and cash flow
statements of the Company and its Subsidiaries for each month of such fiscal
year, and, at the beginning of each fiscal quarter, all revisions thereto
approved by the Board of Directors.
(e) Concurrently with the delivery of each of the financial statements
referred to in Section 8.01(b) and Section 8.01(c), a certificate of an
--------------- ---------------
authorized officer of the Company (i) stating, with respect to the financial
statements contemplated by Section 8.01(b), that the financial statements
---------------
attached thereto have been prepared in accordance with GAAP and fairly and
accurately present the consolidated and consolidating financial condition and
results of operations of the Company at the date and for the period indicated
therein, and, with respect to the financial statements contemplated by Section
-------
8.01(c), that the financial statements attached thereto fairly and accurately
-------
present (subject to year-end audit adjustments) the consolidated and
consolidating financial condition and results of operations of the Company at
the date and for the period indicated therein, and (ii) containing a narrative
report of the business and affairs of the Company that includes, but is not
limited to, a discussion of the results of operations compared to those
originally budgeted for such period by the Company prior to the beginning of
such period.
(f) As soon as available, a copy of each (i) financial statement, report,
notice or proxy statement sent by the Company to any of its shareholders, (ii)
regular, periodic or special report, registration statement or prospectus filed
by the Company with any securities exchange, state securities regulator or the
Commission, (iii) material order issued by any Governmental Entity in any
material proceeding to which the Company is a party or to which any of its
assets is subject, (iv) press release or other statement made available
generally by the Company to the public concerning developments in the business
of the Company and (v) a copy of all correspondence, reports and other
information sent by the Company to any holder of any Indebtedness.
43
(g) Promptly, such additional information concerning the Company
as any Holder may request, including, without limitation, auditor
management reports and audit "waive" lists.
8.02 Laws. From and after the date of this Agreement, the Company will
----
comply with all applicable statutes, regulations and orders of the United
States, domestic and foreign states, and municipalities, agencies and
instrumentalities of the foregoing applicable to the Company, except where
failure to so comply would not have a Material Adverse Effect.
8.03 Inspection. From and after the date of this Agreement, the Company
----------
will permit any representative designated by any Holder (a) to visit and to
inspect any of the properties of the Company, (b) to examine the corporate and
financial records of the Company and make copies thereof or extracts therefrom
and (c) to discuss the affairs, finances and accounts of the Company with the
directors, officers, key employees and independent accountants of the Company.
8.04 Certain Actions. From and after the date of this Agreement, the
---------------
Company, without the prior written consent of the Holders (such consent being
one hundred percent (100%) of the Holders with respect to each of clauses (a),
(b), (f), (g), (n), (p)(iii), (p)(iv), (p)(v) and (u) below), which consent may
be withheld in the sole discretion of each such Holder, will not, and will not
permit any Subsidiary to:
(a) except as otherwise contemplated by this Agreement, permit
to occur any amendment, alteration, or modification of its articles of
incorporation, as amended, or other charter or organizational documents
of the Company, in each case as constituted on the date of this
Agreement, the effect of which, in the good faith judgment of any
Holder, would be to adversely alter, impair, or affect, either the
rights and benefits of any of the Holders or the duties and obligations
of the Company under or with respect to this Agreement, the Other
Agreements, the Warrant or the Series D Preferred Stock;
(b) except as otherwise permitted pursuant to the terms of this
Agreement, the Other Agreements or the Amended and Restated Articles,
(i) declare or make any dividends or distributions of its cash, stock,
property or assets or (ii) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of the Capital Stock of the
Company or any of the Capital Stock of any Affiliate of the Company;
(c) effect any sale, lease, assignment, transfer or other
conveyance of any portion of the assets or operations or the revenue or
income generating capacity of the Company (other than inventory in the
ordinary course of business and other assets reasonably and in good
faith determined by the Company to be obsolete or no longer necessary
to the business of the Company) or to take any such action that has the
effect of any of the foregoing;
(d) except for the issuance of Warrant Shares upon exercise of the
Warrants or as otherwise provided pursuant to the terms of this
Agreement, the Other Agreements Agreement or the Amended and Restated
Articles, (i) issue, sell or otherwise dispose of any Capital Stock of
the Company or any Capital Stock of any Subsidiary, (ii) dissolve or
44
liquidate the Company or any of its Subsidiaries or (iii) effect any
consolidation or merger involving the Company or any reclassification, corporate
reorganization, stock split, reverse stock split or other change of or in any
class of Capital Stock;
(e) enter into any line of business that the Company is not conducting on
the date of this Agreement or acquire any substantial business operation or
assets (through a stock or asset purchase or otherwise);
(f) except for the issuance of Warrant Shares upon exercise of the Warrants
or as otherwise provided pursuant to the terms of this Agreement or the Other
Agreements, (i) enter into any transaction or transactions with any Initial
Holder, any director, officer, employee, securityholder or Affiliate of the
Company, or any Affiliate of the foregoing, except upon terms that, in the
opinion of all Holders, are fair and reasonable and that are, in any event, at
least as favorable as would result in a comparable arm's-length transaction with
a Person who is not a director, officer, employee, securityholder or Affiliate
of the Company, or any Affiliate of the foregoing, or (ii) advance any monies to
any such Persons;
(g) except for ordinary and reasonable annual directors fees to be paid by
the Company to its outside directors and except as otherwise provided in the
Monitoring Agreement, pay any management, consulting or similar fee to or for
the direct or indirect benefit of any of its officers, directors, Affiliates or
securityholders;
(h) (i) acquire any debt or equity interest in any Person, (ii) establish
or acquire any Subsidiary not in existence as of the date hereof, (iii) make any
additional capital contribution or purchase any additional equity in any
existing Subsidiary, (iv) make any advances or loans to any Subsidiary or (iv)
during any fiscal year of the Company, transfer any assets to its Subsidiaries
which, either alone or in the aggregate, have a fair market value in excess of
two hundred fifty thousand dollars ($250,000);
(i) allow the aggregate par value of the Capital Stock subject to the
Warrants from time to time to exceed the price payable upon exercise of the
Warrants, as adjusted from time to time;
(j) except as otherwise provided herein, file a registration statement with
the Commission or any state securities commission or agency regarding any
Capital Stock of the Company;
(k) except as otherwise provided in the Senior Loan Documents, incur or
suffer to exist any Indebtedness (including, without limitation, any
Indebtedness incurred in respect of any revolving credit loans, term loans,
capital lease obligations and/or guaranties) in excess of eight million dollars
($8,000,000);
(l) except as otherwise provided in the Senior Loan Documents, permit the
assets of the Company to be subject to any Liens;
45
(m) undertake any litigation against any third party (other than litigation
instituted against one or more account debtors of the Company with respect to
one or more unpaid accounts, where the aggregate amount in controversy is less
than one hundred thousand dollars ($100,000));
(n) during any fiscal year, increase by more than five percent (5%) the
total annual compensation (including, but not limited to, base salary, bonus and
perquisites) of any executive officer of the Company;
(o) enter into any contract or other agreement (other than the Senior Loan
Documents) that obligates the Company to make annual payments thereunder in
excess of two hundred fifty thousand dollars ($250,000);
(p) (i) terminate any Key Employee of the Company or any of its
Subsidiaries, (ii) hire any Person to serve as Key Employee of the Company or
any of its Subsidiaries, (iii) grant any additional equity-based compensation to
any Key Employee of the Company or any of its Subsidiaries, (iv) make any
severance payment to any Key Employee in connection with any termination of the
employment of such Key Employee (other than, with respect to the Management
Employees only, severance payments contemplated by the Employment Agreements, as
in effect on the Closing Date), (v) modify (A) the severance payment obligations
of the Company or (B) the incentive compensation payable by the Company, in each
case set forth in the Employment Agreements, as in effect on the Closing Date;
(q) acquire during any twelve (12) month period any Property or other
assets from any Person or Person, the aggregate value of which exceeds five
hundred thousand dollars ($500,000);
(r) adopt any annual budget for the Company or any of its Subsidiaries;
provided, however, that for purposes of this Section 8.04(r) only and after the
-------- ------- ---------------
Closing Date, the consent of the Holders shall be deemed to have been received
if the Holder Representatives approve such budget;
(s) make or agree to make any capital expenditures other than capital
expenditures that (i) are the subject of contractually committed purchase orders
as of the date hereof and are disclosed on Schedule 7.01(l) or (ii) do not
----------------
exceed two hundred fifty thousand dollars ($250,000) individually and one
million dollars ($1,000,000) in the aggregate;
(t) make any tax election or settle or compromise any material tax
liability or take any other action with respect to the computation of taxes or
the preparation of tax returns or reports, in each case that is inconsistent
with past practice;
(u) enter into or adopt any new Employee Plan or other Benefit Arrangement
or amend in any material respect any Employee Plan or other Benefit Arrangement
in
46
effect as of the date of this Agreement, in each case except as
otherwise required by applicable law;
(v) (i) fail to maintain in full force and effect any Permit that
is required in or for the conduct of the businesses of the Company or
any of its Subsidiaries, or (ii) sell, transfer, license or otherwise
dispose of any rights or interests under such Permits;
(w) except as may be required by GAAP, make any change in or to
its accounting methods or any of its tax or accounting principles or
practices; or
(x) obligate itself or otherwise agree to take, permit or
enter into any of the events described in subsections (a) through (w)
--------------- ---
of this Section 8.04.
------------
8.05 Records. From and after the date of this Agreement, the Company
-------
and each of its Subsidiaries will keep books and records of account in which
full, true and correct entries will be made of all dealings and transactions in
relation to its business and affairs, and all such books and records shall be
kept in accordance with GAAP.
8.06 Accountants. From and after the date of this Agreement, the
-----------
Company will retain independent public accountants (the selection of which shall
be approved by the Holders) who will compile the consolidated and consolidating
financial statements of the Company at the end of each fiscal year, and if the
services of such independent public accountants are terminated, then the Company
will promptly notify each Holder of such termination and will include in such
notice a statement as to whether the change of accountants was recommended or
approved by the Board of Directors or any committee thereof. Upon any Holder's
request, the Company will request the firm of independent public accountants
whose services are terminated to deliver (without liability for such firm) to
each Holder a letter of such firm setting forth the reasons for the termination
of their services.
8.07 Existence. From and after the date of this Agreement, the Company
---------
will maintain in full force and effect its corporate existence, rights and
franchises, including, but not limited to, all licenses and other rights to use
Intellectual Property.
8.08 Notice.
------
(a) In the event of (i) any setting by the Company of a record
date with respect to the holders of any class of Capital Stock for the
purpose of determining which of such holders are entitled to dividends,
repurchases of securities or other distributions, or any right to
subscribe for, purchase or otherwise acquire any shares of Capital
Stock or other property or to receive any other right, (ii) any capital
reorganization of the Company or any reclassification or
recapitalization of its Capital Stock, (iii) any transfer of all or a
majority of the assets, business or revenue or income generating
capacity of the Company or any consolidation, merger, share exchange,
reorganization or similar transaction involving the Company, (iv) any
voluntary or involuntary dissolution, liquidation or winding up of the
Company or (v) any proposed issue or grant by the Company of any
Capital Stock, or any right or option to subscribe for, purchase or
47
otherwise acquire any Capital Stock (other than the issuance of Warrant
Shares upon exercise of the Warrants and other than Permitted Stock), then,
in each such event, the Company will deliver or cause to be delivered to
the Holders a notice specifying, as the case may be, (A) the date on which
any such record is to be set for the purpose of such dividend, distribution
or right, and the amount and character of such dividend, distribution or
right, (B) the date as of which the holders of record will be entitled to
vote on any reorganization, reclassification, recapitalization, transfer,
consolidation, merger, share exchange, conveyance, dissolution, liquidation
or winding-up, (C) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger, share
exchange, conveyance, dissolution, liquidation or winding-up is to take
place and the time, if any is to be fixed, as of which the holders of
record of any class of Capital Stock will be entitled to exchange their
shares of Capital Stock for securities or other property deliverable upon
such event, (D) the amount and character of any Capital Stock, property or
rights proposed to be issued or granted, the consideration to be received
therefor (and, in the case of rights or options, the exercise price
thereof), the date of such proposed issue or grant and the Persons or class
of Persons to whom such proposed issue or grant will be offered or made and
(E) such other information as the Holders may reasonably request. Any such
notice will be deposited in the United States mail, postage prepaid, at
least thirty (30) days prior to the date therein specified.
(b) If there is any adjustment pursuant to the provisions of Section
-------
3.09, or if any Other Securities become issuable in lieu of shares of such
----
Common Stock upon exercise of the Warrants, then the Company will
immediately cause written notice thereof to be sent to each Holder, which
notice will be accompanied by a certificate of the Company setting forth in
reasonable detail: (i) the basis for the Holders becoming entitled to
receive such Other Securities, (ii) the facts requiring any such
adjustment, (iii) the number of shares receivable after such adjustment, or
the kind and amount of any Other Securities to be received upon the
exercise of the Warrant and (iv) the computation by which such adjustment
was made. At the request of any Holder and upon surrender of the Warrants
of such Holder, the Company will reissue the Warrants of such Holder in a
form conforming to such adjustments.
(c) If the Company fails to file its Form 10-K with the Commission on
or before one hundred twenty (120) days of the end of any fiscal year of
the Company, the Company will, within one hundred twenty (120) days of the
end of such fiscal year of the Company, deliver to each Holder of Warrants
a certificate of the chief financial officer of the Company setting forth:
(i) the number of shares of Common Stock issuable upon the
exercise of each Warrant and the Exercise Price of such shares as of
the end of such fiscal year;
(ii) a brief statement of the facts requiring each adjustment, if
any, required to be made in such fiscal year; and
(iii) the computation by which each such adjustment was made.
48
8.09 Taxes. From and after the date of this Agreement, the Company will
-----
file all required tax returns, reports and requests for refunds on a timely
basis and will pay on a timely basis all taxes imposed on it or any of its
assets, income or franchises. This Section 8.09 shall not preclude the Company
------------
from contesting any taxes or other payments if they are being diligently
contested in good faith in a manner that stays enforcement thereof and if
appropriate expense provisions have been recorded in conformity with GAAP.
8.10 Warrant Rights. Subject to the approval and filing of the Amended and
--------------
Restated Articles, the Company covenants and agrees that, during the term of
this Agreement and so long as any Warrant is outstanding, (a) the Company will
at all times have authorized and reserved a sufficient number of shares of
Common Stock and Other Securities (if any), to provide for the exercise in full
of the rights represented by the Warrants and the exercise in full of the rights
of the Holders under this Agreement and the Other Agreements, (b) the Company
will not increase or permit to be increased the par value per share or stated
capital of the Issuable Warrant Shares or the consideration receivable upon
issuance of its Issuable Warrant Shares and (c) if the exercise of the Warrant
would require the payment by the Holder of consideration for the Common Stock or
Other Securities (if any) receivable upon such exercise of less than the par or
stated value of such Issuable Warrant Shares, then the Company will promptly
take such action as may be necessary to change the par or stated value of such
Issuable Warrant Shares to an amount less than or equal to such consideration.
8.11 Reservation of Warrant Shares. Subject to the approval and filing of
-----------------------------
the Amended and Restated Articles, the Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, for
the purpose of effecting the exercise of the Warrants and otherwise complying
with the terms of this Agreement and the Other Agreements, such number of its
duly authorized shares of Common Stock as shall be sufficient to effect the
exercise of the Warrants from time to time outstanding or otherwise to comply
with the terms of this Agreement or the Other Agreements. If at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the exercise of the Warrants or otherwise to comply with the terms of
this Agreement or the Other Agreement following the approval and filing of the
Amended and Restated Articles, then the Company will forthwith take such
additional corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes. The Company will obtain any authorization, consent, approval
or other action by or make any filing with any court or administrative body that
may be required under applicable state securities laws in connection with the
issuance of the Warrant Shares upon exercise of the Warrants.
8.12 Insurance. From and after the date of this Agreement, the Company (i)
---------
shall maintain, and shall cause each of its Subsidiaries (if any) to maintain,
as to their respective properties and business, with financially sound and
reputable insurers, insurance against such casualties and contingencies and of
such types and in such amounts as is customary for companies similarly situated,
and (ii) maintain the existing directors' and officers' liability insurance
policy of the Company.
49
8.13 Prohibition on Conflicting Agreements. From and after the date of this
-------------------------------------
Agreement, neither the Company nor any of its Subsidiaries shall become a party
to any agreement that by its terms prohibits the Company's performance of any of
this Agreement or any of the Other Agreements.
8.14 Transactions with Affiliates. Except for transactions contemplated by
----------------------------
this Agreement or the Other Agreements or as otherwise approved by all of the
Holders, from and after the date of this Agreement, neither the Company nor any
of its Subsidiaries shall enter into any transaction with any director, officer,
employee or holder of more than five percent (5%) of the outstanding Capital
Stock of the Company or any of its Subsidiaries, any Affiliate of such Person,
or any Person in which such Person, or an Affiliate of such Person, is a
director, officer, trustee, partner or holder of more than five percent (5%) of
the outstanding Capital Stock thereof.
8.15 Use of Proceeds. The Company shall use the proceeds from the sale of
---------------
the Series D Preferred Stock and Warrants solely for working capital purposes
and to reduce existing Indebtedness.
8.16 Bylaws. The Company shall at all times cause its bylaws to provide
------
that the number of directors fixed in accordance therewith shall in no event
conflict with any of the terms or provisions of this Agreement or the Other
Agreements. The Company shall at all times maintain in its bylaws and/or other
organizational documents provisions indemnifying all directors against liability
and absolving all directors from liability to the Company and its shareholders,
in each case to the maximum extent permitted under the laws of the State of
Texas.
8.17 Subsidiaries. Except as otherwise approved by the Board of Directors
------------
or as may exist as of the Closing Date, from and after the date of this
Agreement, the Company will not organize or acquire any Subsidiary.
8.18 Certain Other Agreements. The Company will not enter into any
------------------------
amendment, modification or waiver of the ▇▇▇▇▇▇ Purchase Agreement or the
Monitoring Agreement without the prior written consent of all Holders.
8.19 Advice of Changes; Supplemental Schedule. Prior to the Closing Date,
----------------------------------------
the Company shall promptly (but in no event later than three (3) Business Days
after the occurrence thereof) advise NTOF and ▇▇▇▇▇▇▇ Entities orally and in
writing of (i) any representation or warranty of the Company set forth in this
Agreement becoming untrue or inaccurate, (ii) the failure of the Company to
comply with or otherwise satisfy any covenant, condition or agreement to be
complied with or otherwise satisfied by it under this Agreement, (iii) any
change or event that has, or could reasonably be expected to have, a Material
Adverse Effect or that could otherwise materially affect the ability of the
Company to fulfill its obligations hereunder; provided, however, that no
-------- -------
notification made by the Company pursuant to this Section 8.19 shall affect the
------------
representations, warranties, covenants or agreements contained in this Agreement
or be deemed to have amended the disclosure schedules attached hereto. On or
immediately before the Closing Date, the Company shall provide the Purchasers
with a revised and updated set of disclosure schedules (the "Supplemental
------------
Disclosure Schedules"), which Supplemental Disclosure Schedules shall be true,
--------------------
correct and complete as of such Closing Date and shall reflect any and
50
all changes to the underlying disclosure schedules described in this Agreement
that have occurred since the date of this Agreement.
8.20 Preparation and Filing of SEC Documents. Prior to the Closing Date,
---------------------------------------
the Company shall prepare any and all SEC Documents set forth on Schedule
--------
7.01(w) or as otherwise required to be filed by the Company as of such Closing
-------
Date, and all such SEC Documents shall be complete and correct in all material
respects. Within five (5) days of the Closing Date, the Company shall file with
the Commission any and all SEC Documents set forth on Schedule 7.01(w) or
----------------
otherwise required to be filed by the Company as of such Closing Date and shall
provide copies of all such SEC Documents to any Purchaser upon such Purchaser's
written request.
8.21 Preparation of Proxy Statement; Company Shareholders Meeting. The
------------------------------------------------------------
Company, acting through the Board of Directors, shall, in accordance with
applicable law and the terms and provisions of the articles of incorporation, as
amended, and bylaws of the Company:
(a) As promptly as practicable following the Closing Date, (i) prepare
and file with the Commission a proxy statement relating to the Shareholders
Meeting (the "Proxy Statement"), (ii) use its commercially reasonable best
---------------
efforts to have such Proxy Statement declared effective or otherwise be
cleared by the Commission and (iii) mail such Proxy Statement to the
shareholders of the Company. NTOF and ▇▇▇▇▇▇▇ Entities shall be given
reasonable opportunity to review and to comment upon the Proxy Statement
(and any and all supplements thereto) prior to the time that they are filed
with the Commission. The Company shall also provide to each of NTOF and
▇▇▇▇▇▇▇ Entities a copy of any written comments and oral notification of
any verbal comments, in each case, that are received by the Company from
the Commission or any of its staff with respect to such Proxy Statement and
shall further provide to each of NTOF and ▇▇▇▇▇▇▇ Entities a copy of any
written response and oral notification of any verbal response to any and
all such comments. If, at any time the Company is required to prepare and
file a supplement to such Proxy Statement, then the Company shall prepare
and file such supplement with the Commission and shall disseminate such
supplement to its shareholders, in each case as promptly as practicable and
in accordance with applicable law.
(b) As promptly as practicable following the Closing Date, duly call,
give notice of, convene and hold to a meeting of the Company's shareholders
for the purposes of approving the transactions contemplated hereby,
including, but not limited to, the issuance of the Series D Preferred Stock
and the Warrants (the "Shareholders Meeting"). The Company, through the
--------------------
Board of Directors, further agrees to recommend to its shareholders, to the
extent required by applicable law, the approval and adoption of this
Agreement, each of the Other Agreement and the Senior Loan Documents and
the consummation of each of the transactions contemplated hereby and
thereby, including, but not limited to, the issuance of the Series D
Preferred Stock and the Warrants.
8.22 Public Announcements. Each of NTOF, ▇▇▇▇▇▇▇ Entities and the Company
--------------------
hereby agree to consult with each other before issuing, and to provide each
other with reasonable
51
opportunity to review and to comment upon, any press release or other public
statements with respect to the transactions contemplated hereby and by the Other
Agreements, and none of NTOF, ▇▇▇▇▇▇▇ Entities or the Company shall issue any
such press release or other public statement prior to such consultation and
review, except as may otherwise be required by applicable law, stock exchange
requirements or court order. If any of NTOF, ▇▇▇▇▇▇▇ Entities or the Company
determine that a press release or other public statement is required by
applicable law, stock exchange requirements or court order, then such party will
consult and coordinate with the other parties regarding the form and substance
thereof.
8.23 Shareholder Litigation. The Company shall give each of NTOF and
----------------------
▇▇▇▇▇▇▇ Entities the opportunity to participate in the defense or settlement of
any shareholder litigation against the Company or all or any portion of the
Board of Directors relating to the transactions contemplated hereby or by the
Other Agreements. Notwithstanding anything contained or implied herein to the
contrary, the Company shall not settle or otherwise agree to set aside any such
litigation without the prior written consent of each of NTOF and ▇▇▇▇▇▇▇
Entities, which consent shall not be unreasonably withheld or delayed.
8.24 Officers and Directors Indemnification. The Purchasers hereby agree
--------------------------------------
that any and all rights to indemnification existing as of the date hereof in
favor of the directors and officers of the Company as provided in the articles
of incorporation, as amended, and bylaws of the Company (in each case, as in
effect as of the date hereof) shall survive the Closing and shall continue in
full force and effect in accordance with the terms thereof.
Article IX
Conditions
9.01 Purchasers' Conditions. The obligations of the Purchasers to effect
----------------------
the transactions contemplated by this Agreement are subject to the satisfaction
or waiver by each such Purchaser of the following conditions precedent:
(a) Opinion. The Purchasers will have received favorable opinions, dated
-------
the Closing Date, from ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel for the Company covering
matters raised by this Agreement and such other matters as the Purchasers or
their respective counsel may request, and otherwise in form and substance
satisfactory to each of the Purchasers and their respective counsel, and written
permission from each other firm issuing an opinion to the Company in connection
with the transactions contemplated hereby and thereby authorizing each Purchaser
to rely on such opinions.
(b) Material Adverse Effect. No event or occurrence shall have occurred
-----------------------
since December 29, 2000, that has had or that could reasonably be expected to
have a Material Adverse Effect.
(c) Other Agreements. The Company and each of the other parties thereto
----------------
(other than the Purchasers) will have executed and delivered the Other
Agreements.
52
(d) Thirteenth Amendment. The Company and each of the other parties thereto
--------------------
will have executed and delivered the Thirteenth Amendment, which Thirteenth
Amendment shall be in form and substance satisfactory to each Purchaser (in each
Purchaser's sole and absolute discretion).
(e) Shareholder Approval. The Purchasers shall have received irrevocable
--------------------
proxies or other voting agreements from shareholders of the Company holding such
number of shares of Capital Stock of the Company as shall be necessary and
appropriate to effect and to consummate the transactions contemplated hereby and
by the Other Agreements.
(f) No Injunctions or Other Restraints. No judgement, decree, statute, law,
--------------
ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order preventing (i) the consummation of the
transactions contemplated hereby or by the Other Agreements or (ii) the
ownership by any Purchaser of any portion of the Company or its Subsidiaries or
any of the Capital Stock of the Company shall have been entered, enacted,
promulgated, enforced or otherwise issued by any court of competent jurisdiction
or any Governmental Entity and shall be in effect.
(g) No Litigation. There shall not be pending or threatened by any
-------------
Governmental Entity any suit, action or other proceeding that (i) challenges or
seeks to restrain or to prohibit (A) the consummation of any of the transactions
contemplated hereby or by the Other Agreements or (B) the ownership by any
Purchaser of any portion of the Company or its Subsidiaries, (ii) seeks to
compel any of the Purchasers to dispose of or to hold separate any portion of
the business or assets of the Company or its Subsidiaries or (iii) seeks to
impose limitations on the ability of any of the Purchasers to acquire, to hold,
or otherwise to exercise full rights of ownership with respect to, any shares of
Capital Stock of the Company.
(h) Representations and Warranties; Covenants. Each representation and
-----------------------------------------
warranty of the Company set forth in this Agreement and the Other Agreements
will be true and correct when made and as of the Closing Date, and the Company
will have fully performed each covenant or agreement set forth in this Agreement
and the Other Agreements.
(i) Proceedings; Consents. All proceedings taken in connection with the
---------------------
transactions contemplated by this Agreement or the Other Agreements, and all
documents necessary to the consummation of this Agreement or the Other
Agreements, will be satisfactory in form and substance to the Purchasers and
their respective counsel, and the Purchasers and their respective counsel will
have received certificates of compliance and copies (executed or certified as
may be appropriate) of all documents, instruments and agreements that the
Purchasers or their respective counsel may reasonably request in connection with
the consummation of such transactions. All consents of any Person necessary to
the consummation of the transactions contemplated by this Agreement or the Other
Agreements will have been received, be in full force and effect, and not be
subject to any onerous condition.
(j) Certificates. The Company shall have executed and delivered to the
------------
Purchasers a certificate, dated as of the Closing Date, attesting to the matters
set forth in Section 9.01(b) and
---------------
53
(h), which certificate shall be in form and substance satisfactory to the
---
Purchasers and their respective counsel.
(k) Payment of Fees and Expenses. The Company shall have paid to,
----------------------------
reimbursed or otherwise made provision for the payment to each of the Purchasers
and their respective counsel of any all fees and expenses due and payable
thereto pursuant to the provisions of Section 10.10; provided, however, that all
------------- -------- -------
such fees and expenses due and payable to the ▇▇▇▇▇▇▇ Entities and their counsel
shall be paid first from the ▇▇▇▇▇▇▇ Expense Deposit in accordance with Section
-------
10.10(d) (to the extent that the unused amount of the ▇▇▇▇▇▇▇ Expense Deposit,
--------
as of the Closing Date, is sufficient to cover all such fees and expenses).
(l) Financial Statements. The Purchasers shall have received (i) final,
--------------------
correct and complete copies of the Company's unaudited financial statements
(including balance sheet, income statement and statement of shareholders'
equity) for the six (6) month period ended June 29, 2001 and (ii) final, correct
and complete copies of the Company's audited financial statements for its fiscal
year ended December 29, 2000 (excluding only the annual audit report prepared by
the Company's independent public accountants, which annual audit report shall be
delivered to the Purchasers within thirty (30) days after the Closing Date in
accordance with Section 8.01(a)), in each case, which shall be satisfactory to
---------------
each of the Purchasers (in each Purchaser's sole and absolute discretion).
9.02 Company Conditions. The obligations of the Company to effect the
------------------
transactions contemplated by this Agreement are subject to the following
conditions precedent:
(a) Other Agreements. The Purchasers and each of the other parties thereto
----------------
(other than the Company) will have entered into the Other Agreements.
(b) Representations and Warranties; Covenants. Each representation and
-----------------------------------------
warranty of the Purchasers set forth in this Agreement and the Other Agreements
will be true and correct when made and as of the Closing Date, and the
Purchasers will have fully performed each covenant or agreement set forth in
this Agreement and the Other Agreements required to be performed by the
Purchasers.
(c) No Injunctions or Other Restraints. No judgement, decree, statute,
----------------------------------
law, ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order preventing (i) the consummation of the
transactions contemplated hereby or by the Other Agreements or (ii) the
ownership by any Purchaser of any portion of the Company or its Subsidiaries or
any of the Capital Stock of the Company shall have been entered, enacted,
promulgated, enforced or otherwise issued by any court of competent jurisdiction
or any Governmental Entity and shall be in effect.
(d) Proceedings; Consents. All proceedings taken in connection with the
---------------------
transactions contemplated by this Agreement or the Other Agreements, and all
documents necessary to the consummation of this Agreement or the Other
Agreements, will be satisfactory in form and substance to the Company and its
counsel, and the Company and its counsel will have received certificates of
compliance and copies (executed or certified as may be appropriate) of all
54
documents, instruments and agreements that the Company or its counsel may
reasonably request in connection with the consummation of such transactions. All
consents of any Person necessary to the consummation of the transactions
contemplated by this Agreement or the Other Agreements will have been received,
be in full force and effect, and not be subject to any onerous condition.
(e) Certificates. Each Purchaser shall have executed and delivered to the
------------
Company a certificate, dated as of the Closing Date, attesting to the matters
set forth in Sections 9.02(b) and 9.02(c), which certificate shall be in form
---------------- -------
and substance satisfactory to the Company and its counsel.
(f) Shareholder Approval. The Purchasers shall have received irrevocable
--------------------
proxies or other voting agreements from shareholders of the Company holding such
number of shares of Capital Stock of the Company as shall be necessary and
appropriate to effect and to consummate the transactions contemplated hereby and
by the Other Agreements.
Article X
Miscellaneous
10.01 Indemnification. In addition to any other rights or remedies to which
---------------
the Purchasers and the other Holders may be entitled, the Company agrees to and
will indemnify and hold harmless all Purchasers, all Holders, and each of their
respective Affiliates, successors, assigns, officers, directors, employees,
attorneys and agents (individually and collectively, an "Indemnified Party")
-----------------
from and against any and all losses, claims, obligations, liabilities,
deficiencies, diminutions in value, penalties, causes of action, damages, costs,
and expenses (including, without limitation, costs of investigation and defense,
reasonable attorneys' fees, and expenses), including, without limitation, those
arising out of the sole or contributory negligence of any Indemnified Party (but
excluding the gross negligence or willful misconduct of such Indemnified Party),
that the Indemnified Party may suffer, incur, or be responsible for, arising or
resulting from (i) any misrepresentation, breach of warranty or nonfulfillment
of any covenant or agreement on the part of the Company under this Agreement,
the Other Agreements or any other agreement, document or instrument governing or
evidencing the Series D Preferred Stock, the Warrants or the Warrant Shares,
(ii) any misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished by the Company to any Purchaser or any
Holder under or in connection with this Agreement or the Other Agreements, (iii)
any action or inaction taken by the Company in the conduct of its business or
operations, (iv) the transactions contemplated hereby or by the Other Agreements
or (v) any investigation, litigation or other proceeding (including, without
limitation, any threatened investigation, litigation or other proceeding)
relating to any of the foregoing.
55
10.02 Equitable Relief. It is agreed that a violation by any party of the
----------------
terms of this Agreement cannot be adequately measured or compensated in money
damages, and that any breach or threatened breach of this Agreement by a party
to this Agreement would do irreparable injury to the nondefaulting party. It is,
therefore, agreed that in the event of any breach or threatened breach by a
party to this Agreement of the terms and conditions set forth in this Agreement,
the nondefaulting party will be entitled, in addition to any and all other
rights and remedies that it may have in law or in equity, to apply for and
obtain injunctive relief requiring the defaulting party to be restrained from
any such breach or threatened breach or to refrain from a continuation of any
actual breach.
10.03 Integration and Amendments. This Agreement and the Other Agreements
--------------------------
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all previous written, and all previous
or contemporaneous oral, negotiations, understandings, arrangements, and
agreements. This Agreement may not be amended or supplemented except by a
writing signed by Company and the Holders of a majority-in-interest of the
Registrable Securities; provided, however, that changes, revisions, supplements
-------- -------
or amendments to the provisions related to (i) any economic term with respect to
any of the Registrable Securities, (ii) Section 2.02 (and any defined terms used
------------
therein), (iii) Section 3.02 (and any defined terms used therein), (iv) Article
------------ -------
IV (and any defined terms used therein), (v) Article V (and any defined terms
-- ---------
used therein), (vi) Article VI (and any defined terms used therein), (vii)
----------
Sections 8.04(a), 8.04(b), 8.04(f), 8.04(g), 8.04(n), 8.04(p)(iii), 8.04(p)(iv),
---------------- ------- ------- ------- ------- ------------ -----------
8.04(p)(v), 8.04(u), 8.14 and 8.18 (and any defined terms used in such
---------- ------- ---- ----
Sections), (viii) the definition of Permitted Stock, (ix) Article IX (and any
----------
defined terms used therein), (x) this Section 10.03, and (xi) Section 10.10(d)
------------- ----------------
shall, in each case, require the consent of each Purchaser and each other
Holder. Any approval or consent granted by Holders in accordance with the second
sentence of the definition of "Holders" shall not be deemed an amendment or
supplement for purposes of the preceding sentence. Notwithstanding anything to
the contrary contained herein, no change, revision, supplement or amendment to
any provision of this Agreement or any Other Agreement may be made during the
period from the date of execution of this Agreement through and including the
Closing Date except by a writing signed by the Company and all Holders.
10.04 Headings. The headings in this Agreement are for convenience and
--------
reference only and are not part of the substance of this Agreement. References
in this Agreement to Sections and Articles are references to the Sections and
Articles of this Agreement unless otherwise specified.
10.05 Severability. The parties to this Agreement expressly agree that it
------------
is not the intention of any of them to violate any public policy, statutory or
common law rules, regulations or decisions of any governmental or regulatory
body. If any provision of this Agreement is judicially or administratively
interpreted or construed as being in violation of any such policy, rule,
regulation or decision, then the provision, section, sentence, word, clause or
combination thereof causing such violation will be inoperative (and in lieu
thereof there will be inserted such provision, sentence, word, clause or
combination thereof as may be valid and consistent with the intent of the
parties under this Agreement), and the remainder of this Agreement, as amended,
56
will remain binding upon the parties, unless the inoperative provision would
cause enforcement of the remainder of this Agreement to be inequitable under the
circumstances.
10.06 Notices. Whenever it is provided herein that any notice, demand,
-------
request, consent, approval, declaration or other communication be given to or
served upon any of the parties by another, such notice, demand, request,
consent, approval, declaration or other communication will be in writing and
will be deemed to have been validly served, given or delivered (and "the date of
such notice" or words of similar effect will mean the date) five (5) days after
deposit in the United States mails, certified mail, return receipt requested,
with proper postage prepaid, or upon receipt thereof (whether by non-certified
mail, telecopy, telegram, express delivery or otherwise), whichever is earlier,
and addressed to the party to be notified as follows:
If to NTOF, at: North Texas Opportunity Fund LP
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with courtesy copies to: ▇▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: R. ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the ▇▇▇▇▇▇▇ Entities, at ▇▇▇▇ ▇▇▇▇▇▇▇ Life Insurance Company
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇ ▇▇▇▇▇▇▇ Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (T30)
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇ ▇▇▇▇▇▇▇ Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇ (T57)
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
57
with courtesy copies to: ▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, at: Fresh America Corp.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with courtesy copies to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by like notice.
Notice to any Management Shareholder or to any Holder other than the Purchasers
will be delivered as set forth above to the address of such Person shown on the
stock transfer books of the Company unless such Person has advised the Company
in writing of a different address to which notices are to be sent under this
Agreement.
Failure or delay in delivering courtesy copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies of the actual notice will in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
No notice, demand, request, consent, approval, declaration or other
communication will be deemed to have been given or received unless and until it
sets forth all items of information required to be set forth therein pursuant to
the terms of this Agreement.
10.07 Successors. This Agreement will be binding upon and inure to the
----------
benefit of the parties and their respective successors and assigns.
10.08 Remedies. The failure of any party to enforce any right or remedy
--------
under this Agreement, or promptly to enforce any such right or remedy, will not
constitute a waiver thereof, nor give rise to any estoppel against such party,
nor excuse any other party from its obligations under this Agreement. Any waiver
of any such right or remedy by any party must be in writing and signed by the
party against which such waiver is sought to be enforced.
10.09 Survival. All warranties, representations and covenants made by any
--------
party in this Agreement or in any certificate or other instrument delivered by
such party or on its behalf under this Agreement will be considered to have been
relied upon by the party to which it is delivered and will survive the Closing
Date, regardless of any investigation made by such party or on its
58
behalf. All statements in any such certificate or other instrument will
constitute warranties and representations under this Agreement.
10.10 Fees and Expenses.
-----------------
(a) Transaction Fees. The Company shall pay to each Holder
----------------
promptly upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include
reasonable outside counsel fees), expended or incurred by such Holder in
connection with (a)(i) the negotiation and preparation of this Agreement
and the Other Agreements (without regard to whether the Closing ever
occurs), (ii) the Holders' continued administration hereof and thereof
(including, without limitation, from and after the occurrence and during
the continuance of any failure of the Company in any material respect to
perform any of its obligations under this Agreement or the Other
Agreements, any costs and/or expenses incurred by any Holder in connection
with the exercise of its inspection rights pursuant to Section 8.03) and
------------
(iii) the preparation of any amendments and waivers hereto and thereto, (b)
the enforcement of each Holder's rights and/or the collection of any
amounts that become due to any Holder under this Agreement or under any of
the Other Agreements and (c) the prosecution or defense of any action in
any way related to this Agreement or any of the Other Agreements, including
without limitation, any action for declaratory relief, whether incurred at
the trial or appellate level, in an arbitration proceeding or otherwise,
and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by any Holder or any other
Person) relating to the Company or any other Person or entity
(collectively, the "Transaction Fees"); provided, however, that if the
---------------- -------- -------
Closing shall fail to occur for any reason, then the Company shall not be
required to pay any Transaction Fees to NTOF or on behalf of NTOF in excess
of fifty thousand dollars ($50,000).
(b) Closing Fee. In addition to any other amounts payable to NTOF
-----------
pursuant to this Section 10.10, on the Closing Date, the Company shall pay
-------------
to NTOF in immediately available funds a closing fee of two hundred
thousand dollars ($200,000) (the "Closing Fee"), which Closing Fee shall be
-----------
fully earned and non-refundable as of such Closing Date.
(c) Termination Fee. In addition to any other amounts payable to NTOF
---------------
pursuant to this Section 10.10, in the event NTOF is ready, willing and
-------------
able to consummate the transactions on the Closing Date contemplated by
this Agreement and the Other Agreements and if such transactions are not
consummated for any reason (other than a breach or default by NTOF under
this Agreement), including, but not limited to, as a result of the failure
of satisfaction of any conditions precedent set forth in Article IX, then,
----------
in such event, the Company shall pay to NTOF, via wire transfer of
immediately available funds, a termination fee in an amount equal to five
hundred thousand dollars ($500,000) (the "Termination Fee"), provided,
--------------- --------
however, that if NTOF elects not to consummate the transactions
-------
contemplated hereby solely as a result of the failure of satisfaction of
the condition precedent set forth in Section 9.01(e), NTOF shall not be
---------------
entitled to receive the Termination Fee.
59
(d) ▇▇▇▇▇▇▇ Expense Deposit. The ▇▇▇▇▇▇▇ Entities jointly and
-----------------------
severally represent, warrant and agree that on or about April 20,
2001, the Company advanced to ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, on behalf of the
▇▇▇▇▇▇▇ Entities the aggregate sum of two hundred thousand dollars
($200,000) (the "▇▇▇▇▇▇▇ Expense Deposit") for purposes of providing
-----------------------
the ▇▇▇▇▇▇▇ Entities with monies against which the ▇▇▇▇▇▇▇ Entities
could charge fees and expenses reimbursable by the Company under and
pursuant to the Initial Securities Purchase Agreement, the Amended and
Restated Note Agreement, the Additional Securities Purchase Agreement,
the Notes, the Series C Preferred Stock, the Series A Warrants and the
Series B Warrants. The ▇▇▇▇▇▇▇ Entities, jointly and severally,
further represent, warrant and agree that (i) the unused amount of the
▇▇▇▇▇▇▇ Expense Deposit, as of the date of this Agreement (after
application of funds for Invoice No. 517882, dated August 9, 2001), is
one hundred sixty-six thousand nine hundred twenty and 99/100 dollars
($166,920.99), (ii) no fees or expenses of any kind, nature or
description are currently owing to the ▇▇▇▇▇▇▇ Entities by the Company
(except for attorneys fees and expenses which are reimbursable by the
Company to the ▇▇▇▇▇▇▇ Entities in connection with the negotiation and
preparation of this Agreement and the Other Agreements pursuant to
Section 10.10(a) hereof (hereinafter, the "▇▇▇▇▇▇▇ Closing Expenses"))
---------------- ------------------------
and (iii) within thirty (30) days of the later of (A) the date of the
Shareholders Meeting or (B) the Closing Date, the ▇▇▇▇▇▇▇ Entities
will return/refund to the Company the portion, if any, of the ▇▇▇▇▇▇▇
Expense Deposit remaining after payment of the ▇▇▇▇▇▇▇ Closing
Expenses.
10.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original and all of which, taken
together, will constitute one agreement.
10.12 Other Business. It is understood and accepted that the
--------------
Purchasers, the Holders and their respective Affiliates have or may have
interests in other business ventures that may be in conflict with the activities
of the Company and that nothing in this Agreement will limit the current or
future business activities of such parties whether or not such activities are
competitive with those of the Company. The Company and each Management
Shareholder hereby agrees that all business opportunities in any field
substantially related to the business of the Company will be pursued exclusively
through the Company.
10.13 Choice of Law. THIS AGREEMENT HAS BEEN EXECUTED, DELIVERED AND
-------------
ACCEPTED BY THE PARTIES IN THE STATE OF TEXAS, WILL BE DEEMED TO HAVE BEEN MADE
IN THE STATE OF TEXAS, AND WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO
AND THE INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO AN AGREEMENT EXECUTED,
DELIVERED AND PERFORMED THEREIN, WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW
RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE
SUBSTANTIVE LAW OF ANY OTHER JURISDICTION.
60
10.14 Duties Among Holders. Each Holder agrees that no other Holder will by
--------------------
virtue of this Agreement be under any fiduciary or other duty to give or
withhold any consent or approval under this Agreement or to take any other
action or omit to take any action under this Agreement, and that each other
Holder may act or refrain from acting under this Agreement as such other Holder
may, in its discretion, elect.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
61
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
COMPANY:
-------
FRESH AMERICA CORP., a Texas corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
NTOF:
----
NORTH TEXAS OPPORTUNITY FUND LP
By: North Texas Opportunity Fund Capital
Partners LP, its general partner
By: NTOF LLC, its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
Title: Manager
Number of Shares of Series D Preferred Stock: 50,000
Purchase Price (all shares): $5,000,000
Number of Warrant Shares: 84,100,980
Purchase Price (all Warrants): $1.00
▇▇▇▇▇▇▇ ENTITIES:
----------------
▇▇▇▇ ▇▇▇▇▇▇▇ LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
Title: Director
----------------------------------------------
Number of Shares of Series D Preferred Stock: 24,840
Number of Warrant Shares: 29,519,444
▇▇▇▇ ▇▇▇▇▇▇▇ VARIABLE LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
Title: Authorized Signatory
----------------------------------------------
Number of Shares of Series D Preferred Stock: 1,620
Number of Warrant Shares: 6,812,179
SIGNATURE 1A (CAYMAN), LTD.
By: ▇▇▇▇ ▇▇▇▇▇▇▇ Life Insurance Company,
Portfolio Advisor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
Title: Director
----------------------------------------------
Number of Warrant Shares: 4,541,453
SIGNATURE 3 LIMITED
By: ▇▇▇▇ ▇▇▇▇▇▇▇ Life Insurance Company,
Portfolio Advisor
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
Title: Managing Director
---------------------------------------------
Number of Warrant Shares: 4,541,453
INVESTORS PARTNER LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
Title: Authorized Signatory
---------------------------------------------
Number of Shares of Series D Preferred Stock: 540