EX-10.4
SECURITIES PURCHASE AND SUBSCRIPTION AGREEMENT
This SECURITIES PURCHASE AND SUBSCRIPTION AGREEMENT (the "AGREEMENT")
is made as of July 17, 2006, by and among ▇▇▇▇▇▇▇ Foods, Inc., an Oklahoma
corporation (the "COMPANY"), and the undersigned (the "PURCHASER").
WITNESSETH:
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT").
B. The Company desires to issue and sell, upon the terms and conditions
set forth in this Agreement: 10% unsecured promissory notes of the Company,
substantially in the form attached hereto as EXHIBIT A, in the aggregate
principal amount of up to One Million Five Hundred Thousand Dollars ($1,500,000)
(the "NOTES"); and such number and type of equity securities of the Company as
shall be determined in accordance with the provisions of this Agreement (the
"ADDITIONAL SECURITIES" and together with the Notes hereinafter called the
"SECURITIES").
C. Purchaser wishes to purchase, upon the terms and conditions stated
in this Agreement, such principal amount of Notes as is set forth immediately
below its name on the signature page hereto, together with the Additional
Securities obtainable upon such purchase of Notes as provided in this Agreement.
D. Contemporaneous with the Closing (as defined below), (a) the parties
hereto will execute and deliver a Registration Rights Agreement, substantially
in the form attached hereto as EXHIBIT B-1 (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide to Purchaser
(and all other purchasers that execute agreements substantially identical to
this Agreement) (collectively, the "PURCHASERS") certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws for the Additional Securities (the "PURCHASERS
REGISTRATION STATEMENT") and (b) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
(collectively, the "PLEDGORS")will execute and deliver Security and Stock Pledge
Agreement, substantially in the form attached hereto as EXHIBIT B-2 (the "STOCK
PLEDGE AGREEMENT"), pursuant to which they will pledge, on a non-recourse basis,
all of its right, title and interest in and to Allison's Gourmet Kitchens,
Limited Partnership ("ALLISON'S") as collateral security for the repayment of
the Notes.
NOW THEREFORE, the Company and the Purchaser hereby agree as follows:
ARTICLE ONE
PURCHASE AND SALE OF NOTES AND ADDITIONAL SECURUITIES
-----------------------------------------------------
1.1 PURCHASE OF SECURITIES. On the Closing Date (as
defined below), the Company shall sell to the Purchaser and the Purchaser agrees
to purchase from the Company;
(i) such principal amount of Notes as is set forth immediately
below such Purchaser's name on the signature pages hereto (the "PURCHASED
NOTE"); and
(ii) such Additional Securities, as shall be determined in
accordance with Section 1.2 hereof.
1.2 ADDITIONAL SECURITIES. The Company hereby agrees
that, in addition to the Purchased Note, the Purchaser shall be entitled to the
Additional Securities as follows:
(i) If at any time after the date hereof and prior to June 30,
2007 the Company shall have sold any equity securities (whether common stock,
preferred stock, warrants options or any combination thereof, such securities
hereinafter referred to as the "QUALIFIED SALE SECURITIES") in a transaction or
series of related transactions wherein the gross proceeds received by the
Company equal or exceed $5,000,000 (a "QUALIFIED SALE"), then upon the closing
of the first such Qualified Sale, the Company shall deliver to the Purchaser
such number or numbers of securities identical to the Qualified Sale Securities
as shall have a value equal to one-half of the principal amount of the Purchased
Note (such value to be based upon the gross purchase price (before deductions
for fees, commissions, discounts or expenses) for the Qualified Sale Securities
in such Qualified Sale). Any such securities issued to Purchaser shall have the
same cusip numbers as the corresponding securities in the Qualified Sale.
(ii) If a Qualified Sale shall not have occurred on or prior
to June 30, 2007, but the Purchased Note shall have been repaid in full on or
prior to such date, then on July 1, 2007 the Company shall issue to the
Purchaser that number of shares of its common stock as shall equal one-half of
the original principal amount of the Note divided by $4.00.
(iii) If a Qualified Sale shall not have occurred on or prior
to June 30, 2007, and the Purchased Note shall not have been repaid in full on
or prior to such date, then on July 1, 2007 the Company shall issue to the
Purchaser that number of shares of its common stock as shall equal the original
principal amount of the Note divided by $4.00.
The number of shares to be delivered pursuant to clause (ii) of this Section 1.2
assumes that the Company has 5,000,000 shares issued and outstanding. If the
number of shares actually issued and outstanding on July 1, 2007 is more or less
than 5,000,000, the $4.00 divisor shall be adjusted up or down so that the
product of the number of shares issued and outstanding and the divisor is
$20,000,000.
1.3 FORM OF PAYMENT. Currently with the execution of this
Agreement the Purchaser shall remit to ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇ LLP (the "ESCROW AGENT")
an amount equal to the principal amount of the Purchased Note (the "PURCHASE
PRICE") by either (i) wire transfer of immediately available funds to the Escrow
Agent at ▇▇▇▇▇ Fargo Bank, ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Account Name: ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇ LLP (▇▇▇▇▇▇▇ Escrow), Account No.: 7912-028938,
ABA Routing No. ▇▇▇▇▇▇▇▇▇ or (ii) a check made payable to ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇ LLP,
Bank of America Financial Center, Suite 1500, ▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇ (▇▇▇▇▇▇▇ Escrow). The Purchase Price shall be held in escrow by the Escrow
Agent pending the Closing or the termination of this Agreement. At the Closing,
the Purchase Price shall be released from escrow and paid to the Company and the
interest earned thereon (if any) shall be distributed to the Purchaser. If the
Closing shall not have occurred and this Agreement shall have been terminated,
the Escrow Agent shall return the Purchase Price together with the interest
earned thereon (if any) to the Purchaser and the Company shall thereafter have
no further obligation to the Purchaser.
1.4 CLOSING. The closing of the transactions to be
effected hereunder (the "CLOSING") shall be held at 10:00 A.M. on the business
day on which the satisfaction or waiver of the last of the conditions set forth
in Article Five has occurred, or at such other place or at such other time as
the Company and the Purchaser may mutually agree (the "CLOSING DATE"); provided
that if the Closing has
2
not occurred prior to 5:00 PM Pacific time July 15, 2006 this Agreement shall
automatically terminate.
1.5 DELIVERY OF PURCHASED SECURITIES. At the Closing, the
Company shall deliver to the Purchaser the Purchased Note, duly executed on
behalf of the Company. The Company shall deliver to the Purchaser the Additional
Securities within five days after the determination of the type and number
thereof.
1.6 ALLOCATION OF PURCHASE PRICE. For income tax
purposes, the Purchase Price will be allocated to the Purchased Note and the
Additional Securities based on their relative fair market values.
1.7 COMMISSION PAYMENT AND LOAN REPAYMENT. The Purchaser
is aware that the Company has retained the services of ▇▇▇▇▇▇▇ Investment
Company, Inc. ("▇▇▇▇▇▇▇") to act as a Placement Agent in connection with the
sale of the Notes and that ▇▇▇▇▇▇▇ shall be entitled to a selling commission
equal to 8% of the gross proceeds received by the Company in connection with the
sale of the Notes and reimbursement of up to $10,000 of expenses incurred in
connection therewith.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
2.1. NO VIOLATIONS. The making and performance by the
Company of this Agreement does not violate any provision of law or of the
Articles of Incorporation or Bylaws of the Company, nor does it result in a
breach of or constitute a default under any agreement, indenture or other
instrument to which the Company is a party or by which the Company may be bound,
where such breach or default would have a material adverse effect on the
Company.
2.2. DUE AUTHORIZATION; VALIDITY. This Agreement has been
duly authorized, executed and delivered and is a valid and binding Agreement of
the Company and the Promissory Notes to be issued hereunder by the Company will
be valid and binding obligations of the Company in accordance with their terms.
2.3. CORPORATE REQUIREMENTS. The Company (i) is a
corporation duly organized and existing in good standing under the laws of the
State of Oklahoma; (ii) has the power and authority to own the properties and
assets which it purports to own and to carry on its business as now conducted;
(iii) has the power and authority to execute and deliver all documents required
hereunder; and (iv) to the best of its knowledge, has complied with all filing
and other requirements of Federal, State and local laws, insofar as such laws
relate to its doing business.
ARTICLE THREE
COVENANTS
3.1. ALLISON'S. On or prior to the date on which the
Additional Securities shall be issued (the "ISSUE DATE"), the Company shall
acquire all of the equity interests or all of the operating assets of Allison's.
3.2. CHARTER AMENDMENT. The Purchaser acknowledges that as
of the date hereof, the Company's authorized capital consists of 600 shares of
common stock, par value $1.00 per share. On
3
or prior to the Issue Date, the Company shall take all corporate action
necessary to amend its Articles of Incorporation to increase its authorized
capital so as to permit the issuance of the Additional Securities and shall
reserve a sufficient number of shares of its capital stock to provide for the
issuance of the Additional Securities (as well as shares of capital stock
underlying any options, warrants or convertible securities included in the
Additional Securities).
ARTICLE FOUR
THE PURCHASER
4.1 PURCHASER REPRESENTATIONS AND WARRANTIES. The
Purchaser represents and warrants to the Company that:
(a) The Purchaser understands and acknowledges that the
Securities are being sold by the Company without registration under the
Securities Act of 1933, as amended (the "1933 ACT"), and state securities laws
in reliance on the exemptions from registration set forth in sections 3(b) and
4(2) of the securities law exemptions.
(b) The Securities are being acquired by the Purchaser
for the Purchaser's own account for long-term investment and not with a view to
the distribution thereof, and with no present intention of selling or otherwise
disposing of the Securities or any part thereof. The Purchaser has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for or which is likely to compel a disposition of the
Securities in any manner. The Purchaser is not aware of any present
circumstances that are likely to promote the Purchaser's future disposition of
the Securities.
(c) The Purchaser is an "accredited investor" as such
term is defined in Rule 501 of Regulation D promulgated under the 1933 Act, as
indicated by the Purchaser's responses to the Confidential Purchaser
Questionnaire attached hereto as EXHIBIT C (the "QUESTIONNAIRE"), the Purchaser
is able to bear the economic risk of an investment in the Securities and the
Purchaser understands that because the Securities will be sold without
registration under the 1933 Act, the Purchaser must hold the Securities
indefinitely and cannot sell, exchange, assign, transfer, gift, pledge,
encumber, hypothecate or otherwise dispose of the Securities except pursuant to
an exemption from the registration provisions of the federal and state
securities laws, the availability of which must be satisfied to the Company in
its discretion.
(d) The Purchaser has such knowledge and experience in
financial and business matters that the Purchaser is capable of evaluating the
merits and risks of the prospective investment in the Company; the Purchaser has
received and reviewed all information requested of the Company and, based on
such review, understands and has evaluated the merits and risks of the
prospective investment in the Company, and has decided to purchase the
Securities.
(e) The Purchaser has had the opportunity to ask
questions and receive answers concerning the Company, as well as the terms and
conditions of the offering of the Securities, and to obtain additional
information reasonably available to the Company and any persons acting on the
Company's behalf, necessary to verify the accuracy of any information provided
to the Purchaser, and the Purchaser has received all of the information the
Purchaser has requested to the extent that such information is reasonably
available to the Company. The Purchaser requires no additional information to
evaluate fully the merits and risks of a prospective investment in the Company.
(f) The Purchaser has received and has read carefully the
Executive Summary, the
4
Risk Factors, the audited financial statements for the years ended December 31,
2005 and 2004 and the unaudited balance sheets and statements of operations for
the three months ended March 31, 2006 and 2005 of the Company and of Allison's,
copies of which are annexed hereto as EXHIBIT D. The Purchaser further
understands that any investment in the Securities may involve material risks in
addition to those disclosed in the "Risk Factors," which does not purport to be
an exhaustive list of all material risks involved with an investment in the
Securities.
(g) The Purchaser understands that the Company is relying
on the accuracy of statements contained in this Agreement and the Questionnaire
in connection with the sale of the Securities, and the Securities would not be
sold to the Purchaser if any statement contained in this Agreement or the
Questionnaire were untrue; and all other offerees or purchasers of the
Securities may rely on the accuracy of statement contained in this Agreement and
the Questionnaire in connection with any matters relating to the offer or sale
of the Securities.
(h) The Purchaser acknowledges that the Company has
advised the Purchaser that in accordance with the provisions of Section 1.6
hereof, a portion of the Purchase Price will be allocated to the Purchased Note
and the Additional Securities based on their relative fair market values, and
that therefore the Purchaser will be required to report as interest income the
difference between the amount allocated to the Purchased Note and 100% of the
principal amount of the Purchased Note. The Purchaser further acknowledges that
the Company has advised the Purchaser that such allocation is not binding on the
Internal Revenue Service which may take the position that the portion of the
Purchase Price to be allocated to the Purchased Note should be less, thereby
increasing the amount of interest income to be recognized by the Purchaser. The
Purchaser represents to the Company that Purchaser has relied on the Purchaser's
own tax counsel as to all tax matters with respect to the purchase of its
Securities, including without limitation the application of Internal Revenue
Code Sections 1271 et. seq., regarding "original issue discount" to the
Purchased Note.
(i) The Purchaser shall immediately notify the Company
if, for any reason, any of the statements contained herein or in the
Confidential Purchaser Questionnaire become inaccurate at any time from the date
hereof until the Closing, and the Purchaser understands that the continued
accuracy of the statements contained herein and in the Confidential Purchaser
Questionnaire is of the essence to the sale of the Securities.
(j) The Purchaser shall indemnify the Company and all
persons acting on their behalf and hold them harmless from any and all
liability, damage, cost or expense, including but not limited to attorneys'
fees, incurred on account of or arising directly or indirectly out of any
inaccuracy in the subscriber's representations in this Agreement or the
Questionnaire or any disposition of all or any portion of the Securities
subscribed for hereunder in violation of his representations in this Agreement
and the Questionnaire.
(k) The Purchaser has relied on the Purchaser's own legal
counsel to the extent the Purchaser has deemed necessary as to all legal matters
and questions presented with reference to the offering and sale of the
Securities.
(l) The Purchaser has relied on the Purchaser's own
accountant or other financial advisor and/or his or her own financial experience
as to all financial matters and questions presented with reference to the
purchase of the Securities.
(m) The Purchaser has relied on the Purchaser's own
analysis and evaluation (or the analysis and evaluation of its professional
advisors) of the Company, its products and services, the technology issues
involved and the market in which the Company intends to operate.
5
(n) The Purchaser fully understands the terms, conditions
and consequences relating to the offering of the Securities and understands the
Purchaser may have to hold such Securities indefinitely.
4.2 PURCHASER COVENANTS. In the event the Company
proposes to complete an underwritten public offering subsequent to the Closing
Date, the Purchaser will execute a "lock-up" agreement containing such terms,
conditions and provisions as may be required by the managing underwriter of such
offering, not to exceed one year; PROVIDED, HOWEVER, in no event shall the
Purchaser be subject to a lock-up agreement that is more restrictive than that
executed by the Company's officers, directors, and the holders of 5% or more of
the Company's common stock.
ARTICLE FIVE
CONDITIONS PRECEDENT TO THE CLOSING
The obligations of the parties pursuant to this Agreement are subject
to the satisfaction at the Closing of each of the following conditions;
provided, however, that the parties may, in their sole discretion, waive any of
such conditions and proceed with the transactions contemplated hereby:
5.1. SALE OF SECURITIES. The Company shall have received
and accepted executed agreements relating to the sale of Notes (including the
Purchased Note) and Additional Securities for a gross purchase price of
$1,500,000 and shall be prepared to close with respect thereto.
5.2 ANCILLARY AGREEMENTS. The Company shall have executed
and delivered the Registration Rights Agreement and the Pledgors shall have
executed and delivered the Stock Pledge Agreement to the Purchasers.
ARTICLE SIX
MISCELLANEOUS
6.1. GENDER. The neuter pronoun, when used herein, shall
include the masculine and feminine and also the plural.
6.2 CHOICE OF LAW. This Agreement has been delivered in
the State of Oklahoma and shall be construed in accordance with the laws of
Oklahoma. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
such provision shall be ineffective to the extent of such prohibition without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. With respect to any claim or action arising under this Agreement, the
Company hereby (i) irrevocably submits to the jurisdiction of the courts of the
state of Georgia and the United States District Court located in the city of
▇▇▇▇▇, State of Oklahoma, and (ii) irrevocably waives any objection which it may
have at any time to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in any such court,
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum and further irrevocably
waives the right to object, with respect to such claim, suit, action or
proceeding brought in any such court, that such court does not have jurisdiction
over such party. Nothing in this Agreement will be deemed to preclude the
Purchaser from bringing an action or proceeding in respect hereof in any other
jurisdiction.
6
6.3 SUCCESSOR AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
parties hereto. The rights and privileges of Purchaser hereunder shall inure to
the benefit of Purchaser's heirs, legal representatives, successors and assigns.
Notwithstanding the foregoing, (i) the Company may not assign its obligations
under this Agreement without the consent of the Purchaser and (ii) Purchaser may
assign or transfer any of its rights hereunder subject to providing the Company
with evidence reasonably acceptable to the Company that such assignment or
transfer will not violate or require registration under any applicable federal
or state securities law or regulation.
6.4. SEVERABILITY. If any provision of this Agreement or
of any of the documents executed in connection herewith or the application
thereof to any party thereto or circumstances shall be invalid or unenforceable
to any extent, the remainder of this Agreement and of such documents and the
application of such provisions to any other parry therein or circumstance shall
not be affected thereby and shall be enforced to the greatest extent permitted
by law.
6.5. SURVIVAL. All representations, warranties and
covenants made in this Agreement shall survive the execution and delivery of
this Agreement.
6.6. COUNTERPARTS. This Agreement may be executed in any
number of counterparts each of which shall be deemed to be an original but all
of which, when taken together, shall constitute one and the same instrument.
6.7. ACCREDITED INVESTOR REPRESENTATION. Purchaser shall
deliver to the Company, together with an executed copy of this Agreement, a
completed Questionnaire, and by executing this Agreement, Purchaser represents
and warrants that it is an "accredited investor" as that term is defined under
Regulation D of the Securities Act of 1933, as amended. Purchaser further agrees
that notwithstanding anything else contained in this Agreement, at the time of
any investment decision by Purchaser, the Company may require, as a condition to
such investment decision or conversion, that Purchaser provide reasonable
evidence and make reasonable representations and warranties regarding its status
as an "accredited investor" as of the time of the investment decision.
6.8. AMENDMENT AND WAIVER. This Agreement may be amended
or modified upon the written consent of the Company and the Purchaser, and any
provision may be waived only in writing, by the party waiving such provision.
6.9 NOTICES. All notices, requests, demands and other
communications which are required to be or may be given under this Agreement to
any party to any of the other parties shall be in writing and shall be deemed to
have been duly given when (a) delivered in person, or (b) the day following
dispatch by an overnight courier service (such as Federal Express or UPS, etc.)
to the party to whom the same is so given or made:
If to the Company
addressed to: ▇▇▇▇▇▇▇ Foods, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
If to Purchaser addressed to: The address set forth on the
signature page hereto.
7
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered under seal, the day and year first above written.
▇▇▇▇▇▇▇ FOODS, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and CEO
PURCHASER:
-----------------------------------
Print Name of Purchaser:__________________________
Print Title of Purchaser (if Purchaser is not an individual):_________________
Tax I.D. # of Purchaser: _________________________
Aggregate amount invested: _______________________
Address: ______________________________
______________________________
______________________________
8