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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FRESH AMERICA CORP.
AND
FRESHPOINT HOLDINGS, INC.
DATED AS OF MAY 3, 1999
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TABLE OF CONTENTS
Page No.
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ARTICLE I THE MERGER.............................................................................................ii
SECTION 1.01. The Merger...............................................................................ii
SECTION 1.02. Closing; Closing Date; Effective Time...................................................iii
SECTION 1.03. Effect of the Merger....................................................................iii
SECTION 1.04. Directors and Executive Officers.........................................................iv
SECTION 1.05. Headquarters.............................................................................iv
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES....................................................iv
SECTION 2.01. Merger Consideration; Conversion and Cancellation of Securities..........................iv
SECTION 2.02. Exchange and Surrender of Certificates..................................................vii
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HOLDINGS...........................................................ix
SECTION 3.01. Organization and Qualification; Subsidiaries.............................................ix
SECTION 3.02. Charter and Bylaws.......................................................................ix
SECTION 3.03. Capitalization............................................................................x
SECTION 3.04. Authority................................................................................xi
SECTION 3.05. No Conflict; Required Filings and Consents..............................................xii
SECTION 3.06. Compliance With Laws...................................................................xiii
SECTION 3.07. Financial Statements....................................................................xiv
SECTION 3.08. Absence of Certain Changes or Events.....................................................xv
SECTION 3.09. No Undisclosed Liabilities..............................................................xvi
SECTION 3.10. Absence of Litigation...................................................................xvi
SECTION 3.11. Employee Benefit Plans; Labor Matters..................................................xvii
SECTION 3.12. Taxes....................................................................................xx
SECTION 3.13. Stockholders and Affiliates............................................................xxii
SECTION 3.14. Material Contracts.....................................................................xxii
SECTION 3.15. Insurance.............................................................................xxiii
SECTION 3.16. Properties............................................................................xxiii
SECTION 3.17. Year 2000 Compliance...................................................................xxiv
SECTION 3.18. Intellectual Property Rights...........................................................xxiv
SECTION 3.19. Customers and Suppliers.................................................................xxv
SECTION 3.20. Vote Required...........................................................................xxv
SECTION 3.21. Brokers.................................................................................xxv
SECTION 3.22. Information Supplied....................................................................xxv
SECTION 3.23. Transactions with Affiliates...........................................................xxvi
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY...........................................................xxvi
SECTION 4.01. Organization and Qualification; Subsidiaries...........................................xxvi
SECTION 4.02. Charter and Bylaws.....................................................................xxvi
SECTION 4.03. Capitalization........................................................................xxvii
SECTION 4.04. Authority............................................................................xxviii
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SECTION 4.05. No Conflict; Required Filings and Consent..............................................xxix
SECTION 4.06. Compliance With Laws....................................................................xxx
SECTION 4.07. SEC Reports; Financial Statements......................................................xxxi
SECTION 4.08. Absence of Certain Changes or Events..................................................xxxii
SECTION 4.09. No Undisclosed Liabilities...........................................................xxxiii
SECTION 4.10. Absence of Litigation................................................................xxxiii
SECTION 4.11. Employee Benefit Plans; Labor Matters.................................................xxxiv
SECTION 4.12. Tax Matters..........................................................................xxxvii
SECTION 4.13. Material Contracts....................................................................xxxix
SECTION 4.14. Insurance................................................................................xl
SECTION 4.15. Properties...............................................................................xl
SECTION 4.16. Year 2000 Compliance....................................................................xli
SECTION 4.17. Intellectual Property Rights............................................................xli
SECTION 4.18. Customers and Suppliers.................................................................xli
SECTION 4.19. Vote Required..........................................................................xlii
SECTION 4.20. Brokers................................................................................xlii
SECTION 4.21. Opinion of Financial Advisor...........................................................xlii
SECTION 4.22. Transactions with Affiliates...........................................................xlii
SECTION 4.23. Certain Statutes.......................................................................xlii
SECTION 4.24. Information Supplied..................................................................xliii
ARTICLE V COVENANTS...........................................................................................xliii
SECTION 5.01. Affirmative Covenants of Holdings.....................................................xliii
SECTION 5.02. Negative Covenants of Holdings.........................................................xliv
SECTION 5.03. Affirmative Covenants of Company......................................................xlvii
SECTION 5.04. Negative Covenants of Company........................................................xlviii
SECTION 5.05. Financing Arrangement...................................................................lii
SECTION 5.06. No Solicitation by Company..............................................................lii
SECTION 5.07. Access and Information..................................................................liv
SECTION 5.08. Appropriate Action; Consents; Filings...................................................lvi
SECTION 5.09. Tax Treatment.........................................................................lviii
SECTION 5.10. Public Announcements..................................................................lviii
SECTION 5.11. NASDAQ Listing........................................................................lviii
SECTION 5.12. Meeting of Shareholders...............................................................lviii
SECTION 5.13. Registration Statement; Proxy Statement.................................................lix
SECTION 5.14. Insurance and Indemnification...........................................................lxi
SECTION 5.15. Employee Loans.........................................................................lxii
SECTION 5.16. Takeover Statutes......................................................................lxii
ARTICLE VI CLOSING CONDITIONS..................................................................................lxii
SECTION 6.01. Conditions to Obligations of Each Party Under This Agreement...........................lxii
SECTION 6.02. Additional Conditions to Obligations of Company........................................lxiv
SECTION 6.03. Additional Conditions to Obligations of Holdings.......................................lxvi
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................................................lxviii
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SECTION 7.01. Termination..........................................................................lxviii
SECTION 7.02. Effect of Termination...................................................................lxx
SECTION 7.03. Amendment...............................................................................lxx
SECTION 7.04. Waiver..................................................................................lxx
SECTION 7.05. Expenses and Other Payments............................................................lxxi
ARTICLE VIII GENERAL PROVISIONS...............................................................................lxxii
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements...........................lxxii
SECTION 8.02. Notices..............................................................................lxxiii
SECTION 8.03. Certain Definitions...................................................................lxxiv
SECTION 8.04. Headings..............................................................................lxxvi
SECTION 8.05. Severability..........................................................................lxxvi
SECTION 8.06. Entire Agreement.....................................................................lxxvii
SECTION 8.07. Assignment...........................................................................lxxvii
SECTION 8.08. Parties in Interest..................................................................lxxvii
SECTION 8.09. Failure or Indulgence Not Waiver; Remedies Cumulative................................lxxvii
SECTION 8.10. Governing Law.......................................................................lxxviii
SECTION 8.11. Counterparts........................................................................lxxviii
EXHIBITS
Exhibit A Form of Articles of Incorporation
Exhibit B Form of Bylaws
Exhibit C Directors and Executive Officers
Exhibit D Form of Employment Agreement
Exhibit E Legal Opinions of Holdings Counsel
Exhibit F Form of Shareholders' Agreement
Exhibit G Form of Affiliate Letters
Exhibit H Xxxxxx Consent
Exhibit I Legal Opinions of Company Counsel
Exhibit J Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May
3, 1999, is by and between Fresh America Corp., a Texas corporation
("Company"), and FreshPoint Holdings, Inc., a Delaware corporation
("Holdings").
RECITALS
WHEREAS, Holdings, upon the terms and subject to the conditions of
this Agreement, will merge with and into Company (the "Merger"), and pursuant
thereto, the issued and outstanding shares of common stock, $.01 par value, of
Holdings (the "Holdings Common Stock") and Holdings Preferred Stock (as defined
in Section 3.03(a)) will be converted into the right to receive shares of
common stock, $0.01 par value, of Company (the "Company Common Stock");
WHEREAS, the Board of Directors of Company has determined that the
Merger is fair to, and in the best interests of, Company and its shareholders,
and has approved and adopted this Agreement and the transactions contemplated
hereby;
WHEREAS, the Board of Directors of Holdings has determined that the
Merger is fair to, and in the best interests of, Holdings and its stockholders,
and has approved and adopted this Agreement and the transactions contemplated
hereby;
WHEREAS, as a condition and an inducement to Company's willingness to
enter into this Agreement, Xxxxxx Xxxxxx Holdings, Inc. ("Xxxxxx") has executed
and delivered to Holdings a consent letter (the "Xxxxxx Consent"), which is
attached hereto as Exhibit H;
WHEREAS, as a condition and an inducement to Company's willingness to
enter into this Agreement, this Agreement and the transactions contemplated
hereby have been approved by
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any required vote of Holdings Common Stock and Holdings Preferred Stock,
subject to the terms of the Xxxxxx Consent;
WHEREAS, as a condition and an inducement to Holdings' willingness to
enter into this Agreement, certain shareholders of Company (the "Company
Principal Shareholders") have granted irrevocable proxies to Holdings (the
"Company Proxies") to vote all Company Common Stock beneficially owned by such
Company Principal Shareholders in favor of approval and adoption of this
Agreement and the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
AGREEMENT
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Texas Business
Corporation Act (the "Texas Act") and the Delaware General Corporation Law (the
"DGCL"), at the Effective Time (as defined in Section 1.02), Holdings shall be
merged with and into Company. As a result of the Merger, the separate corporate
existence of Holdings shall cease and Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). Certain terms used in
this Agreement are defined in Section 8.03.
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SECTION 1.02. Closing; Closing Date; Effective Time. Unless this
Agreement shall have been terminated pursuant to Section 7.01, and subject to
the satisfaction or waiver of the conditions set forth in Article VI, the
consummation of the Merger and the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Xxxxxx &
Xxxx, L.L.P., 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx as soon as practicable (but in
any event within two business days) after the satisfaction or waiver of the
conditions set forth in Article VI (other than those conditions which by their
nature are to be satisfied at the Closing), or at such other date, time and
place as Company and Holdings may agree. The date on which the Closing takes
place is referred to herein as the "Closing Date." As promptly as practicable
on the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger with the Texas Secretary of State
and a certificate of merger with the Delaware Secretary of the State, in such
form as required by, and executed in accordance with the relevant provisions
of, the Texas Act and the DGCL (the date and time of such filing, or such later
date or time agreed upon by Company and Holdings and set forth therein, being
the "Effective Time").
SECTION 1.03. Effect of the Merger.
(a) The effect of the Merger shall be as provided in the
applicable provisions of the Texas Act and the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges and powers of Holdings will vest in the
Surviving Corporation, and all debts, liabilities and duties of Holdings shall
become the debts, liabilities and duties of the Surviving Corporation.
(b) The name of the Surviving Corporation shall be
"FreshPoint America, Inc."
(c) The articles of incorporation of Company, as in effect
immediately prior to the execution of this Agreement, shall be amended and
restated as of the Effective Time as set forth in Exhibit A and, as so amended
and restated, such articles of incorporation shall be the
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articles of incorporation of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
(d) The bylaws of Company, as in effect immediately prior to
the execution of this Agreement, shall be as set forth in Exhibit B and, as so
amended and restated, such bylaws shall be the bylaws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
SECTION 1.04. Directors and Executive Officers. The Board of
Directors (including classes thereof) and executive officers of the Surviving
Corporation shall be as set forth in Exhibit C, each to hold office in
accordance with the articles of incorporation and bylaws of the Surviving
Corporation until their respective successors are duly elected or appointed, as
the case may be. If any director set forth on Exhibit C shall be unable to
serve as a director at the Effective Time, the party which designated such
individual as indicated in Exhibit C shall designate another individual to
serve in such individual's place. The committees of the Board of Directors of
the Surviving Corporation will include an audit committee, compensation
committee, finance committee and stock option plan administration committee,
the members of which shall be duly elected by the Board of Directors of the
Surviving Corporation in accordance with the bylaws of the Surviving
Corporation, as amended and restated.
SECTION 1.05. Headquarters. The Surviving Corporation's headquarters
will be in Dallas, Texas.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Merger Consideration; Conversion and Cancellation of
Securities. At the Effective Time, by virtue of the Merger and without any
action on the part of Company, Holdings or their respective shareholders:
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(a) Subject to the other provisions of this Article II, the
aggregate shares of Holdings Common Stock and Holdings Preferred Stock issued
and outstanding immediately prior to the Effective Time (excluding any Holdings
Common Stock described in Section 2.01(d) and any Holdings Preferred Stock
described in Section 2.01(d)) shall be converted into the Merger Consideration.
The term "Merger Consideration" shall mean 5,685,826 shares of Company Common
Stock.
(b) Subject to the other provisions of this Article II, each
share of Holdings Common Stock issued and outstanding immediately prior to the
Effective Time (excluding any Holdings Common Stock described in Section
2.01(d)) shall be converted into the Merger Consideration Per Common Share. The
term "Merger Consideration Per Common Share" shall mean the Common Stock Merger
Consideration divided by the number of issued and outstanding shares of
Holdings Common Stock at the Effective Time. The term "Common Stock Merger
Consideration" shall mean the Merger Consideration minus the Preferred Stock
Merger Consideration (as defined below).
(c) Subject to the other provisions of this Article II, each
share of Holdings Preferred Stock issued and outstanding immediately prior to
the Effective Time (excluding any Holdings Preferred Stock described in Section
2.01(d)) shall be converted into the Merger Consideration Per Preferred Share.
The term "Merger Consideration Per Preferred Share" shall mean the Preferred
Stock Merger Consideration divided by the number of issued and outstanding
shares of Holdings Preferred Stock at the Effective Time. The term "Preferred
Stock Merger Consideration" shall mean the number of shares of Company Common
Stock determined by dividing the aggregate of the Deemed Value of all of the
shares of Holdings Preferred Stock issued and outstanding five business days
prior to the Effective Time by the Company Common Stock Market Value. "Deemed
Value" for each share shall mean $1,000 per share plus any accrued and unpaid
dividends. The "Company Common Stock Market Value" shall mean the average of
the closing price per share (as published in the Wall Street Journal) of the
Company Common Stock during the period which is the lesser of (i) ninety
trading days ending five trading days prior to the Closing Date or (ii) the
number of trading days commencing on the day
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of public announcement of the Merger (no later than one day after this
Agreement is executed and delivered) and ending five trading days prior to the
Closing Date.
(d) Each share, if any, of Holdings Common Stock or Holdings
Preferred Stock owned by Holdings or by any subsidiary of Holdings immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof and no consideration shall be made with respect thereto.
(e) Each certificate previously evidencing Holdings Common
Stock or Holdings Preferred Stock outstanding immediately prior to the
Effective Time (other than Holdings Common Stock or Holdings Preferred Stock
described in Section 2.01(d)) (the "Converted Shares") shall thereafter
represent the right to receive, subject to Section 2.02(d), that number of
shares of Company Common Stock determined pursuant to the Merger Consideration
Per Common Share or Merger Consideration Per Preferred Share, as applicable,
and, if applicable, cash in lieu of fractional shares pursuant to Section
2.02(d). The holders of certificates previously evidencing Converted Shares
shall cease to have any rights with respect to such Converted Shares except as
otherwise provided herein or by law. Such certificates previously evidencing
Converted Shares shall be exchanged for certificates evidencing whole shares of
Company Common Stock upon the surrender of such certificates evidencing
Converted Shares in accordance with the provisions of Section 2.02, without
interest.
(f) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
after the Effective Time.
(g) In the event that prior to the Effective Time there shall
be a change in the number of shares of Company Common Stock, Holdings Common
Stock or Holdings Preferred Stock issued and outstanding by reason of any
issuance (except for issuances contemplated in Section 5.04), distribution,
stock dividend, subdivision, reclassification, recapitalization, split, reverse
split, combination or plan of exchange or similar transaction, the Common Stock
Merger
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Consideration and the Preferred Stock Merger Consideration shall be
correspondingly adjusted to eliminate the effects of such event.
SECTION 2.02. Exchange and Surrender of Certificates.
(a) At or as soon as practicable after the Effective Time,
the holders of certificates previously evidencing Converted Shares shall be
entitled to receive, upon surrender of such certificates to Company, a
certificate or certificates representing the number of shares of Company Common
Stock into which the Converted Shares so surrendered shall have been converted
as aforesaid, in such denominations and registered in such names as the
applicable holder may request. Until so surrendered and exchanged, each
certificate previously evidencing Converted Shares shall represent solely the
right to receive Company Common Stock and cash in lieu of fractional shares in
accordance with the provisions of Section 2.02(d). Unless and until any such
certificates representing Converted Shares shall be so surrendered and
exchanged, no dividends or other distributions payable to the holders of record
of Company Common Stock as of any time on or after the Effective Time shall be
paid to the holders of record of Converted Shares; provided, however, that,
upon any such surrender and exchange of such certificates, there shall be paid
to the holders of record of Converted Shares (i) the amount, without interest
thereon, of dividends and other distributions, if any, with a record date on or
after the Effective Time paid with respect to such whole shares of Company
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions, if any, with a record date on or after the Effective
Time but prior to surrender and a payment date occurring after surrender,
payable with respect to such shares of Company Common Stock. Notwithstanding
the foregoing, no party hereto shall be liable to any former holder of
Converted Shares for any cash, Company Common Stock or dividends or
distributions thereon delivered to a public official pursuant to applicable
abandoned property, escheat or similar law.
(b) All shares of Company Common Stock issued upon the
surrender for exchange of certificates previously representing Converted Shares
in accordance with the terms hereof (including any cash paid in lieu of
fractional shares pursuant to Section 2.02(d)) shall be
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deemed to have been issued in full satisfaction of all rights pertaining to
such Converted Shares. At and after the Effective Time, there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of Holdings Common Stock or Holdings Preferred Stock that was
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates which previously evidenced Converted Shares are presented to
the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article II.
(c) If certificates for shares of Company Common Stock are to
be issued in a name other than the holder of Converted Shares, it shall be a
condition of the issuance thereof that the certificates so surrendered shall be
properly endorsed, with signatures guaranteed, and otherwise in proper form for
transfer and that such holder shall have paid to Company or its transfer agent
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Company Common Stock in any name other than that of such holder,
or established to the satisfaction of Company or its transfer agent that such
tax has been paid or is not payable.
(d) No certificates or scrip evidencing fractional shares of
Company Common Stock shall be issued upon the surrender for exchange of
certificates representing Holdings Common Stock or Holdings Preferred Stock,
and such fractional share interests will not entitle the holder thereof to any
rights of a shareholder of Company. In lieu of any such fractional shares, the
holder thereof, upon surrender of such certificate for exchange pursuant to
this Article II, shall be paid an amount in cash (without interest), rounded to
the nearest cent, determined by multiplying (i) the closing price for a share
of Company Common Stock on the NASDAQ Stock Market ("NASDAQ") as reported in
the Wall Street Journal (Southwestern Edition) on the Closing Date, by (ii) the
fractional interest to which the holder thereof would otherwise be entitled
(after taking into account all Converted Shares held of record by such holder).
(e) Company shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any former holder
of Converted Shares such amounts as Company (or any affiliate thereof) is
required to deduct and withhold with respect to
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the making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Company, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the former holder of the Converted Shares in respect of which such
deduction and withholding was made by Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings hereby represents and warrants to Company that:
SECTION 3.01. Organization and Qualification; Subsidiaries. Each of
Holdings and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by it or the ownership or leasing of
its properties makes such qualification necessary, other than where the failure
to be so duly qualified and in good standing would not have a Material Adverse
Effect. Schedule 3.01 sets forth a true and complete list of all of Holdings'
directly or indirectly owned subsidiaries, together with the jurisdiction of
incorporation of each such subsidiary and the percentage of each subsidiary's
outstanding capital stock owned by Holdings or another subsidiary of Holdings.
SECTION 3.02. Charter and Bylaws. Holdings has made available to
Company complete and correct copies of the charter and the bylaws, in each case
as amended or restated, of Holdings and each of its subsidiaries. Holdings is
not in violation of any of the provisions of its charter or bylaws.
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SECTION 3.03. Capitalization.
(a) The authorized capital stock of Holdings consists of (i)
20,000 shares of Holdings Common Stock, of which on the date hereof (A) 8,800
shares are issued and outstanding, (B) no shares were held in treasury, and (C)
1,344 shares were reserved for future issuance pursuant to warrants, and (ii)
45,000 shares of preferred stock, $.01 par value, of which the following are
issued and outstanding on the date hereof: (A) 3,796.7 shares of Series A
Exchangeable Preferred Stock, (B) 8,467.2 shares of Series A-1 Exchangeable
Preferred Stock and (C) 3,328.3 shares of Series A-2 Exchangeable Preferred
Stock (collectively, the "Holdings Preferred Stock"). All of the issued and
outstanding shares of Holdings' capital stock are owned as set forth in the
shareholder summary in Schedule 3.03(a). Except as described in this Section
3.03, no shares of capital stock of Holdings are reserved for any purpose. The
outstanding shares of capital stock of Holdings and its subsidiaries are duly
authorized, validly issued, fully paid and nonassessable, and have not been
issued in violation of any securities laws, preemptive or similar rights
created by statute, the charter or bylaws of Holdings or any of its
subsidiaries, or any agreement to which Holdings or any of its subsidiaries is
a party or bound.
(b) Holdings and the holders of all of the warrants to
purchase shares of Holdings' capital stock (the "Holdings Warrants") have
agreed that prior to the Effective Time, all Holdings Warrants will be
converted, by cashless exercise in accordance with their terms, into shares of
Holdings Common Stock. At the Effective Time, (i) no other class of Holdings'
capital stock will be issued and outstanding other than Holdings Common Stock
or Holdings Preferred Stock, and (ii) no options, warrants or other rights,
agreements, arrangements or commitments of any character obligating Holdings or
any of its subsidiaries to grant, issue or sell any shares of its capital stock
will be in effect.
(c) Except for the exercise or exchange of the Holdings
Warrants for shares of Holdings Common Stock and as set forth in Section
3.03(a) or in Schedule 3.03(c), there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which Holdings or
any of its subsidiaries is a party relating to the issued or unissued capital
stock
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of Holdings or any of its subsidiaries or obligating Holdings or any of its
subsidiaries to grant, issue or sell any shares of its capital stock. Except as
set forth in Schedule 3.03(c), there are no obligations, contingent or
otherwise, of Holdings or any of its subsidiaries to (i) repurchase, redeem or
otherwise acquire any shares of the capital stock of Holdings or any of its
subsidiaries or (ii) provide material funds to, or make any material investment
in (in the form of a loan, capital contribution or otherwise), or provide any
guarantee with respect to the obligations of, any other person, other than
advances to subsidiaries in the normal course of business. Except as described
in Schedule 3.03(c), neither Holdings nor any of its subsidiaries (x) directly
or indirectly owns, (y) has agreed to purchase or otherwise acquire or (z)
holds any interest convertible into or exchangeable or exercisable for, any
capital stock (or equivalent equity interest) of any corporation, partnership,
joint venture or other business association or entity. Except as set forth in
Schedule 3.03(c), there are no agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any person is or may be
entitled to receive any payment based on the revenues or earnings, or
calculated in accordance therewith, of Holdings or any of its subsidiaries.
Except for the Holdings Proxies and as set forth in Schedule 3.03(c), there are
no voting trusts, proxies or other agreements or understandings to which
Holdings or any of its subsidiaries is a party or by which Holdings or any of
its subsidiaries is bound with respect to the voting of any shares of capital
stock of Holdings or any of its subsidiaries.
SECTION 3.04. Authority. Holdings has all requisite corporate power and
authority to execute and deliver this Agreement and the other agreements,
documents, instruments and certificates contemplated by this Agreement to which
it is a party (collectively with this Agreement, the "Holdings Documents"), to
perform its obligations hereunder and under the other Holdings Documents and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the other Holdings Documents by Holdings and the
consummation by Holdings of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of Holdings are necessary to authorize this
Agreement or the other Holdings Documents or to consummate the transactions
contemplated hereby or thereby. This
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Agreement has been duly executed and delivered by Holdings and constitutes the
legal, valid and binding obligation of Holdings enforceable against Holdings in
accordance with its terms, and upon execution and delivery, the other Holdings
Documents will constitute legal, valid and binding obligations of Holdings
enforceable against Holdings in accordance with their terms.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) Except as set forth on Schedule 3.05(a), the execution
and delivery of this Agreement and the other Holdings Documents by Holdings
does not, and the consummation of the transactions contemplated hereby and
thereby will not (i) conflict with or violate the charter or bylaws, in each
case as amended or restated, of Holdings or any of its subsidiaries, (ii)
conflict with or violate in any material respect any federal, state, foreign or
local law, statute, ordinance, rule, regulation, order, judgment or decree
(collectively, "Laws") applicable to Holdings or any of its subsidiaries or by
which any of their properties is bound or subject or (iii) result in any
material breach of or constitute a material default (or an event that with
notice or lapse of time or both would become a material default) under, or give
to others any rights of termination, amendment, acceleration or cancellation
of, or require payment under, or result in the creation of a security interest,
lien, claim, pledge, charge or encumbrance (a "Lien") on any of the properties
or assets of Holdings or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Holdings or any of its subsidiaries is
a party or by or to which Holdings or any of its subsidiaries or any of their
properties is bound or subject.
(b) The execution and delivery of this Agreement and the
other Holdings Documents by Holdings does not, and consummation of the
transactions contemplated hereby and thereby will not, require Holdings to
obtain any consent, license, permit, approval, waiver, authorization or order
of, or to make any filing with or notification to, any governmental or
regulatory authority, domestic or foreign (collectively, "Governmental
Entities"), except for (i) the filing of a premerger notification and report
form by Holdings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"); (ii) the filing of a
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certificate of merger with the Delaware Secretary of State, a certificate of
merger with the Texas Secretary of State and appropriate documents with the
relevant authorities of other states in which Holdings is qualified to do
business; (iii) the filing of notifications as may be required by the
Perishable Agricultural Commodities Act ("PACA"); (iv) such other filings and
consents set forth on Schedule 3.05(b) that may be required under any
environmental, health or safety Laws ("Environmental Laws") pertaining to any
notification, disclosure or required approval necessitated by the Merger or the
transactions contemplated by this Agreement or the other Holdings Documents;
and (v) such consents, approvals, orders or authorizations the failure of which
to be made or obtained could not reasonably be expected to have a Material
Adverse Effect on Holdings or prevent or materially delay the consummation of
the Merger.
SECTION 3.06. Compliance With Laws. (a) Each of Holdings and its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses (including licenses under PACA), permits, easements, variances,
exemptions, consents, certificates, approvals and orders which are material to
the operation of the business of Holdings and its subsidiaries taken as a whole
(collectively, the "Holdings Permits"), and there is no action, proceeding or
investigation pending or, to Holdings' knowledge, threatened regarding
suspension or cancellation of any of Holdings Permits. Holdings and its
subsidiaries are in compliance in all material respects with the terms of the
Holdings Permits. The businesses of Holdings and its subsidiaries are being
conducted in compliance in all material respects with the Laws of Governmental
Entities, including under PACA and similar state Laws. Neither Holdings nor any
of its subsidiaries is in conflict with, or in default or violation of, any
order, judgment or decree applicable to Holdings or any of its subsidiaries or
by which any property or asset of Holdings or any of its subsidiaries is bound
or affected. No action, demand, requirement or investigation by any
Governmental Entity with respect to Holdings or any of its subsidiaries is
pending or, to the knowledge of Holdings, threatened, other than, in each case,
those the outcome of which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Holdings.
18
(b) Except as disclosed on Schedule 3.06(b):
(i) Holdings and its subsidiaries are in material
compliance with all Environmental Laws that are applicable to
Holdings or its subsidiaries or their respective properties
or assets;
(ii) Holdings and its subsidiaries have all permits
and authorizations required pursuant to Environmental Laws;
all such permits and authorizations are in full force and
effect; and no actions are pending or threatened to revoke,
limit or modify any of such permits or authorizations; and
(iii) no material Environmental Claims are pending
or threatened against Holdings or its subsidiaries and there
are no civil, criminal or administrative judgments or notices
of violation against Holdings or its subsidiaries pursuant to
Environmental Laws.
For purposes of this Section 3.06(b), "Environmental Claims" shall mean any
written notification pursuant to Environmental Laws that any of the current or
past operations of Holdings or its subsidiaries, or any of the property owned,
leased or operated by Holdings or its subsidiaries in connection with their
respective businesses, is or may be implicated in or subject to any proceeding,
action, complaint, suit, demand, litigation, investigation, claim, order,
hearing, notice or agreement by any governmental authority or any other person.
SECTION 3.07. Financial Statements. The consolidated balance sheets of
Holdings and its subsidiaries as of June 28, 1997 and June 27, 1998 and the
consolidated statements of operations, shareholders' equity and cash flows of
Holdings and its subsidiaries for the year ended June 27, 1998 and the 219 day
period ended June 28, 1997, and all related schedules and notes to the
foregoing have been audited by Ernst & Young LLP, independent auditors. Each of
the foregoing consolidated financial statements (including, in each case, any
related schedules and notes thereto) as well as the unaudited consolidated
balance sheets of
19
Holdings and its subsidiaries as of December 27, 1997 and December 26, 1998 and
the unaudited consolidated statements of operations, stockholders' equity and
cash flows of Holdings and its subsidiaries for the six months ended December
27, 1997 and December 26, 1998 (including, in each case, any related schedules
and notes thereto) and any financial statements of Holdings and/or its
subsidiaries hereafter delivered to Company (a) have been, or will be, prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except to the extent required
by changes in generally accepted accounting principles and as may be indicated
in the notes of the financial statements previously delivered to Company), and
(b) are, or will be, correct and complete and fairly present, or will fairly
present, in all material respects the financial position of Holdings and its
subsidiaries as of the respective dates thereof and the results of operations
and cash flows for the periods indicated, except that any unaudited interim
financial statements were, or will be, subject to normal and recurring year-end
adjustments that individually or in the aggregate will not be material.
SECTION 3.08. Absence of Certain Changes or Events. Except as set forth
in Schedule 3.08 or as contemplated by this Agreement, since December 26, 1998
each of Holdings and its subsidiaries has conducted its businesses only in the
ordinary course and in a manner consistent with past practice and since such
date there has not been: (a) any material damage, destruction or loss (whether
or not covered by insurance) with respect to any assets of Holdings or any of
its subsidiaries; (b) any material change by Holdings or any of its
subsidiaries in their accounting methods, principles or practices; (c) any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of the capital stock of Holdings or any of its subsidiaries,
or any redemption, purchase or other acquisition by Holdings or any of its
subsidiaries of any of their securities; (d) any increase in the benefits
under, or the establishment or amendment of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option, stock
purchase or other employee benefit plan, or any increase in the compensation
payable or to become payable to directors, officers or key employees of
Holdings or any of its subsidiaries, except for annual increases in salaries or
wages in the ordinary course of business and consistent with past practice; (e)
any revaluation by Holdings or any of its subsidiaries of any of their assets,
including the writing down or off of assets, other than in the
20
ordinary course of business and consistent with past practices; (f) any entry
by Holdings or any of its subsidiaries into any commitment or transaction
material to Holdings and its subsidiaries, taken as a whole; (g) any increase
in indebtedness for borrowed money; or (h) any event or circumstance that has
had or could have a Material Adverse Effect on Holdings.
SECTION 3.09. No Undisclosed Liabilities. Except (a) as reflected in
Holdings' consolidated balance sheet as of December 26, 1998, (b) as
contemplated by this Agreement, (c) for current liabilities and obligations
incurred since December 26, 1998 in the ordinary course of business consistent
with past practice, and (d) as set forth on Schedule 3.09, neither Holdings nor
any of its subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect
on Holdings.
SECTION 3.10. Absence of Litigation. Except as set forth in Schedule
3.10, there is no claim, action, suit, litigation, proceeding, arbitration or,
to Holdings' knowledge, investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or, to
Holdings' knowledge, threatened against Holdings or any of its subsidiaries or
any properties or rights of Holdings or any of its subsidiaries, except for
claims, actions, suits, litigation, proceedings, arbitrations or investigations
which individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect on Holdings or could not prevent or materially delay
consummation of the Merger. Except as set forth on Schedule 3.10, neither
Holdings nor any of its subsidiaries is subject to any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, to the knowledge of Holdings continuing investigation by, any Governmental
Entity, or any judgment, order, writ, injunction, decree or award of any
Government Entity or arbitrator, including, without limitation,
cease-and-desist or other orders.
21
SECTION 3.11. Employee Benefit Plans; Labor Matters.
(a) Set forth in Schedule 3.11(a) is a list of all "employee
benefit plans" (as defined in the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), all material plans or policies providing for
"fringe benefits" (including but not limited to vacation, paid holidays,
personal leave, employee discount, educational benefit or similar programs),
and each other material bonus, incentive compensation, deferred compensation,
profit sharing, stock, severance, retirement, health, life, disability, group
insurance, stock option, stock purchase, stock appreciation right, supplemental
unemployment, layoff, or any other similar plan, agreement, policy or
understanding, and any trust, escrow or other agreement related thereto, which
(i) is established, maintained or contributed to by Holdings or any of its
subsidiaries or with respect to which Holdings or any of its subsidiaries has
any liability, including liability as a result of being a Holdings ERISA
Affiliate (as defined below), or (ii) provides benefits, or describes policies
or procedures applicable, to any current or former officer, employee or
director of Holdings or any of its subsidiaries, or any dependent thereof,
regardless of whether funded (collectively, the "Holdings Employee Plans"). The
term "Holdings ERISA Affiliate" shall mean any corporation, trade or business
the employees of which, together with the employees of Holdings, are required
to be treated as employed by a single employer under the provisions of ERISA or
Code Section 414.
(b) Except as set forth on Schedule 3.11(b) and to the extent
of coverage required under Code Section 4980B or other applicable continuation
of coverage laws, no representations have been made to any current or former
employee or officer of Holdings or any of its subsidiaries promising or
guaranteeing any coverage under any employee welfare plan for any period of
time beyond the end of the current plan year. Neither the Merger nor the
consummation of any other transaction contemplated by this Agreement will
accelerate the time of payment or vesting, or increase the amount of
compensation (including amounts due under any Holdings Employee Plans) due to
any current or former employee or officer of Holdings or any of its
subsidiaries.
22
(c) There are no agreements which will or may provide
payments as a result of the transactions contemplated hereby to any officer,
employee, stockholder or highly compensated individual which will be "excess
parachute payments" under Code Section 280G that are nondeductible to Holdings
or subject to tax under Code Section 4999 for which Holdings or any of its
subsidiaries would have withholding liability.
(d) With respect to each Holdings Employee Plan (other than
any Holdings Multi-Employer Plans (as defined below)), Holdings has made
available to Company true, correct and complete copies of (i) the plan
documents and summary plan description; (ii) the most recent determination
letter received from the Internal Revenue Service; (iii) the annual reports
required to be filed for the two most recent plan years of each such Holdings
Employee Plan; (iv) all related trust agreements, insurance contracts or other
funding agreements which implement such Holdings Employee Plan; and (v) all
other material documents, records or other materials related thereto reasonably
requested by Company in writing.
(e) Each Holdings Employee Plan (other than any Holdings
Multi-Employer Plans) which purports to satisfy the requirements of Code
Section 401(a) ("Holdings Qualified Plan") is qualified in form and operation
under Code Section 401(a) and each trust for each Holdings Qualified Plan is
exempt from federal income tax under Code Section 501(a). No event has occurred
or circumstances exist that will or could reasonably be expected to give rise
to disqualification or loss of tax-exempt status of any Holdings Qualified Plan
or related trust. Each Holdings Qualified Plan has received a favorable
determination letter from the Internal Revenue Service, and all such
determination letters remain in effect and have not been revoked.
(f) (i) No Holdings Employee Plan is a single employer plan
that is subject to Part 3 of Title I of ERISA or Title IV of ERISA; (ii) each
Holdings Employee Plan has been operated in all material respects in compliance
with its terms, ERISA, the Code and all other applicable Laws; (iii) none of
the Holdings Employee Plans is a "multiple employer plan" or "multi-employer
plan" (as described or defined in ERISA or the Code), and neither Holdings nor
any of its subsidiaries has within the past six years contributed or been
required to contribute to
23
any such plan, except for the multi-employer plans set forth on Schedule
3.11(f) (the "Holdings Multi-Employer Plans"); and (iv) except as otherwise set
forth on Schedule 3.11(f), there are no material unfunded liabilities existing
under any Holdings Employee Plans (other than any Holdings Multi-Employer
Plan), and each such Holdings Employee Plan could be terminated as of the
Closing Date without any liability to Company, Holdings or any Holdings ERISA
Affiliate.
(g) Other than routine claims for benefits, there are no
actions, suits, claims, audits, or investigations pending or, to Holdings'
knowledge, threatened against, or with respect to, any of the Holdings Employee
Plans (other than any Holdings Multi-Employer Plan) or their assets; and all
contributions required to be made to the Holdings Employee Plans have been made
timely.
(h) Except as described on Schedule 3.11(h), neither Holdings
nor any of its subsidiaries is a party to any collective bargaining or other
labor union contract. No collective bargaining agreement is being negotiated by
Holdings or any of its subsidiaries, and to Holdings' knowledge there is no
organizing effort or representation question pending. Holdings and its
subsidiaries are in compliance in all material respects with all applicable
collective bargaining agreements and Laws respecting employment, employment
practices and wages and hours.
(i) With respect to each Holdings Multi-Employer Plan, (i)
Holdings and each Holdings ERISA Affiliate has or will have, as of the
Effective Time, made all contributions to each Holdings Multi-Employer Plan
required by the terms of such Holdings Multi-Employer Plan or any collective
bargaining agreement; and (ii) except as set forth on Schedule 3.11(i),
Holdings would not be subject to any withdrawal liability under Part 1 of
Subtitle E of Title IV of ERISA if, as of the Effective Time, Holdings or any
Holdings ERISA Affiliate were to engage in a complete withdrawal (as defined in
ERISA Section 4203) or a partial withdrawal (as defined in ERISA Section 4205)
from any Holdings Multi-Employer Plan. Neither Holdings nor any Holdings ERISA
Affiliate has within the past six years (w) incurred any liabilities under the
provisions of Section 4062 of ERISA; (x) withdrawn as a substantial employer so
as to become
24
subject to the provisions of Section 4063 of ERISA; (y) ceased making
contributions to any Holdings Multi-Employer Plan; or (z) made a complete or
partial withdrawal from a Holdings Multi-Employer Plan so as to incur
withdrawal liability as defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under Section 4207 or 4208 of
ERISA).
SECTION 3.12. Taxes.
(a) Except as set forth on Schedule 3.12(a), (i) all material
returns and reports ("Tax Returns") of or with respect to any Tax which is
required to be filed on or before the Closing Date by or with respect to
Holdings or any of its subsidiaries have been or will be duly and timely filed,
(ii) all material items of income, gain, loss, deduction and credit or other
items required to be included in each such Tax Return have been or will be so
included and all information provided in each such Tax Return is true, correct
and complete in all material respects, (iii) all material Taxes which have
become or will become due with respect to the period covered by each such Tax
Return have been or will be timely paid in full, and (iv) all withholding Tax
requirements imposed on or with respect to Holdings or any of its subsidiaries
have been or will be satisfied in all material respects.
(b) Except as set forth on Schedule 3.12(b), there is not in
force any extension of time with respect to the due date for the filing of any
Tax Return of or with respect to Holdings or any of its subsidiaries or any
waiver or agreement for any extension of time for the assessment, collection or
payment of any Tax of or with respect to Holdings or any of its subsidiaries.
(c) There are no material pending audits, actions,
proceedings, investigations, disputes or claims with respect to or against
Holdings or any of its subsidiaries for or with respect to any Taxes, and no
material assessment, deficiency or adjustment has been assessed or proposed
with respect to any Tax Return of or with respect to Holdings or any of its
subsidiaries, other than those set forth on Schedule 3.12(c).
25
(d) Holdings has previously delivered to Company true and
complete copies of each written Tax allocation or sharing agreement and a true
and complete description of each unwritten Tax allocation or sharing
arrangement affecting Holdings or any of its subsidiaries, if any.
(e) Except for statutory liens for current Taxes not yet due,
no liens for Taxes exist upon the assets of any of Holdings or its
subsidiaries.
(f) Except as set forth on Schedule 3.12(f), none of the
property of Holdings or any of its subsidiaries is held in an arrangement for
which partnership Tax Returns are being filed, and neither Holdings nor any of
its subsidiaries owns any interest in any controlled foreign corporation (as
defined in section 957 of the Code), passive foreign investment company (as
defined in section 1296 of the Code) or other entity the income of which is
required to be included in the income of Holdings or such subsidiary.
(g) Neither Holdings nor any of its subsidiaries has made an
election under section 341(f) of the Code.
(h) Neither Holdings nor any subsidiary has ever been a
member of an affiliated group of corporations (as defined in Section 1504(a) of
the Code), other than an affiliated group of which Holdings is the parent.
(i) Except for Canada, neither Holdings nor any subsidiary is
or has ever been subject to Taxes in any jurisdiction outside the United
States.
(j) Neither Holdings nor, to the knowledge of Holdings, any
of its affiliates has taken or agreed to take any action that would prevent the
Merger from constituting a reorganization qualifying under the provisions of
section 368(a) of the Code.
26
SECTION 3.13. Stockholders and Affiliates. Schedule 3.13 identifies all
persons who may, in the opinion of Holdings, be deemed to be "affiliates" of
Holdings for purposes of Rule 145 of the Securities Act of 1933, as amended
(the "Securities Act"), including, without limitation, all directors and
executive officers of Holdings (the "Affiliates").
SECTION 3.14. Material Contracts.
(a) Schedule 3.14(a) lists each agreement to which Holdings
or any of its subsidiaries is a party or by which Holdings or any of its
subsidiaries is bound that is material to the financial condition or results of
operations or current or future business or operations of Holdings or any of
its subsidiaries (collectively, the "Holdings Material Contracts"), including,
without limitation, (i) any contracts with directors, officers, stockholders,
employees, agents or representatives involving payments of at least $100,000
per year or $250,000 in the aggregate; (ii) any contract upon which Holdings'
or any of its subsidiary's business is substantially dependent, including
without limitation contracts to sell a major part of its products or services
or to purchase a major part of its requirements of products or services and
distributorship, marketing, agency, dealer or similar contracts; (iii) any
franchise or license or other agreement to use a trade secret, process or trade
name upon which Holdings' or any of its subsidiary's business depends to a
material extent; (iv) any executory contract for the acquisition or sale of any
property, plant or equipment for a consideration not included in Holdings' 1999
budget and exceeding $1,000,000; (v) any lease under which any material
property is leased by or to Holdings or any of its subsidiaries; (vi) any
agreement evidencing, securing or otherwise relating to indebtedness for
borrowed money; (vii) any management contract or any compensatory plan,
contract or arrangement with any director or any officer; (viii) partnership or
joint venture agreements; (ix) contracts containing covenants of Holdings or
any of its subsidiaries not to compete in any line of business or with any
person in any geographical area or covenants of any other person not to compete
with Holdings or any of its subsidiaries in any line of business or in any
geographical area; (x) contracts relating to the acquisition by Holdings or any
of its subsidiaries of any operating business or the capital stock of any other
person; or (xi) any other contracts pursuant to the terms of
27
which there is either a current or future obligation or right of Holdings or
any of its subsidiaries to make or receive payments in excess of $500,000 in
any year or $2,000,000 in the aggregate.
(b) There have been made available to the Company true and
complete copies of all the Holdings Material Contracts listed on Schedule
3.14(a) or any other Schedule. All of the Holdings Material Contracts referred
to in the preceding sentence are valid and binding upon Holdings or one of its
subsidiaries, as the case may be, in accordance with their respective terms.
Holdings and its subsidiaries have performed in all material respects all of
their obligations under each Holdings Material Contract and there exists no
material breach, violation or default (or event that with notice or lapse of
time would constitute a material breach, violation or default) under any
Holdings Material Contract.
(c) Except as set forth in Schedule 3.14(c), no consent of
any person is required in connection with the transactions contemplated by this
Agreement or any of the other Holdings Documents in order to preserve the
rights of Holdings or any of its subsidiaries under any Holdings Material
Contract after the Effective Time.
SECTION 3.15. Insurance. Holdings and each of its subsidiaries are
currently insured, and since December 1, 1996 have been insured, for reasonable
amounts against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. All of
Holdings' and its subsidiaries' policies of insurance are in full force and
effect, all premiums due with respect thereto have been paid, and no notice of
cancellation or termination has been received with respect to any such
policies. Schedule 3.15 sets forth the amount of each pending claim in an
amount exceeding $50,000 made by Holdings to the insurers under such policies
and each other claim in an amount exceeding $100,000 made by Holdings to the
insurers under such policies since December 31, 1997.
SECTION 3.16. Properties. Except as set forth on Schedule 3.16 and
properties and assets disposed of in the ordinary course of business after
December 26, 1998, Holdings and its subsidiaries have good and merchantable
title, free and clear of all Liens, to all their material
28
properties and assets, whether tangible or intangible, real, personal or mixed,
reflected in the December 26, 1998 consolidated balance sheet of Holdings as
being owned by Holdings and its subsidiaries as of the date thereof or
purported to be owned on the date hereof.
SECTION 3.17. Year 2000 Compliance. Except as set forth on Schedule
3.17, all hardware, firmware, software and computer systems of Holdings and its
subsidiaries and to Holdings' knowledge, of their respective material customers
and suppliers, are, or will be by the Effective Time, Year 2000 Compliant (as
hereinafter defined) and shall continue to function in accordance with their
intended purpose without material error or material interruption as a result of
the transition to the year 2000. Schedule 3.17 includes (a) a reasonable
estimate of the additional costs Holdings and its subsidiaries will incur to
become Year 2000 Compliant; (b) a reasonable estimate as to when such costs
will be incurred and (c) a summary of the implementation plan of Holdings and
its subsidiaries to become Year 2000 Compliant. As used herein, "Year 2000
Compliant" means, with respect to any person, that the hardware, firmware,
software and computer systems of such person (a) will completely and accurately
address, produce, store and calculate data involving dates before, on and after
January 1, 2000 and will not produce abnormally ending or incorrect results
involving such dates as used in any forward or regression dated based
functions; and (b) will provide that all "date"-related functionalities and
data fields include the indication of century and millennium, and will perform
calculations which involve a four-digit year.
SECTION 3.18. Intellectual Property Rights. There are no registered
patents, trademarks, service marks, trade names or copyrights, or applications
for or licenses (to or from Holdings or any of its subsidiaries) with respect
to any of the foregoing, that (a) is owned by Holdings or any of its
subsidiaries, or with respect to which Holdings or any of its subsidiaries has
any rights, or (b) is used, whether directly or indirectly, by Holdings or any
of its subsidiaries, other than the trade names and trademarks set forth on
Schedule 3.18. Except as set forth on Schedule 3.18, Holdings or its
subsidiaries owns or has the exclusive right to use, sell, license and dispose
of all of the trade names and trademarks listed on Schedule 3.18. Neither
Holdings nor any of its subsidiaries has to its knowledge infringed upon or
otherwise violated the
29
intellectual property rights of third parties or received any pending written
claim alleging any infringement or violation.
SECTION 3.19. Customers and Suppliers. Schedule 3.19 sets forth a list
of the ten largest customers and ten largest suppliers of Holdings and its
subsidiaries, taken as a whole, during the twelve months ended December 26,
1998. Since such date, except as set forth on Schedule 3.19, none of such
customers or suppliers has canceled or otherwise modified in any material
adverse respect its relationship with Holdings, and Holdings has not received
notice or is otherwise aware that any such customer or supplier intends to
cancel or otherwise modify in any material adverse respect its relationship
with Holdings.
SECTION 3.20. Vote Required. The Merger and this Agreement have been
approved by any required vote of Holdings Common Stock and Holdings Preferred
Stock, subject to the terms of the Xxxxxx Consent.
SECTION 3.21. Brokers. Except for Xxxxxxx Xxxxx Barney Inc. pursuant
to an engagement letter with Holdings (as amended), a true and complete copy of
which has been furnished to Company, and Rosecliff, Inc. ("Rosecliff") and
Buttonwood Capital ("Buttonwood") pursuant to their respective consulting
agreements with Holdings, true and complete copies of which have been furnished
to Company, and in the amounts disclosed in Schedule 5.02, no broker, finder,
investment banker or other person is entitled to any brokerage, finder's,
financial advisory or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Holdings.
SECTION 3.22. Information Supplied. Without limiting any of the
representations and warranties contained herein, no representation or warranty
of Holdings contained in this Agreement and no statement by Holdings or other
information contained in any schedule to this Agreement, as of the date of such
representation, warranty or statement, contains any untrue statement of
material fact, or omits to state a material fact necessary in order to make the
30
statements contained therein, in light of the circumstances under which such
statements were made, not misleading.
SECTION 3.23. Transactions with Affiliates Other than the transactions
contemplated by this Agreement and except to the extent disclosed in writing
prior to the execution and delivery of this Agreement, since January 1, 1998
there have been no transactions, agreements, arrangements or understandings
between Holdings or its subsidiaries, on the one hand, and Holdings' affiliates
(other than subsidiaries of Holdings) or any other person, on the other hand,
that would be required to be disclosed under Item 404 of Regulation S-K under
the Securities Act if Holdings were subject thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Holdings that:
SECTION 4.01. Organization and Qualification; Subsidiaries. Each of
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by it or the ownership or leasing of
its properties makes such qualification necessary, other than where the failure
to be so duly qualified and in good standing would not have a Material Adverse
Effect on Company. Schedule 4.01 sets forth a true and complete list of all of
Company's directly or indirectly owned subsidiaries, together with the
jurisdiction of incorporation of each such subsidiary and the percentage of
each subsidiary's outstanding capital stock owned by Company or another
subsidiary of Company.
SECTION 4.02. Charter and Bylaws. Company has made available to
Holdings complete and correct copies of the charter and bylaws, in each case as
amended or restated, of
31
Company and each of its subsidiaries. Company is not in violation of any of the
provisions of its charter or bylaws.
SECTION 4.03. Capitalization.
(a) The authorized capital stock of Company consists of (i)
10,000,000 shares of Company Common Stock, of which as of March 11, 1999, (A)
5,239,051 shares were issued and outstanding, (B) no shares were held in
treasury, and (C) 1,932,572 shares were reserved for future issuance pursuant
to Company's employee stock option plans, warrants and contingent seller notes
incurred in connection with acquisitions; and (ii) 1,000,000 shares of
preferred stock, par value $1.00 per share, of which no shares are issued and
outstanding. Except as described in this Section 4.03, no shares of capital
stock of Company are reserved for any purpose. The outstanding shares of
capital stock of Company and its subsidiaries are duly authorized, validly
issued, fully paid and nonassessable, and have not been issued in violation of
any securities laws, preemptive or similar rights created by statute, the
charter or bylaws of Company or any of its subsidiaries, or any agreement to
which Company or any of its subsidiaries is a party or bound.
(b) Except as set forth in Section 4.03(a) above or in
Schedule 4.03(b), there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which Company or any of its
subsidiaries are a party relating to the issued or unissued capital stock of
Company or any of its subsidiaries or obligating Company or any of its
subsidiaries to grant, issue or sell any shares of its capital stock. Except as
set forth in Schedule 4.03(b), there are no obligations, contingent or
otherwise, of Company or any of its subsidiaries to (i) repurchase, redeem or
otherwise acquire any shares of the capital stock of Company or any of its
subsidiaries or (ii) provide material funds to, or make any material investment
in (in the form of a loan, capital contribution or otherwise), or provide any
guarantee with respect to the obligations of, any other person, other than
advances to subsidiaries in the normal course of business. Except as described
in Schedule 4.03(b), neither Company nor any of its subsidiaries (x) directly
or indirectly owns, (y) has agreed to purchase or otherwise acquire or (z)
holds any interest convertible into or exchangeable or exercisable for, any
capital stock (or equivalent
32
equity interest) of any corporation, partnership, joint venture or other
business association or entity. Except as set forth in Schedule 4.03(b), no
options, warrants or other rights, agreements, arrangements or commitments of
any character obligating Company or any of its subsidiaries to grant, issue or
sell any shares of its capital stock will be in effect.
(c) Upon issuance, the Merger Shares will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights created by statute, the Surviving Corporation's charter or bylaws or any
agreement to which Company is a party or is bound.
SECTION 4.04. Authority. Company has all requisite corporate power and
authority to execute and deliver this Agreement and the other agreements,
documents, instruments and certificates contemplated by this Agreement to which
it is a party (collectively with this Agreement, the "Company Documents"), to
perform its obligations hereunder and under the other Company Documents and to
consummate the transactions contemplated hereby and thereby (subject to, with
respect to the consummation of the Merger, the adoption and approval of this
Agreement and the Merger by the holders of Company Common Stock as described in
Section 4.19). The execution and delivery of this Agreement and the other
Company Documents by Company and the consummation by Company of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Company are necessary to authorize this Agreement or the other Company
Documents or to consummate the transactions contemplated hereby or thereby
(subject to, with respect to the consummation of the Merger, the adoption and
approval of this Agreement and the Merger by the holders of Company Common
Stock as described in Section 4.19). This Agreement has been duly executed and
delivered by Company and constitutes the legal, valid and binding obligation of
Company enforceable against Company in accordance with its terms, and upon
execution and delivery, the other Company Documents will constitute legal,
valid and binding obligations of Company enforceable against Company in
accordance with their terms.
33
SECTION 4.05. No Conflict; Required Filings and Consent.
(a) Except as set forth on Schedule 4.05(a), the execution
and delivery of this Agreement and the other Company Documents by Company does
not, and the consummation of the transactions contemplated hereby and thereby
will not (i) conflict with or violate the charter or bylaws, in each case as
amended or restated, of Company or any of Company's subsidiaries, (ii) conflict
with or violate in any material respect any Laws applicable to Company or any
of its subsidiaries or by which any of their properties is bound or subject, or
(iii) result in any breach of or constitute a material default (or an event
that with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties
or assets of Company or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Company or any of its subsidiaries is a
party or by or to which Company or any of its subsidiaries or any of their
respective properties is bound or subject.
(b) The execution and delivery of this Agreement and the
other Company Documents by Company does not, and the consummation of the
transactions contemplated hereby and thereby will not, require Company to
obtain any consent, license, permit, approval, waiver, authorization or order
of, or to make any filing with or notification to, any Governmental Entities,
except for (i) the filing of a premerger notification and report form by
Company under the HSR Act; (ii) the filing of the Proxy Statement and the
Registration Statement (as such terms are defined in Section 5.13(a)) with the
Securities and Exchange Commission (the "SEC"); (iii) the filing of the
certificate of merger with the Texas Secretary of State and a certificate of
merger with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which Company is qualified to do
business; (iv) the filing of notifications that may be required by PACA; (v)
such other filings and consents set forth on Schedule 4.05(b) that may be
required under any Environmental Laws pertaining to any notification,
disclosure or required approval necessitated by the Merger or the transactions
contemplated by this Agreement or the other Company Documents; and (vi) such
consents, approvals, orders or authorizations the
34
failure of which to be made or obtained could not reasonably be expected to
have a Material Adverse Effect on Company or prevent or materially delay the
consummation of the Merger.
SECTION 4.06. Compliance With Laws
(a) Each of Company and its subsidiaries is in possession of
all material franchises, grants, authorizations, licenses (including licenses
under PACA), permits, easements, variances, exemptions, consents, certificates,
approvals and orders which are material to the operation of the business of
Company and its subsidiaries taken as a whole (collectively, the "Company
Permits"), and there is no action, proceeding or investigation pending or, to
the knowledge of Company, threatened regarding suspension or cancellation of
any of the Company Permits. Company and its subsidiaries are in compliance in
all material respects with the terms of the Company Permits. Neither Company
nor any of its subsidiaries is in conflict with, or in default or violation of,
any order, judgment or decree applicable to Company or any of its subsidiaries
or by which any property or asset of Company or any of its subsidiaries is
bound or affected. The businesses of Company and its subsidiaries are being
conducted in compliance in all material respects with the Laws of Governmental
Entities, including PACA and similar state Laws. No action, demand, requirement
or investigation by any Governmental Entity with respect to Company or any of
its subsidiaries is pending or, to the knowledge of Company, threatened, other
than, in each case, those the outcome of which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect
on Company.
(b) Except as disclosed on Schedule 4.06(b):
(i) Company and its subsidiaries are in material
compliance with all Environmental Laws that are applicable to Company or its
subsidiaries or their respective properties or assets;
(ii) Company and its subsidiaries have all permits and
authorizations required pursuant to Environmental Laws; all such permits and
authorizations are in full force
35
and effect; and no actions are pending or threatened to revoke, limit or modify
any of such permits or authorizations; and
(iii) no material Environmental Claims are pending or
threatened against Company or its subsidiaries and there are no civil, criminal
or administrative judgments or notices of violation against Company or its
subsidiaries pursuant to Environmental Laws.
For purposes of this Section 4.06(b), "Environmental Claims" shall mean any
written notification pursuant to Environmental laws that any of the current or
past operations of Company or its subsidiaries, or any of the property owned,
leased or operated by Company or its subsidiaries in connection with their
respective businesses, is or may be implicated in or subject to any proceeding,
action, complaint, suit, demand, litigation, investigation, claim, order,
hearing, notice or agreement by any governmental authority or any other person.
SECTION 4.07.SEC Reports; Financial Statements.
(a) Since April 14, 1994, Company and its subsidiaries have
filed all material forms, reports, statements and other documents (including
all material exhibits, annexes, supplements and amendments to such documents)
required to be filed with the SEC, including, without limitation, (i) all
Annual Reports on Form l0-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all
proxy statements relating to meetings of shareholders (whether annual or
special), (iv) all Current Reports on Form 8-K and (v) all other material
reports, registration statements or other documents (collectively, the "SEC
Reports"). The SEC Reports, including all SEC Reports filed after the date of
this Agreement and prior to the Effective Time, (x) were, or will be, prepared
in all material respects in accordance with the requirements of applicable Law,
and (y) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. No subsidiary of the Company is subject to the periodic
reporting requirements of
36
the Exchange Act or is otherwise required to file any documents with the SEC or
any national security exchange or quotation service or comparable Governmental
Entity.
(b) Each of the consolidated balance sheets of Company and
its subsidiaries and the consolidated statements of operations, shareholder's
equity and cash flows (including, in each case, any related notes thereto)
contained in the SEC Reports filed prior to the Effective Time (i) have been,
or will be, prepared in accordance with the published rules and regulations of
the SEC and generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except to the extent required by changes
in generally accepted accounting principles and with respect to SEC Reports
filed prior to the date of this Agreement, as may be indicated in such SEC
Reports), and (ii) fairly present, or will fairly present, in all material
respects the consolidated financial position of Company and its subsidiaries as
of the respective dates thereof and the consolidated results of operations and
cash flows for the periods indicated, except that (x) any unaudited interim
financial statements were, or will be, subject to normal and recurring year-end
adjustments that individually or in the aggregate will not be material and (y)
any unaudited pro forma financial information contained in such consolidated
financial statements is not necessarily indicative of the consolidated
financial position of Company and its subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows for the
periods indicated.
SECTION 4.08. Absence of Certain Changes or Events. Except as set
forth in Schedule 4.08 or in the SEC Reports or as otherwise contemplated by
this Agreement, since January 1, 1999, each of Company and its subsidiaries has
conducted its business only in the ordinary course and in a manner consistent
with past practice since such date and there has not been: (a) any material
damage, destruction or loss (whether or not covered by insurance) with respect
to any assets of Company or any of its subsidiaries; (b) any material change to
Company or any of its subsidiaries in their accounting methods, principles or
practices; (c) any declaration, setting aside or payment of any dividends or
distributions in respect of shares of the capital stock of Company or any of
its subsidiaries, or any redemption, purchase or other acquisition by Company
or any of its subsidiaries of any of their securities; (d) any increase in the
benefits
37
under, or the establishment or amendment of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option, stock
purchase or other employee benefit plan, or any increase in the compensation
payable or to become payable to directors, officers or key employees of Company
or any of its subsidiaries, except for annual increases in salaries or wages in
the ordinary course of business and consistent with past practice; (e) any
revaluation by Company or any of its subsidiaries of any of their assets,
including the writing down or off of assets, other than in the ordinary course
consistent with past practice; (f) any entry by Company or any of its
subsidiaries into any commitment or transaction material to Company and its
subsidiaries taken as a whole, (g) any increase in indebtedness for borrowed
money; or (h) any event or circumstance that has had or could have a Material
Adverse Effect on Company.
SECTION 4.09. No Undisclosed Liabilities. Except (a) as set forth in
the SEC Reports, (b) as contemplated by this Agreement, and (c) for current
liabilities and obligations incurred since January 1, 1999 in the ordinary
course of business consistent with past practice, neither Company nor any of
its subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Company.
SECTION 4.10. Absence of Litigation. Except as set forth in Schedule
4.10, there is no claim, action, suit, litigation, proceeding, arbitration or,
to Company's knowledge, investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or, to
the knowledge of Company, threatened against Company or any of its subsidiaries
or any properties or rights of Company or any of its subsidiaries, except for
claims, actions, suits, litigation, proceedings, arbitrations or investigations
which individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect on Company or could not prevent or materially delay
consummation of the Merger. Except as set forth on Schedule 4.10, neither
Company nor any of its subsidiaries is subject to any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, to the knowledge of Company, continuing investigation by, any Governmental
Entity, or any judgment,
38
order, writ, injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease-and-desist or other orders.
SECTION 4.11. Employee Benefit Plans; Labor Matters.
(a) Set forth in Schedule 4.11(a) is a list of all "employee
benefit plans" (as defined in ERISA), all material plans or policies providing
for "fringe benefits" (including but not limited to vacation, paid holidays,
personal leave, employee discount, educational benefit or similar programs),
and each other material bonus, incentive compensation, deferred compensation,
profit sharing, stock, severance, retirement, health, life, disability, group
insurance, stock appreciation right, supplemental unemployment, layoff, or any
other similar plan, agreement, policy or understanding, and any trust, escrow
or other agreement related thereto, which (i) is or has been established,
maintained or contributed to by Company or any of its subsidiaries or with
respect to which Company or any of its subsidiaries has any liability,
including liability as a result of being a Company ERISA Affiliate (as defined
below), or (ii) provides benefits, or describes policies or procedures
applicable, to any current or former officer, employee or director of Company
or any of its subsidiaries, or any dependent thereof, regardless of whether
funded (collectively, the "Company Employee Plans"). The term "Company ERISA
Affiliate" shall mean any corporation, trade or business the employees of
which, together with the employees of Company, are required to be treated as
employed by a single employer under the provisions of ERISA or Code Section
414.
(b) Except to the extent of coverage required under Code
Section 4980B or other applicable continuation of coverage laws, no
representations have been made to any current or former employee or officer of
Company or any of its subsidiaries promising or guaranteeing any coverage under
any employee welfare plan for any period of time beyond the end of the current
plan year. Neither the Merger nor the consummation of any other transaction
contemplated by this Agreement will accelerate the time of payment or vesting,
or increase the amount of compensation (including amounts due under any Company
Employee Plans) due to any current or former employee or officer of Company or
any of its subsidiaries.
39
(c) There are no agreements which will or may provide
payments as a result of the transactions covered hereby to any officer,
employee, shareholder or highly compensated individual which will be "excess
parachute payments" under Code Section 280G that are nondeductible to Company
or subject to tax under Code Section 4999 for which Company or any of its
subsidiaries would have withholding liability.
(d) With respect to each Company Employee Plan (other than
any Company Multi-Employer Plans (as defined below)), Company has made
available to Holdings true, correct and complete copies of (i) the plan
documents and summary plan description; (ii) the most recent determination
letter, if any, received from the Internal Revenue Service; (iii) the annual
reports required to be filed for the two most recent plan years of each such
Company Employee Plan; (iv) all related trust agreements, insurance contracts
or other funding agreements which implement such Company Employee Plan; and (v)
all other material documents, records or other materials related thereto
reasonably requested by Holdings.
(e) Each Company Employee Plan (other than any Company
Multi-Employer Plans (as defined below)) which purports to satisfy the
requirements of Code Section 401(a) ("Company Qualified Plan") is qualified in
form and operation under Code Section 401(a) and each trust for each Company
Qualified Plan is exempt from federal income tax under Code Section 501(a). No
event has occurred or circumstances exist that will or could reasonably be
expected to give rise to disqualification or loss of tax exempt status of any
Company Qualified Plan or related trust.
(f) (i) No Company Employee Plan is a single employer plan
that is subject to Part 3 of Title I of ERISA or Title IV of ERISA; (ii) each
Company Employee Plan has been operated in all material respects in compliance
with ERISA, the Code and all other applicable Laws; (iii) none of the Company
Employee Plans is a "multiple employer plan" or "multi-employer plan" (as
described or defined in ERISA or the Code), and neither Company nor any Company
ERISA Affiliate has within the past six years contributed or been required to
40
contribute to any such plan, except for the multi-employer plans set forth on
Schedule 4.11(f) (the "Company Multi-Employer Plans"); and (iv) there are no
material unfunded liabilities existing under any Company Employee Plans (other
than any Company Multi-Employer Plans), and each such Company Employee Plan
could be terminated as of the Closing Date without any liability to Company, or
any Company ERISA Affiliate.
(g) Other than routine claims for benefits, there are no
actions, suits, claims, audits, or investigations pending or, to Company's
knowledge, threatened against, or with respect to, any of the Company Employee
Plans (other than any Company Multi-Employer Plans) or their assets; and all
contributions required to be made to the Company Employee Plans have been made
timely.
(h) Except as described on Schedule 4.11(h), neither Company
nor any of its subsidiaries is a party to any collective bargaining or other
labor union contract. No collective bargaining agreement is being negotiated by
Company or any of its subsidiaries, and to Company's knowledge there is no
organizing effort or representation question pending. Company and its
subsidiaries are in compliance in all material respects with all applicable
collective bargaining agreements and Laws respecting employment, employment
practices and wages and hours.
(i) With respect to each Company Multi-Employer Plan, (i)
Company and each Company ERISA Affiliate has or will have, as of the Effective
Time, made all contributions to each Company Multi-Employer Plan required by
the terms of such Company Multi-Employer Plan or any collective bargaining
agreement; and (ii) except as set forth on Schedule 4.11(i), Company would not
be subject to any withdrawal liability under Part 1 of Subtitle E of Title IV
of ERISA if, as of the Effective Time, Company or any Company ERISA Affiliate
were to engage in a complete withdrawal (as defined in ERISA Section 4203) or a
partial withdrawal (as defined in ERISA Section 4205) from any Company
Multi-Employer Plan. Neither Company nor any Company ERISA Affiliate has within
the past six years (w) incurred any liabilities under the provisions of Section
4062 of ERISA; (x) withdrawn as a substantial employer so as to
41
become subject to the provisions of Section 4063 of ERISA; (y) ceased making
contributions to any Company Multi-Employer Plan; or (z) made a complete or
partial withdrawal from a Company Multi-Employer Plan so as to incur withdrawal
liability as defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under Section 4207 or 4208 of ERISA).
SECTION 4.12. Tax Matters.
(a) Except as set forth on Schedule 4.12(a), (i) all material
Tax Returns of or with respect to any Tax which is required to be filed on or
before the Closing Date by or with respect to Company or any of its
subsidiaries have been or will be duly and timely filed, (ii) all material
items of income, gain, loss, deduction and credit or other items required to be
included in each such Tax Return have been or will be so included and all
information provided in each such Tax Return is true, correct and complete in
all material respects, (iii) all material Taxes which have become or will
become due with respect to the period covered by each such Tax Return have been
or will be timely paid in full, and (iv) all withholding Tax requirements
imposed on or with respect to Company or any of its subsidiaries have been or
will be satisfied in all material respects.
(b) Except as set forth on Schedule 4.12(b), there is not in
force any extension of time with respect to the due date for the filing of any
Tax Return of or with respect to Company or any of its subsidiaries or any
waiver or agreement for any extension of time for the assessment, collection or
payment of any Tax of or with respect to Company or any of its subsidiaries.
(c) There are no material pending audits, actions,
proceedings, investigations, disputes or claims with respect to or against
Company or any of its subsidiaries for or with respect to any Taxes, and no
material assessment, deficiency or adjustment has been assessed or proposed
with respect to any Tax Return of or with respect to Company or any of its
subsidiaries, other than those set forth on Schedule 4.12(c).
42
(d) Company has previously delivered to Holdings true and
complete copies of each written Tax allocation or sharing agreement and a true
and complete description of each unwritten Tax allocation or sharing
arrangement affecting Company or any of its subsidiaries, if any.
(e) Except for statutory liens for current Taxes not yet due,
no liens for Taxes exist upon the assets of any of Company or its subsidiaries.
(f) Except as set forth on Schedule 4.12(f), none of the
property of Company or any of its subsidiaries is held in an arrangement for
which partnership Tax Returns are being filed, and neither Company nor any of
its subsidiaries owns any interest in any controlled foreign corporation (as
defined in section 957 of the Code), passive foreign investment company (as
defined in section 1296 of the Code) or other entity the income of which is
required to be included in the income of Company or such subsidiary.
(g) Neither Company nor any of its subsidiaries has made an
election under section 341(f) of the Code.
(h) Neither Company nor any subsidiary has ever been a member
of an affiliated group of corporations (as defined in Section 1504(a) of the
Code), other than an affiliated group of which Company is the parent.
(i) Except for Canada, neither Company nor any subsidiary is
or has ever been subject to Taxes in any jurisdiction outside the United
States.
(j) Neither Company nor, to the knowledge of Company, any of
its affiliates has taken or agreed to take any action that would prevent the
Merger from constituting a reorganization qualifying under the provisions of
section 368(a) of the Code.
43
SECTION 4.13. Material Contracts.
(a) Schedule 4.13(a) lists each agreement to which Company or
any of its subsidiaries is a party or by which Company or any of its
subsidiaries is bound that is material to the financial condition or results of
operations or current or future business or operations of Company or any of its
subsidiaries (collectively, the "Company Material Contracts"), including,
without limitation, (i) any contracts with directors, officers, five percent or
greater stockholders, employees, agents or representatives involving payments
of at least $100,000 per year or $250,000 in the aggregate; (ii) any contract
upon which Company's or any of its subsidiary's business is substantially
dependent, including without limitation contracts to sell a major part of its
products or services or to purchase a major part of its requirements of
products or services and distributorship, marketing, agency, dealer or similar
contracts; (iii) any franchise or license or other agreement to use a trade
secret, process or trade name upon which Company's or any of its subsidiary's
business depends to a material extent; (iv) any executory contract for the
acquisition or sale of any property, plant or equipment for a consideration not
included in Company's 1999 budget and exceeding $1,000,000; (v) any lease under
which any material property is leased by or to Company or any of its
subsidiaries; (vi) any agreement evidencing, securing or otherwise relating to
indebtedness for borrowed money; (vii) any management contract or any
compensatory plan, contract or arrangement with any director or any officer;
(viii) partnership or joint venture agreements; (ix) contracts containing
covenants of Company or any of its subsidiaries not to compete in any line of
business or with any person in any geographical area or covenants of any other
person not to compete with Company or any of its subsidiaries in any line of
business or in any geographical area; (x) contracts relating to the acquisition
by Company or any of its subsidiaries of any operating business or the capital
stock of any other person; or (xi) any other contracts pursuant to the terms of
which there is either a current or future obligation or right of Company or any
of its subsidiaries to make or receive payments in excess of $500,000 in any
year or $2,000,000 in the aggregate.
(b) There have been made available to Holdings true and
complete copies of all the Company Material Contracts listed on Schedule
4.13(a) or any other Schedule. All of the Company Material Contracts referred
to in the preceding sentence are valid and binding upon
44
Company or one of its subsidiaries, as the case may be, in accordance with
their respective terms. Company and its subsidiaries have performed in all
material respects all of their obligations under each Company Material Contract
and there exists no material breach, violation or default (or event that with
notice or lapse of time would constitute a material breach, violation or
default) under any Company Material Contract.
(c) Except as set forth in Schedule 4.13(c), no consent of
any person is required in connection with the transactions contemplated by this
Agreement or any of the other Company Documents in order to preserve the rights
of Company or any of its subsidiaries under any Company Material Contract after
the Effective Time.
SECTION 4.14. Insurance. Company and each of its subsidiaries are
currently insured, and during each of the past three years have been insured,
for reasonable amounts against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured. All of Company's and its subsidiaries' policies of insurance are in
full force and effect, all premiums due with respect thereto have been paid,
and no notice of cancellation or termination has been received with respect to
any such policies. Schedule 4.14 sets forth the amount of each pending claim in
an amount exceeding $50,000 made by Company to the insurers under such policies
and each other claim in an amount exceeding $100,000 made by Company to the
insurers under such policies since December 31, 1997.
SECTION 4.15. Properties. Except as set forth on Schedule 4.15 and
properties and assets disposed of in the ordinary course of business after
January 1, 1999, Company and its subsidiaries have good and merchantable title,
free and clear of all Liens, to all their material properties and assets,
whether tangible or intangible, real, personal or mixed, reflected in the
January 1, 1999 consolidated balance sheet of Company as being owned by Company
and its subsidiaries as of the date thereof or purported to be owned on the
date hereof.
45
SECTION 4.16. Year 2000 Compliance. Except as set forth in the SEC
Reports or on Schedule 4.16, all hardware, firmware, software and computer
systems of Company and its subsidiaries and to Company's knowledge, of their
respective material customers and suppliers, are, or will be by the Effective
Time, Year 2000 Compliant and shall continue to function in accordance with
their intended purpose without material error or material interruption as a
result of the transition to the year 2000. Schedule 4.16 includes (a) a
reasonable estimate of the additional costs Company and its subsidiaries will
incur to become Year 2000 Compliant, (b) a reasonable estimate as to when such
costs will be incurred and (c) a summary of the implementation plan of Company
and its subsidiaries to become Year 2000 Compliant.
SECTION 4.17. Intellectual Property Rights. There are no registered
patents, trademarks, service marks, trade names or copyrights, or applications
for or licenses (to or from Company or any of its subsidiaries) with respect to
any of the foregoing, that (a) is owned by Company or any of its subsidiaries,
or with respect to which Company or any of its subsidiaries has any rights, or
(b) is used, whether directly or indirectly, by Company or any of its
subsidiaries, other than the trade names and trademarks set forth on Schedule
4.17. Except as set forth on Schedule 4.17, Company or its subsidiaries owns or
has the exclusive right to use, sell, license and dispose of all of the trade
names and trademarks listed on Schedule 4.17. Neither Company nor any of its
subsidiaries has to its knowledge infringed upon or otherwise violated the
intellectual property rights of third parties or received any pending written
claim alleging any infringement or violation.
SECTION 4.18. Customers and Suppliers. Schedule 4.18 sets forth a list
of the ten largest customers and ten largest suppliers of Company and its
subsidiaries, taken as a whole, during the fiscal year ended January 1, 1999.
Since such date, except as set forth on Schedule 4.18, none of such customers
or suppliers has canceled or otherwise modified in any material adverse respect
its relationship with Company, and Company has not received notice or is
otherwise aware that any such customer or supplier intends to cancel or
otherwise modify in any material adverse respect its relationship with Company.
46
SECTION 4.19. Vote Required. The only vote of the shareholders of any
class or series of Company's capital stock necessary to approve the Merger and
adopt this Agreement is, the affirmative vote of the holders of a two-thirds of
all outstanding shares of Company Common Stock.
SECTION 4.20. Brokers. Except for Bear, Xxxxxxx & Co., Inc. pursuant
to an engagement letter with Company (as amended), a true and complete copy of
which has been furnished to Holdings, no broker, finder, investment banker or
other person is entitled to any brokerage, finder's, financial advisory or
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Company.
SECTION 4.21. Opinion of Financial Advisor. Company has received the
opinion of Bear, Xxxxxxx & Co., Inc. to the effect that, as of the date of
delivery of such opinion, the Merger Consideration is fair to the shareholders
of Company from a financial point of view. The Company has delivered or will
deliver, promptly after receipt, a copy of the written opinion of Bear, Xxxxxxx
& Co., Inc., to such effect.
SECTION 4.22. Transactions with Affiliates. Other than the
transactions contemplated by this Agreement and except to the extent disclosed
in the SEC Reports or disclosed in writing prior to the execution and delivery
of this Agreement, since January 1, 1998 there have been no transactions,
agreements, arrangements or understandings between Company or its subsidiaries,
on the one hand, and Company's affiliates (other than subsidiaries of Company)
or any other person, on the other hand, that would be required to be disclosed
under Item 404 of Regulation S-K under the Securities Act.
SECTION 4.23. Certain Statutes. The Board of Directors of Company has
taken or will take all appropriate and necessary actions to ensure that the
restrictions on business combinations in Section 203 of the DGCL will not have
any effect on the Merger or the other transactions contemplated by this
Agreement. No "fair price," "moratorium," "control share
47
acquisition" or similar state or federal anti-takeover statute or regulation
applicable to Company (each a "Takeover Statute") is, as of the date of this
Agreement, applicable to the Merger or any of the transactions contemplated by
this Agreement.
SECTION 4.24. Information Supplied. Without limiting any of the
representations and warranties contained herein, no representation or warranty
of Company contained in this Agreement and no statement by Company or other
information contained in any schedule to this Agreement, as of the date of such
representation, warranty or statement, contains any untrue statement of
material fact, or omits to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which such
statements were made, not misleading.
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of Holdings. Holdings hereby
covenants and agrees that, from the date of this Agreement to the Effective
Time, unless otherwise expressly contemplated by this Agreement or consented to
in writing by Company (which consent will not be unreasonably withheld or
delayed), Holdings will and will cause its subsidiaries to:
(a) operate its business only in the usual and ordinary
course consistent with past practices and in compliance in all material
respects with all applicable Laws;
(b) use reasonable commercial efforts to preserve intact its
business organization, maintain all Holdings Material Contracts, Holdings
Permits and other material rights, retain the services of all respective
officers and key employees and maintain relationships with material customers
and suppliers;
48
(c) use reasonable commercial efforts to keep in full force
and effect insurance and bonds comparable in amount and scope of coverage to
that currently maintained;
(d) use reasonable commercial efforts to cause to be
delivered to Company a comfort letter from Ernst & Young LLP, dated within two
business days before the date of the mailing of the Proxy Statement to the
shareholders of Company and the stockholders of Holdings, addressed to Holdings
and Company, in form and substance reasonably satisfactory to Company and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with proxy statements and registration
statements similar to the Proxy Statement and Registration Statement; and
(e) promptly supplement or amend any schedule to this
Agreement delivered by Holdings with respect to any matter that arises or is
discovered after the date hereof that, if existing or known at the date hereof,
would have been required to be set forth or listed in any such schedule;
provided, that, for purposes of determining the rights and obligations of the
parties hereunder (other than the obligation of Holdings under this Section
5.01(e)), any such supplemental or amended disclosure will be deemed to have
been disclosed to Company as of the date hereof unless Company otherwise
objects in writing within five business days after receipt.
SECTION 5.02. Negative Covenants of Holdings. Except for (i) the
termination payments to Rosecliff and Buttonwood with respect to the
termination of their respective Consulting Agreements with Holdings and in the
amounts set forth in Schedule 5.02; (ii) the payment of a $1,250,000 fee to
Xxxxxx at the Effective Time and the payment in full at or prior to the Closing
Date of the subordinated promissory note executed by Holding to Xxxxxx on
November 21, 1996 and due November 20, 2006 (the "Xxxxxx Note"); and (iii)
except as expressly contemplated by this Agreement or otherwise consented to in
writing by Company (which consent will not be unreasonably withheld or
delayed), from the date of this Agreement until the Effective Time, Holdings
will not do, and will not permit any of its subsidiaries to do, any of the
foregoing:
49
(a) increase the compensation payable to or to become payable
to any director, officer, key employee or consultant (other than annual
increases and bonuses in the ordinary course of business consistent with past
practices and increases resulting from the operation of compensation
arrangements in effect prior to the date hereof), or grant any severance or
termination pay (other than pursuant to the normal severance policy of Holdings
or its subsidiaries as in effect on the date of this Agreement or as otherwise
may be required under the Workers Adjustment Retraining Notification Act) to,
or enter into or amend any employment or severance agreement with, any
director, officer or key employee or pay any benefit not required by any
existing plan or arrangement (including the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units) or
establish, adopt, enter into, or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, savings, welfare, deferred compensation, employment, termination,
severance or other employee benefit plan, agreement, trust, fund, policy or
arrangement for the benefit or welfare of any directors, officers or current or
former employees, except in each case to the extent required by Law; provided,
however, that nothing in this Agreement will be deemed to prohibit the payment
of benefits as they become payable;
(b) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock, except for
dividends by a wholly-owned subsidiary of Holdings to Holdings or another
wholly-owned subsidiary of Holdings;
(c) except for the exercise or exchange of Holdings Warrants
for Holdings Common Stock, (i) redeem, purchase or otherwise acquire any shares
of its or any of its subsidiaries' capital stock or any securities or
obligations convertible into or exchangeable for any shares of its or its
subsidiaries' capital stock, or any options, warrants or conversion or other
rights to acquire any shares of its or its subsidiaries' capital stock or any
such securities or obligations; (ii) effect any reorganization or
recapitalization; or (iii) split, combine or reclassify any of its or its
subsidiaries' capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for, shares
of its or its subsidiaries' capital stock;
50
(d) except for the exercise or exchange of Holdings Warrants
for Holdings Common Stock, (i) issue, deliver, award, grant or sell, or
authorize or propose the issuance, delivery, award, grant or sale (including
the grant of any Liens) of any shares of any class of its or its subsidiaries'
capital stock (including shares held in treasury), any securities convertible
into or exercisable or exchangeable for any such shares, or any rights,
warrants or options to acquire any such shares; or (ii) amend or otherwise
modify the terms of any such rights, warrants or options the effect of which
shall be to make such terms more favorable to the holders thereof;
(e) acquire or agree to acquire equity interests in or all or
a portion of the assets of any business or person (by purchase, merger,
consolidation or any other means), except for the purchasing of assets from
suppliers or vendors in the ordinary course of business consistent with past
practice;
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any material portion of its assets, except
for dispositions of inventories, equipment and other assets in the ordinary
course of business and consistent with past practice;
(g) adopt or propose to adopt any amendments to its charter
or bylaws;
(h) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or similar
instrument, except under existing credit lines in the ordinary course of
business consistent with past practice and provided that the aggregate amount
of all outstanding indebtedness after giving effect to such incurrence in no
event exceeds $124,500,000;
(i) make any tax election or settle or compromise any income
tax liability that could reasonably be expected to be material to Holdings and
its subsidiaries taken as a whole;
51
(j) make any material commitments or agreements for capital
expenditures or capital additions or betterments except as materially
consistent with the budget for capital expenditures as of the date of this
Agreement and consistent with past practices;
(k) except in the ordinary course of business, modify, amend,
assign or terminate any material agreement, permit, concession, franchise,
license or similar instrument to which Holdings or any of its subsidiaries is a
party or waive any material rights of Holdings or any of its subsidiaries
thereunder;
(l) make any material loans or advances to any other person,
other than to its wholly-owned subsidiaries and other than routine advances to
employees or assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except in the ordinary course of business;
(m) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and
consistent with past practice or as required pursuant to applicable Law or
generally accepted accounting principles; or
(n) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03. Affirmative Covenants of Company. Company hereby
covenants and agrees that, from the date of this Agreement to the Effective
Time, unless otherwise expressly contemplated by this Agreement or consented to
in writing by Holdings (which consent will not be unreasonably withheld or
delayed), Company will and will cause its subsidiaries to:
(a) operate its business only in the usual and ordinary
course consistent with past practices and in compliance in all material
respects with all applicable Laws;
52
(b) use reasonable commercial efforts to preserve intact its
business organization, maintain all material contracts, Company Permits and
other material rights, retain the services of all respective officers and key
employees and maintain relationships with material customers and suppliers;
(c) use reasonable commercial efforts to keep in full force
and effect insurance and bonds comparable in amount and scope of coverage to
that currently maintained;
(d) use reasonable commercial efforts to cause to be
delivered to Holdings a letter from KPMG LLP, dated within two business days
before the date of the mailing of the Proxy Statement to the shareholders of
Company and the stockholders of Holdings, addressed to Company and Holdings, in
form and substance reasonably satisfactory to Holdings and customary in scope
and substance for comfort letters delivered by independent public accountants
in connection with proxy statements and registration statements similar to the
Proxy Statement and Registration Statement;
(e) promptly supplement or amend any schedule to this
Agreement delivered by Company with respect to any matter that arises or is
discovered after the date hereof that, if existing or known at the date hereof,
would have been required to be set forth or listed in any such schedule;
provided, that, for purposes of determining the rights and obligations of the
parties hereunder (other than the obligation of Company under this Section
5.03(e)), any such supplemental or amended disclosure will be deemed to have
been disclosed to Holdings as of the date hereof unless Holdings otherwise
expressly objects in writing within five business days after receipt; and
(f) enter into a Registration Rights Agreement with the
Affiliates substantially in the form of Exhibit J.
SECTION 5.04. Negative Covenants of Company. Except as expressly
contemplated by this Agreement or Schedule 5.04, or otherwise consented to in
writing by
53
Holdings (which consent will not be unreasonably withheld or delayed), from the
date of this Agreement until the Effective Time, Company will not do, and will
not permit any of its subsidiaries to do, any of the foregoing:
(a) increase the compensation payable to or to become payable
to any director, officer, key employee or consultant (other than for annual
merit increases and bonuses in the ordinary course of business consistent with
past practices and increases resulting from the operation of compensation
arrangements in effect prior to the date hereof), or grant any severance or
termination pay (other than pursuant to the normal severance policy of Company
or its subsidiaries as in effect on the date of this Agreement or as otherwise
may be required under the Workers Adjustment Retraining Notification Act) to,
or enter into or amend any employment or severance agreement with, any
director, officer or key employee or pay any benefit not required by any
existing plan or arrangement (including the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units not
permitted under Section 5.04(d)(i)(w)) or establish, adopt, enter into, or
amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, savings, welfare, deferred
compensation, employment, termination, severance or other employee benefit
plan, agreement, trust, fund, policy or arrangement for the benefit or welfare
of any directors, officers or current or former employees, except in each case
to the extent required by applicable Law; provided, however, that nothing in
this Agreement will be deemed to prohibit the payment of benefits as they
become payable;
(b) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock, except for
dividends by a wholly-owned subsidiary of Company to Company or another
wholly-owned subsidiary of Company;
(c) (i) redeem, purchase or otherwise acquire any shares of
its or any of its subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its subsidiaries'
capital stock, or any options, warrants or conversion or other rights to
acquire any shares of its or its subsidiaries' capital stock or any such
securities or
54
obligations; (ii) effect any reorganization or recapitalization; or (iii)
split, combine or reclassify any of its or its subsidiaries' capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its or its subsidiaries'
capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the grant of
any Liens) of any shares of any class of its or its subsidiaries' capital
stock, any securities convertible into or exercisable or exchangeable for any
such shares, or any rights, warrants or options to acquire any such shares,
except for (w) the issuance of stock options under Company's employee stock
option plans in effect on the date hereof in the ordinary course and consistent
with past practice; provided, that such options can not be exercised prior to
the Effective Time; (x) the issuance of Company Common Stock upon the exercise
of employee stock options and warrants outstanding on the date of this
Agreement; and (y) the issuance of Company Common Stock upon conversion of all
or any part of contingent payment obligations incurred in connection with
acquisitions made prior to the date of this Agreement and disclosed on Schedule
4.03(b); and in each of the cases set forth in the foregoing clauses (w), (x)
and (y), in accordance with their present terms; or (ii) amend or otherwise
modify the terms of any such rights, warrants, options, employee stock option
plans or contingent payment obligations the effect of which shall be to make
such terms more favorable to the holders thereof;
(e) acquire or agree to acquire equity interests in or all or
a portion of the assets of any business or person (by purchase, merger,
consolidation or any other means), except for the purchasing of assets from
suppliers or vendors in the ordinary course of business and consistent with
past practice;
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any material portion of its assets, except
for dispositions of inventories, equipment and other assets in the ordinary
course of business and consistent with past practice;
55
(g) adopt or propose to adopt any amendments to its charter
or bylaws;
(h) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or similar
instrument, except under existing credit lines in the ordinary course of
business consistent with past practice and provided that the aggregate amount
of all outstanding indebtedness after giving effect to such incurrence in no
event exceeds $53,000,000;
(i) take any action which would result in a failure to
maintain the trading of Company Common Stock on NASDAQ;
(j) make any tax election or settle or compromise any income
tax liability that could reasonably be expected to be material to Company and
its subsidiaries taken as a whole;
(k) make any material commitments or agreements for capital
expenditures or capital additions or betterments except as materially
consistent with the budget for capital expenditures as of the date of this
Agreement and consistent with past practices;
(l) make any material loans or advances to any other person,
other than to its wholly-owned subsidiaries and other than routine advances to
employees or assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except in the ordinary course of business;
(m) except in the ordinary course of business, modify, amend,
assign or terminate any material agreement, permit, concession, franchise,
license or similar instrument to which Company or any of its subsidiaries is a
party or waive any material rights of Company or any of its subsidiaries
thereunder;
56
(n) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and
consistent with past practice or as required pursuant to applicable Law or
generally accepted accounting principles; or
(o) agree in writing to do any of the foregoing.
SECTION 5.05. Financing Arrangement. Company and Holdings shall use
their reasonable commercial efforts to jointly arrange a senior credit facility
of not less than $195,000,000 to be provided to the Surviving Corporation
immediately after the Effective Time (the "Senior Financing"). The Senior
Financing will be on terms that are reasonably acceptable to each of Company's
Board of Directors and Holdings' Board of Directors.
SECTION 5.06. No Solicitation by Company.
(a) Company shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its subsidiaries
to, directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Company Competing Transaction (as hereinafter defined) or
(ii) participate in any discussions or negotiations regarding any Company
Competing Transaction; provided, however, that if, at any time prior to the
approval and adoption of the Merger and this Agreement by the requisite holders
of Company Common Stock, the Board of Directors of Company determines in good
faith, after consultation with outside counsel, that it is necessary to do so
in order to comply with its fiduciary duties to Company's shareholders under
applicable Law, Company may, in response to a Company Competing Transaction
which was not solicited by it or which did not otherwise result from a breach
of this Section 5.06(a), and subject to compliance with Section 5.06(c), (x)
furnish information with respect to Company and its subsidiaries to any person
pursuant to a customary confidentiality agreement (as determined by Company
after consultation with its outside counsel), the benefits of the terms of
which, if
57
more favorable to the other party to such Confidentiality Agreement than those
in place with Holdings, shall be extended to Holdings, and (y) participate in
negotiations regarding such Company Competing Transaction. For purposes of this
Agreement, "Company Competing Transaction" means any bona fide written inquiry,
proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 20 percent or more of the assets of Company and its
subsidiaries on a consolidated basis or 20 percent or more of any class of
equity securities of Company, or any tender offer (including a self-tender
offer), merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Company, other than
the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 5.06,
neither the Board of Directors of Company nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Holdings, the approval or recommendation by such Board of Directors
or such committee of the Merger and this Agreement, (ii) approve or recommend,
or propose publicly to approve or recommend, any Company Competing Transaction,
or (iii) cause Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a "Company
Acquisition Agreement") related to any Company Competing Transaction.
Notwithstanding the foregoing, in the event that prior to the approval and
adoption of the Merger and this Agreement by the requisite holders of Company
Common Stock, the Board of Directors of Company determines in good faith, after
it has an offer for a Company Superior Proposal (as defined below) and after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to Company's shareholders under applicable
Law, the Board of Directors of Company may, subject to Holdings' rights under
Section 7.05, withdraw or modify its approval or recommendation of the Merger
and this Agreement or terminate this Agreement and on at least two business
days' notice and after such termination, if it so chooses, cause Company to
enter into any Company Acquisition Agreement with respect to any Company
Superior Transaction. For purposes of this Agreement, a "Company Superior
Proposal" means a Company Competing Transaction on terms which the Board of
Directors of Company determines in its good faith judgment (based on the advice
of a financial advisor of nationally
58
recognized reputation) to be more favorable to Company's shareholders than the
Merger and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Board of Directors of Company, after
consultation with its financial advisor, is reasonably likely to be obtained by
such third party.
(c) In addition to the obligations of Company set forth in
subsections (a) and (b) of this Section 5.06, Company shall immediately advise
Holdings orally and in writing of any request for information relating to any
Company Competing Transaction or of any Company Competing Transaction,
including the material terms thereof and the identity of the person making such
request or Company Competing Transaction. Company will keep Holdings informed
of the status of any such request or Company Competing Transaction, including
the principal steps the Company is taking in response thereto.
(d) Nothing contained in this Section 5.06 shall prohibit
Company from taking and disclosing to its shareholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act of 1934, as amended (the
"Exchange Act") or from making any disclosure to Company's shareholders if, in
the good faith judgment of the Board of Directors of Company, after
consultation with outside counsel, failure so to disclose would be inconsistent
with its fiduciary duties to Company's shareholders under applicable Law;
provided, however, that neither Company nor its Board of Directors nor any
committee thereof shall, except as permitted by Section 5.06(b), withdraw or
modify, or propose publicly to withdraw or modify, its position with respect to
this Agreement and the Merger, or approve or recommend, or propose publicly to
approve or recommend, a Company Competing Transaction.
SECTION 5.07. Access and Information.
(a) Holdings shall, and shall cause its subsidiaries to, (i)
afford to Company and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively, the
"Company Representatives") reasonable access at reasonable times, upon
reasonable prior notice, to the officers, employees, agents, properties,
offices and
59
other facilities of Holdings and its subsidiaries and to the books and records
thereof, and (ii) furnish promptly to Company and the Company Representatives
such information concerning the business, properties, contracts, records and
personnel of Holdings and its subsidiaries (including, without limitation,
financial, operating and other data and information) as may be reasonably
requested, from time to time, by Company.
(b) Company shall, and shall cause its subsidiaries to, (i)
afford to Holdings and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively, the
"Holdings Representatives") reasonable access at reasonable times, upon
reasonable prior notice, to the officers, employees, accountants, agents,
properties, offices and other facilities of Company and its subsidiaries and to
the books and records thereof, and (ii) furnish promptly to Holdings and the
Holdings Representatives such information concerning the business, properties,
contracts, records and personnel of Company and its subsidiaries (including,
without limitation, financial, operating and other data and information) as may
be reasonably requested, from time to time, by Holdings.
(c) Notwithstanding the foregoing provisions of this Section
5.07, neither party shall be required to grant access or furnish information to
the other party to the extent that such access or the furnishing of such
information is prohibited by Law or would waive any rights to privileged
communications. No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the parties which
are herein contained and each such representation and warranty shall survive
such investigation.
(d) The information received pursuant to subsections (a) and
(b) of this Section 5.07 shall be deemed to be "Confidential Information" for
purposes of the reciprocal Confidentiality Agreements, dated September 28, 1998
between Company and FreshPoint, Inc., a subsidiary of Holdings (the
"Confidentiality Agreements").
60
SECTION 5.08. Appropriate Action; Consents; Filings.
(a) Upon the terms and subject to the conditions hereof, each of
Company and Holdings shall use (and shall cause each of their respective
subsidiaries to use, as applicable) reasonable commercial efforts to (i) take,
or cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement; (ii) obtain from any Governmental Entities or other third
parties any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Company or Holdings or any of their
subsidiaries, as applicable, in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby or required to prevent a Material Adverse Effect from occurring to
Company, Holdings or the Surviving Corporation; and (iii) make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (u) the DGCL, (v) the Texas Act,
(w) NASDAQ, (x) the Securities Act and the Exchange Act and the rules and
regulations thereunder, and any other applicable federal or state securities
Laws; (y) the HSR Act, and (z) any other applicable Law.
(b) Each of Company and Holdings shall (and shall cause their
respective subsidiaries to, as applicable) cooperate and consult with each other
in connection with the making of all filings referred to in Section 5.08(a),
including providing copies of all such documents to the nonfiling party and its
advisors prior to filings and, if requested, shall accept all reasonable
additions, deletions or changes suggested in connection therewith, and shall
furnish all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable Law.
(c) In the event that either Company or Holdings (or any of their
respective subsidiaries) shall fail to obtain any Governmental Entity or other
third party consent, waiver, approval, authorization or order required to be
obtained or made in connection with the authorization, execution and delivery of
this Agreement and the consummation of the
61
transactions contemplated hereby, and the parties agree to consummate the Merger
without such consent, waiver, approval, authorization or order, such party shall
use its best efforts, and shall take any such actions reasonably requested by
the other party, prior to Closing to limit the adverse effect upon the Surviving
Corporation, its respective subsidiaries, and their respective businesses
resulting, which could reasonably be expected to result after the Effective
Time, from the failure to obtain such consent, waiver, approval, authorization
or order.
(d) Company and Holdings agree to cooperate with respect to, and shall
cause each of their respective subsidiaries, as applicable, to cooperate with
respect to, and agree to use best efforts vigorously to contest and resist, any
action, including legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent (an "Order"), of any
Governmental Entity that is in effect and that restricts, prevents or prohibits
the consummation of the Merger or any other transaction contemplated by this
Agreement.
(e) Each of Company and Holdings shall promptly notify the other of (i)
any material change in its current or future business, financial condition or
results of operations, (ii) any material complaints, investigations or hearings
(or communications indicating that the same may be contemplated) of any
Governmental Entities with respect to its business or the transactions
contemplated hereby, (iii) the institution or the threat of material litigation
involving it or any of its subsidiaries, (iv) any material notice or
communication from any regulatory authority or NASDAQ in connection with the
Merger or the other transactions contemplated by this Agreement, or (v) any
event or condition that might reasonably be expected to cause any of its
representations, warranties, covenants or agreements set forth herein not to be
true and correct at the Effective Time.
(f) Each party hereto shall promptly inform the other of any material
communication from the Federal Trade Commission, the Department of Justice or
any other domestic or foreign government or governmental or multinational
antitrust authority regarding any of the transactions contemplated by this
Agreement. If any party or any affiliate thereof
62
receives a request for additional information or documentary material from any
such government or authority with respect to the transactions contemplated by
this Agreement, then such party will endeavor in good faith to make, or cause to
be made, as soon as reasonably practical after consultation with the other
party, an appropriate response in compliance with such request. Company will
advise Holdings promptly in respect of any understandings, undertakings or
agreements (oral or written) which Company proposes, or has proposed to it, to
make or enter into with the Federal Trade Commission, the Department of Justice
or any other domestic or foreign government or governmental or multinational
authority in connection with the transactions contemplated by this Agreement.
SECTION 5.09. Tax Treatment. Each party hereto shall use best efforts to
cause the Merger to qualify, and shall not take, and shall use best efforts to
prevent any affiliate of such party from taking, any actions which could prevent
the Merger from qualifying as a reorganization under the provisions of section
368(a) of the Code.
SECTION 5.10. Public Announcements. Each party hereto shall consult with
the other parties hereto before issuing any press release or otherwise making
any public announcements with respect to the Merger and shall not issue any such
press release or make any such public announcements prior to such consultation,
except as otherwise required by applicable Law or the rules of NASDAQ. The press
release announcing the execution and delivery of this Agreement shall be a joint
press release of Company and Holdings.
SECTION 5.11. NASDAQ Listing. Company shall use best efforts to cause the
Merger Shares to be approved for listing (subject to official notice of
issuance) on NASDAQ prior to the Effective Time.
SECTION 5.12. Meeting of Shareholders. Company will, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene and
hold a special meeting of its shareholders (the "Company Shareholders' Meeting")
for the purpose of obtaining the adoption and approval of this Agreement and the
Merger by its shareholders. Company will,
63
through its Board of Directors, recommend to its shareholders the adoption and
approval of this Agreement and the Merger, except to the extent that the Board
of Directors of Company shall have withdrawn or modified its approval or
recommendation of the Merger and this Agreement or terminated this Agreement in
accordance with Section 5.06(b). Company shall use its reasonable commercial
efforts (through its agents or otherwise) to solicit from its shareholders
proxies in favor of the adoption of this Agreement, and shall take all other
reasonable action to seek the necessary affirmative vote by its shareholders
approving this Agreement and the Merger, except to the extent that the Board of
Directors of Company determines in good faith after consultation with outside
counsel that doing so would cause the Board of Directors of Company to breach
its fiduciary duties to Company's shareholders under applicable law.
SECTION 5.13. Registration Statement; Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement,
(i) Company shall prepare and Company shall file with the SEC a proxy statement
(together with any amendments thereof or supplements thereto, in each case in
the form or forms mailed to Company's shareholders, the "Proxy Statement") and
(ii) Company shall prepare and file with the SEC a registration statement to
register the Merger Shares (in which the Proxy Statement will be included) on
Form S-4 (such registration statement, together with any amendments thereof or
supplements thereto, being the "Registration Statement"). Holdings shall
cooperate with Company in the preparation of the Proxy Statement and the
Registration Statement and shall be provided a reasonable opportunity to review
and comment on such documents. Company shall, as promptly as practicable,
provide Holdings with any comments received from the SEC with respect to the
Proxy Statement or the Registration Statement. Company and Holdings shall
promptly advise the other if any event or circumstance arises with respect to it
or its affiliates or its officers or directors that should be set forth in a
supplement or amendment to the Proxy Statement or the Registration Statement.
Company shall use reasonable commercial efforts to cause the Registration
Statement to be declared effective as promptly as practicable, and shall use
reasonable commercial efforts to take any action required to be taken under any
applicable federal or state securities Laws in connection with the issuance of
the Merger Shares. As
64
promptly as practicable after the Registration Statement shall have been
declared effective, each of Company and Holdings shall mail the Proxy Statement
to its respective shareholders. Company shall cause the Registration Statement
and the Proxy Statement to conform as to form and substance in all material
respects with all applicable requirements of (i) the Exchange Act including
Section 14(a) thereof, and the respective regulations promulgated thereunder,
(ii) the Securities Act, (iii) the rules and regulations of NASDAQ, (iv)
Delaware Law and (v) Texas Law.
(b) The Proxy Statement shall include the recommendation of the Board
of Directors of Company to the shareholders of Company that they vote in favor
of the adoption of this Agreement and the Merger; provided, however, that the
Board of Directors of Company may, at any time prior to the Effective Time,
withdraw, modify or change such recommendation if the Board of Directors of
Company determines in good faith after consultation with outside counsel that
failure to so withdraw, modify or change its recommendation would cause the
Board of Directors of Company to breach its fiduciary duties to Company's
shareholders under applicable law. In addition, the Proxy Statement will include
a copy of the written opinion of Bear Xxxxxxx referred to in Section 4.21.
(c) No amendment or supplement to the Registration Statement or the
Proxy Statement will be made without the approval of each of Holdings and
Company, which approval will not be unreasonably withheld or delayed. Company
will advise Holdings promptly after it receives notice thereof, of the issuance
of any stop order, of the suspension of the qualification of the Company Common
Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC or NASDAQ for amendment of the
Registration Statement or the Proxy Statement or comments thereon and responses
thereto or requests by the SEC for additional information.
(d) The information supplied by Holdings for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein
65
or necessary in order to make the statements therein not misleading. The
information supplied by Holdings for inclusion in the Proxy Statement shall not,
at the date the Proxy Statement is first mailed or at the time of the Company
Shareholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. If, at any time prior to the Effective Time, any
event or circumstance relating to Holdings for any of its subsidiaries, or any
of their respective officers or directors, should be discovered by Holdings that
should be set forth in an amendment or supplement to the Registration Statement
or the Proxy Statement, Holdings shall promptly inform Company.
(e) The information supplied by Company for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading. The information supplied by Company
for inclusion in the Proxy Statement shall not, at the date the Proxy Statement
is first mailed or at the time of the Company Shareholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. If, at
any time prior to the Effective Time, any event or circumstance relating to
Company or its subsidiaries, or any of their respective officers or directors,
should be discovered by Company that should be set forth in an amendment or
supplement to the Registration Statement or the Proxy Statement, Company shall
promptly inform Holdings.
SECTION 5.14. Insurance and Indemnification. (a) For a period of three
years after the Effective Time, the Surviving Corporation shall provide
officers' and directors' liability insurance in respect of acts or omissions
occurring up to and including the Effective Time covering each person currently
covered by Holdings' and Company's officers' and directors' liability insurance
policies on terms with respect to coverage and in amounts (including
deductibles) no less favorable than those of such policies in effect on the date
hereof. For a period of six years after the Effective Time, the Surviving
Corporation shall not amend or
66
otherwise modify Article Nine of the articles of incorporation of the Surviving
Corporation (as in effect at the Effective Time) in a manner that would
adversely affect the indemnification rights thereunder of any individuals who at
any time prior to the Effective Time were directors or officers of Holdings or
Company in respect of acts or omissions occurring at or prior to the Effective
Time (including, without limitation, the transactions contemplated by this
Agreement), unless such amendment or modification is required by Law.
(b) The provisions of this Section 5.14 are intended for the benefit
of, and shall be enforceable by, each insured or indemnified party and his or
her heirs and representatives.
SECTION 5.15. Employee Loans. Prior to the Effective Time, the principal
balance of the employee loans owing to Company and Holdings described on
Schedule 5.15 will be forgiven by Company or Holdings, as applicable.
SECTION 5.16. Takeover Statutes. If any "fair price", "moratorium",
"control share acquisition" or similar state or federal anti-takeover statute or
regulation is or may become applicable to the Merger or the transaction
contemplated hereby each of Company and Holdings and its respective Board of
Directors shall grant such approvals and take such actions as are necessary so
that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement and otherwise act to eliminate or minimize
the effects of such statute or regulation on such transactions.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.01. Conditions to Obligations of Each Party Under This Agreement.
The respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of the
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following conditions, any or all of which may be waived in writing by the
parties hereto, in whole or in part, to the extent permitted by applicable Law:
(a) This Agreement and the Merger shall have been approved by the
requisite vote of the shareholders of Company and the stockholders of Holdings.
(b) No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order,
whether temporary, preliminary or permanent (an "Order"), which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting or
materially delaying consummation of the Merger; and no such Governmental Entity
shall have initiated or threatened to initiate any proceeding seeking any of the
foregoing.
(c) The applicable waiting period under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or been
terminated.
(d) The Senior Financing shall be in full force and effect as of the
Effective Time.
(e) Xxxxxx & Xxxx, L.L.P. shall have delivered to each of Company,
Holdings and Holdings' stockholders its written opinion substantially to the
effect that (i) the Merger will constitute a reorganization within the meaning
of section 368(a) of the Code, (ii) Company and Holdings will each be a party to
that reorganization within the meaning of section 368(b) of the Code, and (iii)
Company, Holdings and Holdings' stockholders will not recognize any gain or loss
for U.S. federal income tax purposes as a result of the Merger, except that
Xxxxxx & Xxxx, L.L.P. shall not express an opinion concerning whether the
receipt of shares of Company Common Stock exchanged for Holdings Preferred
Stock, insofar as measured with respect to accrued and unpaid dividends on
Holdings Preferred Stock, will result in taxable income to the holders of
Holdings Preferred Stock.
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(f) Each of Xxxxx Xxxxxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxxxx, Xxxxx
Xxxxxxxx and Xxxx Xxxx shall have entered into an employment agreement with the
Surviving Corporation substantially in the form of Exhibit D, which shall be
signed as of the date hereof and shall be in full force and effect on the
Closing Date.
(g) The Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order. The Proxy Statement shall have been delivered to the
shareholders of the Company in accordance with the requirements of the Exchange
Act.
(h) The Company shall have received all state securities and "blue sky"
permits and approvals necessary to consummate the Merger and the transactions
contemplated hereby.
(i) The Xxxxxx Consent shall be in full force and effect without
amendment or modification since the date of this Agreement, and the Xxxxxx Note
shall have been paid in full at or prior to the Closing Date, and all
obligations of Holdings or any of its subsidiaries thereunder shall be released
upon payment of all obligations thereunder.
(j) The shareholders listed on Schedule 6.01(j) shall have entered into
a Shareholders' Agreement with the Company and subsidiary substantially in the
form of Exhibit F.
SECTION 6.02. Additional Conditions to Obligations of Company. The
obligations of Company to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived in
writing by Company, in whole or in part:
69
(a) Each of the representations and warranties of Holdings set forth in
this Agreement that contains any materiality qualification shall be true and
correct in all respects as of the Closing Date as though made on and as of the
Closing Date (except to the extent any such representation and warranty
specifically relates to an earlier date, in which case such representation and
warranty shall be true and correct in all respects as of such earlier date), and
each of the representations and warranties of Holdings set forth in this
Agreement that does not contain any materiality qualification shall be true and
correct in all material respects as of the Closing Date as though made on and as
of the Closing Date (except to the extent any such representation and warranty
specifically relates to an earlier date, in which case such representation and
warranty shall be true and correct in all material respects as of such earlier
date). Company shall have received certificates of the President and the Chief
Financial Officer of Holdings dated the Closing Date, to such effect.
(b) Holdings shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date. Company shall have received
certificates of the President and the Chief Financial Officer of Holdings, as
applicable, dated the Closing Date, to that effect.
(c) Since December 26, 1998, there shall have been no change, event,
occurrence or circumstance in the current or future business, financial
condition or results of operations of Holdings or any of its subsidiaries having
or reasonably likely to have a Material Adverse Effect on Holdings. Company
shall have received a certificate of the President and the Chief Financial
Officer of Holdings, dated the Closing Date, to such effect.
(d) Counsel to Holdings shall provide a written legal opinion to
Company, in form and substance satisfactory to Company and its counsel, covering
the matters set forth in Exhibit E.
(e) All of the Holdings Warrants shall have been exchanged or exercised
for shares of Holdings Common Stock.
70
(f) Holdings shall have delivered to Company affiliate letters executed
by the Affiliates substantially in the form of Exhibit G.
(g) Holdings shall provide written evidence to Company of the
termination of the credit facility of Holdings and its subsidiaries with
NationsBank of Texas, N.A. at or prior to the Effective Time, and all
obligations of Holdings or any of its subsidiaries thereunder shall be released
upon payment of all obligations thereunder.
(h) Holdings shall provide written evidence to Company of the
termination of the consulting agreements with Rosecliff and Buttonwood as of the
Effective Time, and all obligations of Holdings or any of its subsidiaries to
Rosecliff and Buttonwood thereunder or otherwise shall be terminated as of the
Effective Time.
(i) Holdings shall provide written evidence that all filings,
authorizations, consents, approvals or other actions listed on Schedule 6.02(i)
shall have been filed, obtained, or taken, as the case may be.
(j) Holdings shall provide written evidence that all of the Company
Common Stock received by the Holdings stockholders described in the shareholder
summary in Schedule 3.03(a), except for those listed under the caption
"Rosecliff Investors and Affiliates" on that schedule, shall have been
distributed at or promptly after the Closing Date.
SECTION 6.03. Additional Conditions to Obligations of Holdings. The
obligations of Holdings to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived in
writing by Holdings, in whole or in part:
(a) Each of the representations and warranties of Company set forth in
this Agreement that contains any materiality qualification shall be true and
correct in all respects as
71
of the Closing Date as though made on and as of the Closing Date (except to the
extent any such representation and warranty specifically relates to an earlier
date, in which case such representation and warranty shall be true and correct
in all respects as of such earlier date), and each of the representations and
warranties of Company set forth in this Agreement that does not contain any
materiality qualification shall be true and correct in all material respects as
of the Closing Date as though made on and as of the Closing Date (except to the
extent any such representation and warranty specifically relates to an earlier
date, in which case such representation and warranty shall be true and correct
in all material respects as of such earlier date). Holdings shall have received
a certificate of the President and the Chief Financial Officer of Company, dated
the Closing Date, to such effect.
(b) Company shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date. Holdings shall have
received a certificate of the President and the Chief Financial Officer of
Company, dated the Closing Date, to that effect.
(c) Since October 2, 1998, there shall have been no change, event,
occurrence or circumstance in the current or future business, financial
condition or results of operations of Company or any of its subsidiaries having
or reasonably likely to have a Material Adverse Effect on Company. Holdings
shall have received a certificate of the President and the Chief Financial
Officer of Company, dated the Closing Date, to such effect.
(d) Company shall provide written evidence that all filings,
authorizations, consents, approvals or other actions listed on Schedule 6.03(d)
shall have been filed, obtained or taken, as the case may be.
(e) Counsel to Company shall provide a written legal opinion to
Holdings, in form and substance satisfactory to Holdings and its counsel,
covering the matters set forth in Exhibit I.
72
(f) Company shall provide written evidence to Holdings of the
termination of the credit facility of Company and its subsidiaries with Bank of
America Texas, N.A. at or prior to the Effective Time, and all obligations of
Company or any of its subsidiaries thereunder shall be released upon payment of
all obligations thereunder.
(g) The Merger Shares shall be approved for listing on NASDAQ.
(h) The Affiliates shall have entered into a Registration Rights
Agreement with the Company substantially in the form of Exhibit J.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the shareholders of Company or Holdings:
(a) by mutual written consent of Company and Holdings;
(b) by either Company or Holdings, if there shall be any Order which is
final and nonappealable preventing the consummation of the Merger, except if the
party relying on such Order to terminate this Agreement has not complied with
its obligations under Section 5.08(d) of this Agreement;
(c) by either Company or Holdings, if the Merger shall not have been
consummated before September 30, 1999 unless the failure to consummate the
Merger by such date is the result of a willful material breach of this Agreement
by the party seeking to terminate;
73
(d) by either Company or Holdings if this Agreement and the Merger
shall fail to receive the requisite vote for approval and adoption at the
Company Shareholders' Meeting;
(e) by Holdings, upon a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this Agreement, or if
any representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 6.03(a), (b), (c) or (d), as
the case may be, would be incapable of being satisfied by September 30, 1999;
provided, that in any case, a willful material breach shall be deemed to cause
such conditions to be incapable of being satisfied for purposes of this Section
7.01(e);
(f) by Holdings, if the Board of Directors of Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Holdings its
approval or recommendation of the Merger or this Agreement or failed to
reconfirm its recommendation within 15 business days after a written request to
do so, or approved or recommended any Company Competing Transaction;
(g) by Company, upon a breach of any representation, warranty, covenant
or agreement on the part of Holdings set forth in this Agreement, or if any
representation or warranty of Holdings shall have become untrue, in either case
such that the conditions set forth in Section 6.02(a), (b), (c) or (i), as the
case may be, would be incapable of being satisfied by September 30, 1999;
provided, that in any case, a willful breach shall be deemed to cause such
conditions to be incapable of being satisfied for purposes of this Section
7.01(g); or
(h) by Company, in accordance with Section 5.06(b), provided that it
has complied with all provisions thereof, including the notice provisions
therein, and that it complies with applicable requirements of Section 7.05.
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf
74
of any party hereto, any person controlling any such party or any of their
respective officers, directors, representatives or agents, whether prior to or
after the execution of this Agreement.
SECTION 7.02. Effect of Termination. Except as provided in Section 5.06(b),
7.05, 9.01 or this Section 7.02, in the event of the termination of this
Agreement pursuant to Section 7.01, this Agreement shall forthwith become void,
there shall be no liability on the part of the parties to the other parties and
all rights and obligations of any party hereto shall cease, except to the extent
that such termination results from the willful breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, in which case the non-breaching party shall have the rights and
remedies available to it at Law or in equity as a result of such willful breach.
SECTION 7.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
or committee thereof, as applicable, at any time prior to the Effective Time;
provided, however, (a) no amendment, which under applicable Law may not be made
without the approval of the shareholders of Holdings, may be made without such
approval and (b) no amendment, which under applicable Law, may not be made
without the approval of the stockholders of Company, may be made without such
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 7.04. Waiver. Subject to Section 7.03, at any time prior to the
Effective Time, any party hereto may (a) extend the time for the performance of
any of the obligations or other acts of any other party hereto, (b) waive any
inaccuracies in the representations and warranties of any other party contained
herein or in any document delivered pursuant hereto, or (c) waive compliance by
any other party with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
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SECTION 7.05. Expenses and Other Payments.
(a) Except as set forth in this Section 7.05, all Expenses incurred by
Company in connection with the negotiation, execution and performance of this
Agreement or any of the transactions contemplated hereby shall be borne solely
and entirely by Company, and all Expenses incurred by Holdings in connection
with the negotiation, execution and performance of this Agreement or any of the
transactions contemplated hereby shall be borne solely and entirely by Holdings;
provided, however, that Expenses borne by Holdings shall not include any
out-of-pocket expenses of counsel and advisors to Xxxxxx or counsel and advisors
to the estate of Xxxxx X. Xxxxxx.
(b) Holdings and Company agree that if this Agreement is terminated by
Company pursuant to Sections 7.01(c), (d) or (h) or by Holdings pursuant to
Sections 7.01(c), (d) or (f), and at or prior to such termination there exists a
Company Competing Transaction and prior to or within 12 months of such
termination, Company recommends or enters into a letter of intent or definitive
agreement for, or consummates, a Company Competing Transaction, Company shall
pay to Holdings a termination fee equal to $3,000,000, plus all documented
out-of-pocket Expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by Holdings in connection with this
Agreement and the transactions contemplated by this Agreement in an amount not
to exceed $750,000.
(c) Holdings and Company agree that if this Agreement is terminated (i)
by Holdings pursuant to Section 7.01(e), subject to the provision in Section
7.02 regarding willful breach, Company shall reimburse all of Holdings' Expenses
relating to the Merger in an amount not to exceed $1,000,000; provided, however,
that Expenses borne by Holdings shall not include any out-of-pocket expenses of
counsel and advisors to Xxxxxx or counsel and advisors to the estate of Xxxxx X.
Xxxxxx, or (ii) by Company pursuant to Section 7.01(g), subject to the provision
in Section 7.02 regarding willful breach, Holdings shall reimburse all of
Company's Expenses relating to the Merger in an amount not to exceed $1,000,000.
76
(d) Any payment required to be made pursuant to Section 7.05(b) shall
be made contemporaneously with the recommendation, execution of a letter of
intent or definitive agreement or consummation, as applicable, of the Company
Competing Transaction, and shall be made by wire transfer of immediately
available funds to an account designated by Holdings.
(e) Any filing fees under the HSR Act shall be shared equally by
Holdings and Company.
(f) Company and Holdings acknowledge that the agreements contained in
this Section 7.05 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Holdings and Company would not
enter into this Agreement; accordingly, if either Company or Holdings fails to
pay promptly the amount due pursuant to this Section 7.05, and, in order to
obtain such payment, the other party commences a suit which results in a
judgment against Company or Holdings for such amount, Company shall pay to
Holdings or Holdings shall pay to Company Expenses in connection with such suit,
together with interest on the amount of such amount at the prime rate of Bank of
America in effect on the date such payment was required to be made.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements.
(a) Except as set forth in Section 8.01(b), the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers, directors, representatives or agents, whether prior to or after the
execution of this Agreement.
77
(b) The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VII, except that the agreements set forth in Articles I, II
and VIII shall survive the Effective Time and those set forth in Sections 7.02
and 7.05 and Article VIII shall survive termination. Nothing herein shall be
construed to cause the Confidentiality Agreements to terminate upon the
termination of this Agreement pursuant to Article VII.
SECTION 8.02. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the facsimile number
specified below:
(a) If to Company, to:
Fresh America Corp.
0000 XXX Xxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
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(b) If to Holdings, to:
FreshPoint Holdings, Inc.
00000 Xxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
SECTION 8.03. Certain Definitions. For the purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person.
(b) a "person" shall be deemed a "beneficial owner" of or to have
"beneficial ownership" of Holdings Common Stock or Company Common Stock, as the
case may be, in accordance with the interpretation of the term "beneficial
ownership" as defined in Rule 13d-3 under the Exchange Act, as in effect on the
date hereof; provided that a person shall be deemed to be the beneficial owner
of, and to have beneficial ownership of, Holdings Common Stock or Company Common
Stock, as the case may be, that such person or any affiliate of such person has
the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise.
79
(c) "business day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
(d) "control" (including the terms "controlled," "controlled by," and
"under common control with") means the possession, directly or indirectly, or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise.
(e) "Expenses" shall include all out-of-pocket expenses (including,
without limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates) incurred
by a party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
preparation, printing, filing and mailing of the Registration Statement, the
Proxy Statement, the solicitation of shareholder approvals and all other matters
related to the consummation of the transactions contemplated hereby.
(f) "knowledge" or "known" means with respect to any matter in
question, if an executive officer of Holdings or Company, as the case may be,
has actual knowledge after reasonable inquiry of such matter.
(g) "Material Adverse Effect" means, when used in connection with
Company or Holdings, any change, circumstance or effect that, individually or
when taken together with all other such changes, circumstances or effects, could
reasonably be expected to be materially adverse to the business, operations,
assets, financial condition, results of operations or prospects of such party
and of its subsidiaries, taken as a whole.
(h) "Merger Shares" means Company Common Stock issued pursuant to
Sections 2.01(a) and (b).
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(i) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as used
in Section 13(d) of the Exchange Act).
(j) "subsidiary" or "subsidiaries" of Holdings, Company, the Surviving
Corporation or any other person, means any corporation, partnership, joint
venture or other legal entity of which Holdings, Company, the Surviving
Corporation or any such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly, 50
percent or more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
(k) "Tax" or "Taxes" means any and all taxes, charges, fees, levies,
assessments, duties or other amounts payable to any federal, state, local or
foreign taxing authority or agency, including, without limitation, (i) income,
franchise, profits, gross receipts, minimum, alternative minimum, estimated, ad
valorem, value added, sales, use, service, real or personal property, capital
stock, license, payroll, withholding, disability, employment, social security,
workers compensation, unemployment compensation, utility, severance, excise,
stamp, windfall profits, transfer and gains taxes, (ii) customs, duties,
imposts, charges, levies or other similar assessments of any kind, and (iii)
interest, penalties and additions to tax imposed with respect thereto.
SECTION 8.04. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement Section references herein are, unless the
context otherwise requires, references to sections of this Agreement.
SECTION 8.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so
81
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
SECTION 8.06. Entire Agreement. This Agreement (together with the Exhibits
and Schedules) and the Confidentiality Agreements constitute the entire
agreement of the parties, and supersede all prior agreements and undertakings,
both written and oral, among the parties or between any of them, with respect to
the subject matter hereof.
SECTION 8.07. Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
SECTION 8.08. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied (other than as contemplated by Article II or Section 5.14),
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 8.09. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
82
SECTION 8.10. Governing Law. Except to the extent the laws of the State of
Delaware are mandatorily applicable to the Merger, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of Texas,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law thereof.
SECTION 8.11. Counterparts. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
83
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
FRESH AMERICA CORP.
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
-------------------------------------
Title: Chairman and Chief Executive Officer
------------------------------------
FRESHPOINT HOLDINGS, INC.
By: /s/ Xxxx Xxxxxx
---------------------------------------
Name: Xxxx Xxxxxx
-------------------------------------
Title: President and Chief Executive Officer
------------------------------------
84
EXHIBIT C
BOARD OF DIRECTORS OF
FRESHPOINT AMERICA, INC.
NAME TERM EXPIRES
---- ------------
Xxxxx Xxxxxxxxx (1) 2002
Xxxxxxxx Xxxxxxx (1) 2001
Xxxxx Xxxxxxxxx (1) 2000
Xxxxxx Xxxxx (1) 2000
Colon Xxxxxxxx (1) 2001
Xxxx X. Xxxxxxx (2) 2001
Xxxx Xxxxxx (2) 2002
Xxxxxx X. Xxxxxxx (2) 2001
Xxxxx Xxxxxxxx (2) 2002
Xxxx Xxxxxxxxx (2) 2000
Xxx Xxxxxxx (2) 2000
----------
(1) Designated by Company
(2) Designated by Holdings
85
EXECUTIVE OFFICERS OF
FRESHPOINT AMERICA, INC.
NAME OFFICE
---- ------
Xxxxx Xxxxxxxxx Chairman of the Board
Xxxx Xxxxxx Chief Executive Officer
Xxxxx Xxxxxxxxx Executive Vice President, President Fresh
America Division
Xxxxx Xxxxxxxx Executive Vice President, President Fresh
Point Division
Xxxx Xxxx Executive Vice President, Chief Financial
Officer
86
EXHIBIT D
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), made and entered into as of
_______________, 1999 by and between __________________________, a resident of
the State of Texas (the "EXECUTIVE") and FRESH AMERICA CORP., a Texas
corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of _________________, 1999, by and between the Company and
FRESHPOINT HOLDINGS, INC., a Delaware Corporation ("HOLDINGS"), Holdings will
merge with and into the Company (the "Merger"), with the Company being the
surviving entity resulting from the Merger and having the name FRESHPOINT
AMERICA, INC.;
WHEREAS, the Executive is serving as the ______________________________
of the _______________________;
WHEREAS, as a condition to the execution of the Merger Agreement, the
Executive and Company have agreed to enter into this Agreement whereby the
Executive shall serve as the ______________________ of the Company; and
WHEREAS, the Board of Directors of the Company (the "BOARD OF
DIRECTORS") desires the Company to employ the Executive, and the Executive
desires to be employed by the
Exhibit D
Employment Agreement
Page 1
87
Company, on the terms and conditions set forth in this Agreement but only in the
event the Merger is consummated.
NOW, THEREFORE, in consideration of the employment of the Executive by
the Company, of the premises and the mutual promises and covenants contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby accepts such employment subject to the consummation of the
Merger, on the terms and conditions set forth in this Agreement. The Executive
represents and warrants that he is not a signatory to, or otherwise bound by,
any agreement that would prevent or materially impair his ability to accept and
perform the employment duties contemplated by this Agreement.
2. Term. Subject to the provisions of Sections 10 and 12 of this
Agreement, the period of Executive's employment under this Agreement (the
"TERM") shall be deemed to have commenced as of the effective time of the Merger
(the "EFFECTIVE TIME"), and shall continue for a period of twenty four (24)
calendar months thereafter, and any extensions thereafter, unless the Executive
dies before the end of such twenty four (24) months, in which case the period of
employment shall continue until the end of the month of such death. [NOTE: AS TO
XXXX XXXX ONLY, 12 MONTHS IS SUBSTITUTED FOR 24 MONTHS IN THE PRECEDING
PARAGRAPH.]
The said twenty four (24) month period of employment shall
automatically be extended for additional twenty four (24) full calendar months
terms without further action by the parties, commencing on the second
anniversary of this Agreement and each anniversary thereafter. No
Exhibit D
Employment Agreement
Page 2
88
such automatic extension shall occur if either party shall, at least ninety (90)
days prior to any said anniversary, have served written notice upon the other of
its intention that this Agreement shall not be so extended. [NOTE: AS TO XXXX
XXXX ONLY, THE PRECEDING PARAGRAPH IS NOT APPLICABLE.]
3. Duties, Authority, Status and Responsibilities. The Executive shall
serve in the capacity or capacities and shall have the duties and
responsibilities set forth in Section A of Appendix I attached hereto and such
other duties and responsibilities consistent therewith as may be determined from
time to time by the Board of Directors. During the Term, the Executive shall
devote substantially all his time and use his best efforts during normal
business hours to the business and affairs of the Company except for vacations,
illness or as otherwise agreed to by the Board of Directors and the Executive.
Subject to his election or appointment as such, the Executive agrees to serve
without additional compensation during the Term as a director or a member of any
committee of the Board of Directors or the board of directors of any of the
Company's affiliates.
4. Place of Performance. The Executive shall be based and shall perform
his duties at the offices of the Company set forth in Section B of Appendix I
attached hereto, except for reasonable travel as the performance of the
Executive's duties may require.
5. Compensation.
(a) Base Salary. Subject to Section 10, during the Term, the
Executive shall receive from the Company the annual base salary set forth in
Section C of Appendix I attached hereto (as in effect from time to time, the
("BASE SALARY"). The Base Salary shall be payable in
Exhibit D
Employment Agreement
Page 3
89
regular installments in accordance with the customary executive payroll
practices of the Company. The Board of Directors shall review the Executive's
Base Salary annually and in its sole discretion may adjust upwards the
Executive's Base Salary from year to year during the term of this Agreement. The
annual compensation adjustment, (regardless of form), will be determined by the
Board of Directors after taking into account, among other things, changes in the
cost of living, Executive's performance and the performance of the Company. Any
action or review by the Board of Directors may be delegated to an appropriate
committee thereof.
(b) Incentive Compensation. In addition to Base Salary and subject
to Section 11, with respect to each fiscal year of the Company during the Term,
the Executive shall be eligible to earn incentive or bonus compensation (the
"BONUS"). The amount of the Bonus (the "BONUS AMOUNT") shall be determined in
accordance with the bonus plan (the "BONUS PLAN"), attached hereto as Schedule
A. The Bonus Amount shall be paid within the earlier of 15 days of the Board of
Director's receipt of the Company's audited financial statements for the
applicable fiscal year and 90 days after the end of such fiscal year.
6. Expenses. During the Term, the Executive shall be entitled to
receive from the Company prompt reimbursement for all reasonable travel and
business expenses incurred by him (in accordance with the policies and
procedures established by the Board of Directors from time to time for the
Company's senior executive officers) in performing services hereunder, upon
presentation of expense statements or vouchers and such other information as the
Company may reasonably require.
Exhibit D
Employment Agreement
Page 4
90
7. Employee Benefits.
(a) General. The Executive shall be entitled to participate in all
executive benefit plans, programs and arrangements of the Company now or
hereafter made available to senior executives of the Company, as such plans,
programs and arrangements may be in effect from time to time. Without limitation
of the Executive's rights under Section 5(b) and 8, the compensation committee
of the Board of Directors or the Board of Directors shall determine, from time
to time, the extent to which the Executive shall have the right to participate
in other bonus, incentive compensation, stock option or purchase plans. The
Company shall indemnify the Executive and hold the Executive harmless from and
against any claim, loss or cause of action arising from or out of the
Executive's performance as an officer, director or Executive of the Company to
the maximum extent permitted by law and the certificate of incorporation and
by-laws of the Company, except in cases where such performance constitutes
fraud, gross negligence, criminal conduct or bad faith. The Company shall
maintain in full force and effect directors' and officers' liability insurance
unless the Board of Directors of the Company determines that the cost of such
insurance is not commercially reasonable when weighed against the nature of the
coverage available.
(b) Vacations. The Executive shall be entitled to annual vacations
in accordance with the Company's vacation policies in effect from time to time
for senior executives of the Company, but in any event shall be entitled to not
less than the number of weeks described in Section D of Appendix I attached
hereto which may be used during the twelve month period during the Term in which
accrued or in the next succeeding twelve month period during the Term; provided,
that the Executive's accrued and unused vacation shall not exceed six weeks at
Exhibit D
Employment Agreement
Page 5
91
any time. Vacations shall not be taken in a manner which will unreasonably
interfere with the Executive's duties hereunder. The Executive shall also be
entitled to all paid holidays and personal days given by the Company to its
senior executives.
8. Other Long Term Compensation. The Executive is granted an option to
purchase the number of shares of common stock in the Company, set forth in
Section E of Appendix I (the "OPTIONS"); and, shall further participate in such
other long term compensation arrangements, set forth in Section E of Appendix I.
If either (i) a Change in Control has occurred as set forth in Section 12 of
this Agreement; or, (ii) this Agreement is terminated by the Company at any time
for any reason other than for Cause, as defined in Section 10 herein, all
Options not previously vested shall vest 100% on the date of such event.
9. Restrictive Covenants and Confidentiality.
(a) Non-competition and Non-solicitation.
(i) For a period commencing with the Effective Time and ending
two (2) years after the Executive is no longer employed by the Company or any
affiliate of the Company (the "RESTRICTED PERIOD"), the Executive shall not, and
shall not permit any of his affiliates to, directly or indirectly, in any
geographical area in which the Company does business, as of the date the
Executive's employment by the Company terminates for any reason (the
"Territory"), engage in the business of purchasing, selling and distributing,
and arranging for or brokering the sale and distribution of fresh fruits and
vegetables or such other products or other businesses as the Company and its
affiliates are then engaged (the "BUSINESS") or, whether alone or in association
with others, as principal, officer, agent, executive, director or stockholder of
any
Exhibit D
Employment Agreement
Page 6
92
corporation, partnership, association or other entity, or through the investment
of capital, lending of money or property, rendering of services or otherwise,
engage, influence, control, have an interest in or otherwise become actively
involved with any business competitive with the Business of the Company and its
affiliates.
(ii) During the Restricted Period, the Executive shall not, and
shall not permit any of his respective affiliates, employees, or agents to,
directly or indirectly, on their own behalf or on behalf of any other person,
(A) call upon, accept business from, or solicit the business of (or attempt to
do any of the foregoing) any customer of the Company or any of its affiliates or
any other person who is, or who had been at any time during the preceding twelve
months, a customer of the Company or any of its affiliates in the Territory, (B)
otherwise divert or attempt to divert any business from the Company or any of
its affiliates operating in the Territory, (C) interfere with the business
relationships between the Company and any of its affiliates operating in the
Territory, on the one hand, and any of its respective customers, suppliers or
others with whom they have business relationships, on the other hand, or (D)
recruit or otherwise solicit or induce, or enter into or participate in any plan
or arrangement to cause, any person who is an executive of, or otherwise
performing services for, the Company or any of its affiliates to terminate his
or her employment or other relationship with the Company or such affiliate, hire
any person who has left the employ of the Company or any of its affiliates
during the preceding twelve months, or hire any person who is or has been an
executive officer of the Company or any of its affiliates at any time.
Exhibit D
Employment Agreement
Page 7
93
(iii) The Executive shall not at any time, directly or
indirectly, use or purport to authorize any person to use any name, xxxx, logo,
trade dress or other identifying words or images which are the same as or
similar to those used currently or in the past by the Company in connection with
any product or service, whether or not such use would be in a business
competitive with that of the Company or any affiliate of the Company.
(iv) The ownership or control of up to five percent of the
outstanding voting securities or securities of any class of a company with a
class of securities registered under the Securities Exchange Act of 1934, as
amended, shall not be deemed to be a violation of the provisions of this Section
9(a).
(b) Confidential Information.
(i) The Executive acknowledges that in the course of his
employment pursuant to this Agreement, he has had and is expected to continue to
have extensive contact with customers of the Company and its affiliates, and to
have knowledge of and access to trade secrets and other proprietary and
confidential information of the Company and its affiliates, including, without
limitation, the identity of customers and suppliers and other persons with whom
the Company and its affiliates have business relationships, technical
information, knowhow, plans, specifications, and information relating to the
financial condition, results of operations, employees, products, products under
development, inventions, sources, leads or methods of obtaining new products or
business, pricing formulae, methods or procedures, cost of supplies or services
and marketing strategies of the Company or its affiliates or any other
information relating to the Company or its affiliates that could reasonably be
regarded as
Exhibit D
Employment Agreement
Page 8
94
confidential or proprietary or which is not available to the public
(collectively, the "CONFIDENTIAL INFORMATION"), and that such information, even
to the extent it may be or have been developed or acquired by or through the
efforts of the Executive, constitutes valuable, special and unique assets of the
Company and its affiliates developed or acquired at great expense which are the
exclusive property of the Company and its affiliates.
(ii) Executive agrees not to use, disclose or exploit, for two
(2) years after leaving the Company's employ, Confidential Information (as
defined in the preceding subsection) relating to the business of the Company
(whether constituting a trade secret or not) which is or has been disclosed to
Executive or of which Executive became aware as a consequence of or through his
relationship to the Company and which has value to the Company and is not
generally known to its competitors. However, such confidential data and
information shall not include any data or information that has been voluntarily
disclosed to the public by the Company (except where such public disclosure has
been made by Executive without authorization) or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means.
(iii) Without limiting the generality of the foregoing, the
Executive shall not, for two (2) years after leaving the Company's employ,
directly or indirectly, disclose or otherwise make known to any person the names
or addresses of any of the suppliers or customers of the Company or its
affiliates, whether such persons are suppliers or customers as of the Effective
Date or become such in the future and whether or not such persons have
previously conducted business with the Executive in any capacity, or any
information as to the Company's
Exhibit D
Employment Agreement
Page 9
95
executives and others providing services to the Company or its affiliates,
including with respect to their abilities, compensation, benefits and other
terms of employment or engagement.
(iv) Upon the termination of the Executive's employment with the
Company, the Executive shall promptly deliver to the Company all customer files,
correspondence, manuals, notes, notebooks, reports and copies thereof, and all
other materials relating to the Company's business, including without limitation
any materials incorporating Confidential Information, which are in the
possession or control of the Executive.
(v) The Executive acknowledges that the Company would not enter
into this Agreement without the assurances provided above with respect to the
Confidential Information of the Company and its affiliates. Confidential
Information for purposes of this Agreement shall be deemed not to include
information which is generally available to the public, other than as a result
of a breach by the Executive of an obligation of confidentiality.
(c) Continuing Obligations. The Executive acknowledges that the
Company would be irreparably harmed and that monetary damages would not provide
an adequate remedy to it in the event the covenants contained in subsections (a)
and (b) of this Section 9 were not complied with in accordance with their terms.
Accordingly, the Executive agrees that any breach or threatened breach by him of
any provision of subsections (a) and (b) of this Section 9 shall entitle the
Company to seek injunctive and other equitable relief to secure the enforcement
of these provisions, in addition to any other remedies which may be available to
it and it shall be entitled to receive from the Executive reimbursement for all
attorneys' fees and expenses incurred by it in enforcing these provisions
(unless one of them is not the substantially prevailing party in
Exhibit D
Employment Agreement
Page 10
96
any legal action brought for such purposes). It is the desire and intent of the
parties that the provisions of this Section 9 be enforced in full; however, if
any provisions of this Section 9 relating to the time period, scope of
activities or geographic area of restrictions is declared by a court of
competent jurisdiction to exceed the maximum permissible time period, scope of
activities or geographic area, the maximum time period, scope of activities or
geographic area, as the case may be, shall be reduced to the maximum which such
court deems enforceable. If any provisions of this Section 9 other than those
described in the preceding sentence are adjudicated to be invalid or
unenforceable, the invalid or unenforceable provisions shall be deemed amended
(with respect only to the jurisdiction in which such adjudication is made) in
such manner as to render them enforceable and to effectuate as nearly as
possible the original intentions and agreement of the parties.
(d) Modification of Restrictive Period. In the event this Agreement
is terminated either (x) by Employer at any time for any reason other than for
Cause, as defined in Section 10 herein; or, (y) by Executive for Good Reason, as
defined in Section 10 herein, the term "Restrictive Period" as described in
Section 9(a) shall terminate on the date all amounts otherwise payable to the
Executive either have been paid to him or should have been paid to him pursuant
to the terms of this Agreement.
10. Termination. During the term of this Agreement, employment,
including without limitation, except as otherwise provided in this Section 10
and Section 12, all compensation, salary, expenses reimbursement, and the
Executive benefits may be terminated as follows:
(a) At the election of the Company for Cause;
Exhibit D
Employment Agreement
Page 11
97
(b) At the Executive's election, for Good Reason or upon the
Company's breach of any material provision of this Agreement;
(c) As used herein, the term "CAUSE" shall mean the occurrence of
one or more of the following: (i) a material breach by the Executive of any
provision of this Agreement which breach is not cured to the Company's
reasonable satisfaction within ten days after written notice thereof, (ii) the
Executive's gross negligence, willful misconduct or willful refusal or failure
to perform in any material respect any of his duties or responsibilities under
this Agreement, which does not cease to the Company's reasonable satisfaction
within ten days after written notice thereof, (iii) the Executive's
misappropriation for personal use of material assets or any business opportunity
of the Company; (iv) the Board of Directors determination in good faith that the
Executive engaged in conduct that is materially injurious to the Company,
including but not limited to such conduct which the Executive knew to be in
contravention of any federal or state employment law or regulation, or (v) any
event, condition or circumstance which, pursuant to the provisions of PACA or
other federal or state law, renders the Executive unemployable by the Company in
the position and with the duties described in Section 3.
(d) Upon the Executive's death, or, at the election of either party,
upon the Executive's disability as determined in accordance with the standards
and procedures under the Executive's then-current long-term disability insurance
coverage provided by the Company, or, if such disability insurance coverage
provided by the Company is not then in place, upon the Executive's disability
resulting in inability to perform the duties described in Section 3 of this
Exhibit D
Employment Agreement
Page 12
98
Agreement for a period of one hundred and eighty days (180) days during any
twelve (12) month period.
(e) At the Executive's election by delivery of the thirty (30) days'
notice thereof for any reason other than as set forth in Section 10(b) of this
Agreement.
(f) The term "GOOD REASON" shall mean action taken by the Company
which results in:
(i) a reduction in the Executive's Base Salary and or aggregate
level of benefits;
(ii) any requirement by the Company that the Executive relocate
to a location more than fifty (50) miles from the offices of the Company set
forth in Section B of Appendix I attached hereto; or,
(iii) a material breach of this Agreement by the Company.
(g) Provided there has not occurred a Change in Control as set forth
in Section 12 of this Agreement, if this Agreement is either (i) terminated by
the Company at any time for any reason other than for Cause or terminated by the
Executive for Good Reason; or, (ii) not renewed by the Company at the expiration
of the Term and the Executive resigns as an officer and employee of the Company
within thirty (30) days after the expiration of the Term, then the Company shall
pay to the Executive as the Executive's sole remedy hereunder the Executive's
Base Salary and Bonus Amount for a term equal to the greater of either (y) the
remaining months of this Agreement, or (z) twelve (12) months. [NOTE: AS TO XXXX
XXXX ONLY, 6 MONTHS IS SUBSTITUTED FOR 12 MONTHS IN THE PRECEDING PARAGRAPH.]
Exhibit D
Employment Agreement
Page 13
99
(h) If the Agreement is terminated either for Cause or by the
Executive pursuant to Section 10(e) of this Agreement, the Executive shall
receive no further compensation or benefits, other than the Executive's Base
Salary and Bonus Amount accrued through the date of such termination.
11. Notices.
All notices provided for herein shall be in writing and shall be deemed
to be given when delivered in person or deposited in the United States Mail,
registered or certified, return receipt requested, with proper postage prepaid
and addressed as follows:
Company: Fresh America Corp.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Chairman, Compensation Committee
of the Board of Directors
Executive:
12. Change in Control. None of the benefits provided in Section 12 of
this Agreement shall be payable to the Executive unless (i) there shall have
been a Change in Control of the Company, as set forth in this Section 12, and
(ii) the Executive was employed by the Company at least ninety (90) days prior
to such time.
(a) A "CHANGE IN CONTROL" shall be deemed to have occurred if (i)
during the Term of this Agreement, the individuals constituting the Company's
Board of Directors at the effective
Exhibit D
Employment Agreement
Page 14
100
date of this Agreement (the "BEGINNING COMPANY BOARD") cease for any reason to
constitute at least a majority of the Board of Directors, provided that in
making such determination, a director elected by or on the recommendation of the
Beginning Company Board shall be deemed to be a member of such Beginning Company
Board, excluding, for this purpose, any director whose assumption of office
occurs as a result of an actual or threatened election contest or proxy contest
with respect to the election or removal of directors; or, (ii) more than 35% of
the Company's outstanding common stock or equivalent in voting power of any
class or classes of outstanding securities of Company entitled to vote in
elections of directors shall be acquired by any corporation, other person or
group. The term "group" shall mean persons who act in concert as described in
Section 13(d)(3) or 14(d) (2) of the Securities Exchange Act of 1934 as amended;
or, (iii) the Company shall become a subsidiary of another corporation or shall
be merged or consolidated into another corporation; or, (iv) substantially all
of the assets of the Company shall be sold to another entity other than a sale
to a wholly-owned subsidiary of the Company; or, (v) the sale or transfer of a
majority of the stock or substantially all of the assets of the Company
regardless of the form of the transaction, other than a sale to transfer to a
wholly owned subsidiary of the Company and in the case of (iii), (iv), or (v)
above, any of (x) less than a majority of the outstanding voting shares of the
parent or surviving corporation after such acquisition, merger or consolidation
are owned immediately after such acquisition, merger or consolidation by the
owners of the voting shares of the Company immediately before such acquisition,
merger or consolidation, or (y) a person or entity (excluding any corporation
resulting from such business combination or any employee benefit plan or related
trust of the
Exhibit D
Employment Agreement
Page 15
101
Company or such resulting corporation) beneficially owns or controls 35% or more
of the combined voting power of the then outstanding securities of such
corporation, except to the extent that such ownership existed prior to the
business combination, or (z) less than a majority of the members of the board of
directors of the corporation resulting from such business combination were
members of the Company's Board of Directors at the time of the execution of the
initial agreement for such merger or consolidation.
(b) In the event of a Change in Control of the Company, the
Executive shall be entitled for a period of ninety (90) days after the date of
closing of the transaction effecting such Change in Control and at his election,
to either (i) deliver written notice to the Company and the Company of
termination of this Agreement whereupon the Company will continue to pay the
Executive's base salary for twelve (12) months after termination; provided that
all other benefits or compensation, including incentive compensation, shall be
terminated as of the termination of this Agreement; or, (ii) deliver written
notice to the Company that he intends to remain in the employ of the Company and
the Company shall employ the Executive, for the remainder of the term of this
Agreement, or twenty four (24) months, whichever is greater, performing the same
duties that he was performing at the time of the effective date of the Change in
Control and with the same title, compensation, benefits, reporting requirements
and location. Any extension of employment under this Section 12(b) shall be
deemed an extension of the term of this Agreement, during which all provisions
of this Agreement shall remain in effect.
(c) Subject to the terms and conditions of this Agreement, following
a Change in Control of the Company, if the Executive elects to remain hereunder
and is terminated without
Exhibit D
Employment Agreement
Page 16
102
Cause, the Executive shall receive the compensation set forth in Section
12(c)(1) of this Agreement in consideration for the services to be provided on
behalf of the Company as set forth herein.
(1) If the Company terminates the Executive without Cause, or
if the Company takes any action specified in Section 12(c)(2) of this Agreement
during the term of this Agreement following the date of occurrence of a Change
in Control of the Company, (the "TERMINATION OF EMPLOYMENT"), the Company shall
pay the Executive a lump sum cash payment in an amount equal to the product of
(x) two and eleven twelfth's (2 and 11/12) multiplied by (y) the Executive's
annual compensation from the Company, including salary, bonuses, all
perquisites, and all other forms of compensation paid to the Executive for his
benefit or the benefit of his family, however characterized, for the fiscal year
during the term of this Agreement for which such compensation was highest (the
"EXECUTIVE'S ANNUAL SALARY") multiplied by (z) a fraction of which the numerator
shall be 35 less the number of full months that have expired since the effective
date of the Change in Control and the denominator shall be 35. The payment
provided for in this Section 12(c)(1) shall be due and payable to the Executive
within thirty (30) days after the date of the Termination of Employment.
(2) During the remaining term of this Agreement following the
effective date of a Change in Control, if the Company takes any of the following
actions, such action shall be deemed to be a termination without Cause. Those
actions are: (i) a reduction in the Executive's salary, bonus provisions or
other perquisites as were in effect immediately prior to a Change in Control of
the Company, (ii) a material change in the Executive's status, offices, titles,
reporting
Exhibit D
Employment Agreement
Page 17
103
requirements, duties or responsibilities with the Company as in effect
immediately prior to a Change in Control of the Company, or (iii) the Company's
requirement that Executive relocate more than fifty (50) miles from the offices
of the Company immediately prior to a Change in Control of the Company set forth
in Section B of Appendix I attached hereto. In any such event, Executive shall
be entitled to all payments provided for in Section 12(c)(1) of this Agreement.
(d) Notwithstanding any other provision of this Section 12 of this
Agreement, in no event shall the Company pay or be obligated to pay the
Executive an amount which would be an Excess Parachute Payment. The term "Excess
Parachute Payment" shall mean any payment or any portion thereof which would be
an "excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and would result in the
imposition of an excise tax under Section 4999 of the Code, in the opinion of
tax counsel selected by the Company's independent accountants and acceptable to
the Executive. If it is established pursuant to a final determination of a court
or an Internal Revenue Service administrative appeals proceeding that,
notwithstanding the good faith of the Executive and the Company in applying the
terms of this Section 12 of the Agreement, a payment (or portion thereof) made
is an Excess Parachute Payment, then, except as hereafter provided, the
Executive shall have the obligation to repay the Company upon demand an amount
equal to the minimum amount (but without interest) necessary to insure that no
payments made or to be made by the Company pursuant to this Section 12 of the
Agreement is an Excess Parachute Payment; provided, however, that if, in the
opinion of tax counsel selected by the Company's independent
Exhibit D
Employment Agreement
Page 18
104
accountants and acceptable to the Executive, such repayment will not ensure that
no Excess Parachute Payment would be made hereunder, then (1) no such repayment
obligation will exist and (2) the Company shall pay to the Executive an
additional amount in cash equal to the amount necessary to cause the amount of
the aggregate after-tax cash compensation and benefits otherwise receivable by
the Executive to be equal to the aggregate after-tax cash compensation and
benefits he would have received as if Sections 280G and 4999 of the Code had not
been enacted.
13. Resolution of Disputes: Arbitration.
(a) Except as contemplated in Section 9, the Company and the
Executive shall use their best efforts to resolve any dispute, controversy or
claim between them with respect to any matter related to or arising out of this
Agreement (each, a "Dispute") through negotiation. Such negotiation shall begin
immediately after a party has delivered to the other party a written request for
such negotiation. If within 60 days following the date on which such notice is
given, the parties fail to resolve the dispute through such negotiations, then
either party may initiate an arbitration proceeding in accordance with this
Section 13.
(b) Subject to Section 13(a), any Dispute shall be referred to
and finally resolved by arbitration administered by the American Arbitration
Association (the "AAA") in accordance with the Commercial Arbitration Rules of
the AAA and the provisions of this Section 13, before a single arbitrator to be
appointed by the mutual consent of the Company and the Executive. In
Exhibit D
Employment Agreement
Page 19
105
the event that the parties cannot agree on an arbitrator, the parties agree that
the AAA shall designate an arbitrator. The arbitration proceedings shall be held
in Dallas, Texas.
(c) The arbitrator shall decide the Dispute in accordance with this
Agreement and the laws of the State of Texas applicable to agreements made and
to be performed entirely within such State. The decision of the arbitrator shall
be in writing and presented in separate findings of fact and law. The award of
the arbitrator shall be final and binding on the parties from which no appeal
may be taken, and an order confirming the award or judgment upon the award may
be entered into in any court having jurisdiction there over.
(d) Prior to the appointment of the arbitrator, the Company or the
Executive may seek provisional remedies, including, without limitation,
temporary restraining orders and preliminary injunctions. After the appointment
of the arbitrator, the arbitrator shall have sole authority to grant such
provisional remedies as the arbitrator, in its sole discretion, deems necessary
and appropriate.
(e) The arbitrator, in the award, may assess the fees and expenses
of the arbitrator and of the arbitration proceeding, and the witness and
attorneys' fees of the parties, or any part thereof, against either the Company
or the Executive or both of them, taking into account the circumstances of the
case. Except as assessed by the arbitrator in the award and as provided in the
preceding sentence, the Company and the Executive shall each bear their own
costs in connection with the arbitration proceeding, and shall each bear 50% of
the fees and expenses of the arbitrator.
Exhibit D
Employment Agreement
Page 20
106
14. Miscellaneous.
(a) Modification, Waiver, etc. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and a duly authorized officer of
the Company. No waiver by any party hereto at any time of any breach of another
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement shall be binding on and inure to the benefit of
the successors and assigns of the Company.
(b) Withholding Taxes. The Company may withhold from amounts payable
under this Agreement such Federal, state and local taxes as are required to be
withheld pursuant to any applicable law or regulation and the Company shall be
authorized to take such action as may be necessary in the opinion of the
Company's counsel (including, without limitation, withholding from amounts from
any compensation or other amount owing from the Company to Executive) to satisfy
all obligations for the payment of such taxes.
(c) Continuation of Employment. Unless the parties otherwise agree
in writing, continuation of Executive's employment with the Company beyond the
expiration of the Term shall be deemed an employment at will and shall not be
deemed to extend any of the provisions of this Agreement and Executive's
employment may thereafter be terminated at will by Executive or the Company
without further obligation of either party hereunder.
(d) Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas applicable to agreements made
Exhibit D
Employment Agreement
Page 21
107
and to be performed entirely in Texas, without regard to the conflict of laws
principles of such State.
(e) Assignment. This Agreement is a personal contract, and the
rights and interests of the Executive hereunder may not, during the Term, be
sold, transferred, assigned, pledged or hypothecated. This Agreement may be
assigned by the Company to a company which is wholly-owned or controlled
directly or indirectly by the Company, or which is a successor-in-interest to
substantially all of the business operations of the Company. Such assignment
shall become effective when the Company, shall have notified the Executive of
such assignment or at such later date as may be specified in such notice. Upon
such assignment the rights and obligations of the Company, hereunder shall
become the rights and obligations of such company, and the Company shall have no
further rights or obligations hereunder; provided, however, that the Company
shall guarantee the obligations of such company to the Executive under this
Agreement.
(f) Definition of Terms. The term "affiliate", when used in this
Agreement with respect to any person, means any person that, directly or
indirectly, controls, is controlled by or is under common control with such
person, and with respect to any natural person, includes the members of such
person's immediate family (spouse, children and parents). The term "person",
when used in this Agreement, means any natural person or entity with legal
status.
(g) Severability of Invalid or Unenforceable Provisions. The
invalidity or unenforceability of any provision or provisions of this Agreement
shall not affect the validity or
Exhibit D
Employment Agreement
Page 22
108
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
(i) Entire Agreement. This Agreement, together with Schedule A, and
Appendix I, sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersedes all prior agreements,
understandings, promises, covenants, arrangements and communications, both oral
or written, among the parties hereto in respect of the subject matter contained
herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first written above.
"Executive"
(SEAL)
---------------------------------
[name of Executive]
"Company"
Fresh America Corp.
By:
Its:
Exhibit D
Employment Agreement
Page 23
109
Schedule A
BONUS PLAN
The Bonus Plan shall be such plan adopted by the Company as of the Effective
Time substantially on the terms recommended by Price Waterhouse Coopers, LLP or
such other independent compensation consulting firm employed by the Board of
Directors (the "Compensation Consultant"); provided, however, such plan shall
enable the Executive to earn a maximum Bonus Amount equal to 110% of his Base
Salary upon the attainment by the Company of financial earnings that are
reasonably attainable.
Exhibit D
Employment Agreement
Page 24
110
Appendix I to Employment Agreement
between [ ] and [ ] (the "Employment Agreement")
------------------------------------------------------------------
A. Capacity, Duties and Responsibilities.
B. Place of Performance.
The greater Dallas, Texas metropolitan area, or such other place as the
Company and the Executive mutually agree.
C. Compensation.
Annual Base Salary: $ .
------
Bonus calculation: To be determined in accordance with the Bonus Plan,
attached to the Employment Agreement as Schedule A.
D. Number of Weeks of Vacation.
E. Other Long Term Compensation.
Options: The number of Options granted by the Company as of the
Effective Time in an amount of at least and at an exercise
price of not more than recommended by the Compensation
Consultant under the Company's existing stock option plan;
provided, however, the stock option agreement to be entered
into between the Executive and the Company pursuant to such
grant shall provide that the Options shall vest one third per
year starting with the first anniversary of the Effective Time.
111
Other: Such other long term compensation plan or arrangement in which
the Executive will be a participant as of the Effective Time
substantially on the terms and in such amount as recommended by
the Compensation Consultant.
112
EXHIBIT F
===============================================================================
STOCKHOLDERS' AGREEMENT
among
ROSECLIFF RCD MANAGEMENT, L.P.,
ROSECLIFF XXXXXX XXXXXX PARTNERS, L.P.,
ROSECLIFF RCD PARTNERS,
XXXXXX XXXXXX NORTH AMERICA, INC.,
ROSECLIFF RCD PARTNERS BENEFIT RESERVE TRUST,
XXXXX X. XXXXXXXXX
and
XXXXXX X. XXXXXXX
-----------------------------------------------
Dated ________ __, 1999
-----------------------------------------------
===============================================================================
113
TABLE OF CONTENTS
Page
1. Definitions..........................................................1
2. Restrictions on Transfer of Shares...................................3
2.1 Limitation on Transfer...............................................3
2.2 Transfers in Compliance with Law; Substitution of Transferee.........3
3. Corporate Governance.................................................4
3.1 General..............................................................4
3.2 Election of Directors; Number and Composition........................4
3.3 Vacancies............................................................4
4. After-Acquired Securities. ..........................................5
5. Stock Certificate Legend.............................................5
6. Miscellaneous........................................................6
6.1 Notices..............................................................6
6.2 Amendment and Waiver.................................................6
6.3 Specific Performance.................................................7
6.4 Headings.............................................................7
6.5 Severability.........................................................7
6.6 Entire Agreement.....................................................7
6.7 Term of Agreement....................................................7
6.8 Governing Law........................................................7
6.9 Further Assurances...................................................7
6.10 Successors and Assigns..............................................8
6.11 Counterparts........................................................8
114
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of _________ __, 1999 (this
"Agreement"), by and among FreshPoint America, Inc., and Rosecliff RCD
Management, L.P., Rosecliff Xxxxxx Xxxxxx Partners, L.P., Rosecliff RCD
Partners, Xxxxxx Xxxxxx North America, Inc., Rosecliff RCD Partners Benefit
Reserve Trust, Xxxxx X. Xxxxxxxxx and Xxxxxx X. Xxxxxxx (collectively, together
with their respective permitted successors and assigns, including partners of
the various partnerships signatory to this Agreement, the "Principal
Stockholders").
WHEREAS, pursuant to a merger of FreshPoint Holdings, Inc., a
Delaware corporation ("Holdings"), with and into Fresh America Corp., a Texas
corporation (the "Company"), with the Company as the surviving corporation, all
of the outstanding shares of Holdings were converted into [ ] shares of Common
Stock (as hereinafter defined);
WHEREAS, to provide for the management of the Company and to avoid
possible dissension among the Principal Stockholders, the parties hereto wish
to restrict the transfer of the Shares (as hereinafter defined) and to provide
for certain other rights and obligations.
NOW, THEREFORE, in consideration of the mutual promises and
agreements set forth herein, the adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
115
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
For the purposes of this definition, "control," when used with respect to any
Person, means the power to direct or cause the direction of the management or
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Xxxxxx Xxxxxx" means The Xxxxxx Xxxxxx Group PLC.
"Board of Directors" means the Board of Directors of the
Company.
"Charter Documents" means the Certificate of Incorporation
and the Bylaws of the Company as in effect on the date hereof.
"Co-investor Partnerships" means Rosecliff-Palmetto Partners,
L.P., Rosecliff-Mousseteek Partners, L.P., Rosecliff-Drakefield Partners, L.P.,
Rosecliff-CIR Partners, L.P., Rosecliff-SK Partners, L.P., and Rosecliff-ENE
Partners, L.P.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the common stock, par value $1.00 per
share, of the Company or any other capital stock of the Company into which such
stock is reclassified or reconstituted.
"Fresh America Continuing Directors" means the following
persons: (i) each of the following persons so long as he continues to serve as
a member
116
4
of the Board of Directors of the Company: Xxxxx Xxxxxxxxx, Xxxxxx Xxxxxxxxx,
Xxxxxxxx Xxxxxxx, Xxxxxxx Xxxxx and Xxxxx Xxxxxxxx; and (ii) each of their
successors who became a director of the Company and whose nomination for
election by the Company's stockholders was made pursuant to Section 3.2(ii) or
3.3 by the Fresh America Continuing Directors then on the Board of Directors of
the Company.
"Fresh America Principal Stockholders" means Xxxxx X.
Xxxxxxxxx and Xxxxxx X. Xxxxxxx.
"Fresh America Shares" means Shares then owned by the Fresh
America Principal Stockholders.
"FreshPoint Designator" means PTJ GenPar, Inc. until such
time as Rosecliff RCD Partners, and those of the Co-investor Partnerships that
represent in the aggregate a majority of the partnership interest of Rosecliff
RCD Partners held by all of the Co-investor Partnerships, are dissolved and the
shares held by Rosecliff RCD Partners are distributed, at which time the rights
and obligations of the FreshPoint Designator shall be transferred by PTJ
GenPar, Inc. to such other person or persons, as reasonably accepted by
Palmetto Partners, a Texas General Partnership, provided, however, that, if the
FreshPoint Designator exercises its right to replace one of its designees on
the Board of Directors and nominate a new designee for election at an annual
meeting of shareholders of the Company, such new designee must be reasonably
acceptable to the remainder of the directors whose nomination for election by
the Company's shareholders was made pursuant to Section 3.2(i) or 3.3 by the
FreshPoint Designator.
117
5
"FreshPoint Principal Stockholders" means the Principal
Stockholders other than the Fresh America Principal Stockholders.
"FreshPoint Shares" means Shares then owned by the FreshPoint
Principal Stockholders.
"Person" means any individual, firm, corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, governmental body or other
entity of any kind.
"Principal Stockholders" has the meaning set forth in the
preamble of this Agreement.
"Public Sales" means any sale of Common Stock pursuant to (i)
an effective Registration Statement filed under the Securities Act, (ii) Rule
144 under the Securities Act, or (iii) any other sale into the public market
for which a Registration Statement is not required.
"Registration Statement" means a registration statement filed
pursuant to the Securities Act.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.
"Shares" means, with respect to each Principal Stockholder,
all shares of Common Stock now owned or hereafter acquired by such Principal
Stockholder.
118
6
"transfer" has the meaning assigned to such term in Section
2.1.
2. Restrictions on Transfer of Shares.
2.1 Limitation on Transfer. No Principal Stockholder shall
sell, give, assign, hypothecate, pledge, encumber, grant a security interest in
or otherwise dispose of (whether by operation of law or otherwise) any Shares or
any right, title or interest therein or thereto (each a "transfer"), except a
bona fide sale or pledge of such Shares (including pursuant to a statutory
merger transaction) in accordance with the provisions of this Agreement
including, but not limited to, Section 2.2. Any attempt to transfer any Shares
in violation of the preceding sentence shall be null and void ab initio and the
Company shall not register any such transfer.
2.2 Transfers in Compliance with Law; Substitution of
Transferee. Notwithstanding any other provision of this Agreement, no transfer
may be made (a) unless the transfer complies in all respects with the applicable
provisions of this Agreement and applicable federal and state securities laws,
including, without limitation, the Securities Act and (b) other than pursuant to
a Public Sale, unless the transferee agrees in writing
119
7
to be bound by the terms and conditions of this Agreement (whereupon such
transferee shall be substituted for, and shall enjoy the same rights and be
subject to the same obligations, as its predecessor hereunder). A Principal
Stockholder may not encumber or pledge its Shares unless the pledgee agrees in
writing to be bound by the terms and conditions of this Agreement. Nothing
herein shall prohibit a Public Sale made in accordance with applicable law.
3. Corporate Governance.
3.1 General. Each Principal Stockholder shall vote its Shares
at any regular or special meeting of stockholders of the Company or in any
written consent executed in lieu of such a meeting of stockholders of the
Company and shall take all other actions necessary, to give effect to the
provisions of this Agreement (including, without limitation, Section 3.2
hereof), and to ensure that the Charter Documents do not, at any time hereafter,
conflict in any respect with the provisions of this Agreement.
3.2 Election of Directors; Number and Composition. Each
Principal Stockholder agrees that the number of directors constituting the
entire Board of Directors shall be eleven, comprised of the following
individuals:
(i) six individuals designated by the FreshPoint
Designator, which shall initially be Xxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxx
X. Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxxx Xxxxxxxxx and Xxxxxx Xxxxxxx;
provided, however, that (1) one of these individuals shall be Xxxx
Xxxxxx so long as he serves as the chief executive officer of the
Company, (2) one of these individuals shall be Xxxxx Xxxxxxxx so long
as he serves as the Executive Vice President of the Company and the
Food Services Division President, and (3) Xxxxxx Xxxxxx shall have the
right to designate one of these individuals upon written notice to the
FreshPoint Designator, such notice to be given at least 90 days prior
to the annual meeting of the shareholders of the Company, so long as
Xxxxxx Xxxxxx owns Shares representing at least 5% of the outstanding
Common
120
8
Stock or at least 50% of its shares as of the date of this Agreement,
provided, however, that an individual designated by Xxxxxx Xxxxxx may
be designated for removal by the FreshPoint Designator from and after
the date Xxxxxx Xxxxxx owns Shares representing less than 5% of the
outstanding Common Stock or less than 50% of its shares as of the date
of this Agreement; and
(ii) Xxxxx Xxxxxxxxx, Xxxxx Xxxxxxxxx, Xxxxxxxx Xxxxxxx,
Xxxxxx Xxxxx and Xxxxx Xxxxxxxx; provided, however, that if any of
such individuals is no longer serving for any reason, a majority of
the Fresh America Continuing Directors shall designate a replacement
individual (the "Fresh America Designators").
3.3 Vacancies. If at any time a vacancy is created on the
Board of Directors by reason of the death, removal or resignation of any
Director, then each Principal Stockholder shall, as soon as practicable after
the date such vacancy first occurs and in any event prior to the transaction of
any other business by the stockholders of the Company or the Board of Directors,
take action, including the voting of its Shares, to elect a successor as
provided in Section 3.2, provided, however, that the Board of Directors shall
not be prevented from taking any action if the failure to take such action would
be a breach of its fiduciary duties.
4. After-Acquired Securities. All of the provisions of this
Agreement shall apply to all of the Shares now owned or that may be issued or
transferred hereafter to a Principal Stockholder in consequence of any
additional issuance, purchase, exchange or reclassification of any of the Shares
(including without limitation, upon the exercise of any option or warrant),
corporate
121
9
reorganization, or any other form of recapitalization, consolidation, merger,
share split or share dividend, or that are acquired by a Principal Stockholder
in any other manner.
5. Stock Certificate Legend. A copy of this Agreement shall be
filed with the Secretary of the Company and kept with the records of the
Company. Each certificate representing Shares now held or hereafter acquired by
any Principal Stockholder shall, for as long as this Agreement is effective,
bear legends substantially in the following forms:
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR PURSUANT TO A
WRITTEN OPINION OF COUNSEL FOR THE COMPANY THAT REGISTRATION IS NOT
REQUIRED.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
STOCKHOLDERS' AGREEMENT, DATED AS OF _____ __, 1999 (THE
"STOCKHOLDERS' AGREEMENT"), AMONG [STOCKHOLDERS], A COPY OF WHICH MAY
BE INSPECTED AT
122
10
THE COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL NOT REGISTER THE
TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND
UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE
STOCKHOLDERS' AGREEMENT.
Provided, however, that if Shares are transferred to a
permitted transferee pursuant to a Public Sale, the certificates representing
such Shares shall not bear such legend and, if required by the transferor in
order to make the transfer, the Company, at its own expense, shall provide an
opinion of counsel that such transfer may be properly made without registration
under the Securities Act or that such Shares have been registered under a
Registration Statement which is in effect at the date of such transfer.
6. Miscellaneous.
6.1 Notices. All notices or other communications
required or permitted hereunder shall be in writing and shall be delivered
personally, telecopied or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally, telecopied or sent by certified, registered or express mail or, if
mailed, five days after the date of deposit in the United States mail, as
follows:
(a) if to the Company:
with a copy to:
123
11
(b) if to the Principal Stockholders, to the addresses set forth on
Schedule A attached hereto.
Any party may, by notice given in accordance with this Section 6.1, designate
another address or person for receipt of notices hereunder.
6.2 Amendment and Waiver.
(a) No failure or delay on the part of any party hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the parties
hereto at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by any party from the terms of any provision of
this Agreement, shall be effective (i) only if it is made or given in writing
and signed by the
124
12
Principal Stockholders holding two-thirds of the Fresh America Shares and the
FreshPoint Shares provided, however, that modifications to Xxxxxx Xxxxxx'x
rights under Section 3.2(i) shall also require the written approval of Xxxxxx
Xxxxxx and provided, further, that modifications extending the term of this
Agreement or imposing additional restrictions or obligations, shall require the
written approval of all Principal Stockholders, and (ii) only in the specific
instance and for the specific purpose for which made or given.
6.3 Specific Performance. The parties hereto intend that each of the
parties has the right to seek damages or specific performance in the event that
any other party hereto fails to perform such party's obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
6.4 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.5 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid,
125
13
illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
6.6 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
6.7 Term of Agreement. This Agreement shall become effective upon the
execution hereof and shall continue in effect until the earlier of (i) such time
as two annual meetings of the stockholders of the Company have taken place
following 180 days from the date hereof, (ii) such time as the FreshPoint
Principal Stockholders cease to own at least 15% of the outstanding Common
Stock; provided that this Agreement shall cease to be effective as to a
particular Principal Stockholder when it ceases to own any Shares or (iii) the
third anniversary of the date hereof.
6.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
126
14
6.9 Further Assurances. Each of the parties shall, and shall cause
their respective Affiliates to, execute such instruments and take such action as
may be reasonably required or desirable to carry out the provisions hereof and
the transactions contemplated hereby.
6.10 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective permitted successors
and assigns. This Agreement is not assignable except in connection with a
transfer of Shares in accordance with this Agreement.
6.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
127
15
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement on the date first written above.
ROSECLIFF RCD MANAGEMENT, L.P.
By:
---------------------------------
Name:
Title:
ROSECLIFF XXXXXX XXXXXX PARTNERS, L.P.
By:
---------------------------------
Name:
Title:
ROSECLIFF RCD PARTNERS
By:
---------------------------------
Name:
Title:
000
00
XXXXXX XXXXXX XXXXX XXXXXXX, INC.
By:
---------------------------------
Name:
Title:
ROSECLIFF RCD PARTNERS BENEFIT
RESERVE TRUST
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Xxxxx X. Xxxxxxxxx
By:
---------------------------------
Xxxxxx X. Xxxxxxx
129
17
EXHIBIT J
REGISTRATION RIGHTS AGREEMENT
among
FRESHPOINT AMERICA, INC.
and
ROSECLIFF RCD MANAGEMENT, L.P.,
ROSECLIFF XXXXXX XXXXXX PARTNERS, L.P.,
ROSECLIFF RCD PARTNERS,
XXXXXX XXXXXX NORTH AMERICA, INC.
and
ROSECLIFF RCD PARTNERS BENEFIT RESERVE TRUST
-----------------------------------------------------
Common Stock, par value $0.01 per share
-----------------------------------------------------
Dated as of __________ __, 1999
===============================================================================
130
TABLE OF CONTENTS
Page
1. Securities Subject to this Agreement.................................1
2. Registration Under Securities Act....................................2
2.1 Registration on Request..............................................2
2.2 Piggy-Back Registration..............................................4
(a) Piggy-Back Rights....................................................4
(b) Priority in Piggy-Back Registration..................................5
(c) Expenses.............................................................5
2.3 Registration Procedures..............................................5
2.4 (a) Underwritten Offerings...........................................8
2.5 Preparation; Reasonable Investigation................................9
2.6 Indemnification.....................................................10
3. Lock Up.............................................................13
4. Definitions.........................................................13
5. Rule 144............................................................14
6. Amendments and Waivers..............................................14
7. Nominees for Beneficial Owners......................................14
8. Notices.............................................................15
i
131
9. Assignment..........................................................15
10. Calculation of Percentage Interests in Registrable Securities.......15
11. No Inconsistent Agreements..........................................15
12. Remedies............................................................15
13. Severability........................................................16
14. Entire Agreement....................................................16
15. Descriptive Headings................................................16
16. Governing Law.......................................................16
17. Counterparts........................................................16
18. Term of Agreement...................................................16
19. No Third Party Beneficiaries........................................16
ii
132
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of ____________, 1999 (the
"Agreement"), by and among FreshPoint America, Inc., a Delaware corporation
(the "Company"), and Rosecliff RCD Management, L.P., Rosecliff Xxxxxx Xxxxxx
Partners, L.P., Rosecliff RCD Partners, Xxxxxx Xxxxxx North America, Inc. and
Rosecliff RCD Partners Benefit Reserve Trust, whose names appear on the
signature pages hereto under the heading "RIGHTS HOLDERS" (collectively, the
"Initial Holders"), and, subject to Section 9 hereof, any of their respective
(a) successors-in-interest by merger, consolidation or similar transaction, (b)
family members, trusts wholly or principally for the benefit of family members
and affiliates to whom an Initial Holder or its successor-in-interest transfers
any of the Registrable Securities (as hereinafter defined) initially issued to
such Initial Holder and (c) any other person or persons to whom an Initial
Holder transfers the Registrable Securities initially issued to such Initial
Holder in accordance with the terms hereof or any subsequent transferee of such
person (including partners of the various partnerships signatory to the
Agreement), which family member, trust, affiliate or person described in clause
(b) or (c) is registered on the books of the Company (together with the Initial
Holders, such successors-in-interest, family members, trusts, affiliates and
other persons are hereinafter sometimes referred to as the "Holders").
This Agreement is made pursuant to the Agreement and Plan of Merger,
dated as of __________, 1999, as amended from time to time (the "Merger
Agreement"), by and between Fresh America, Inc. and FreshPoint Holdings, Inc.
("Holdings"), pursuant to which, among other things, (a) Holdings is merging
with and
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into the Company (the "Merger"), with the Company being the surviving
corporation and (b) the Company is issuing shares (the "Shares") of its common
stock to the Initial Holders. In order to induce Holdings to enter into the
Merger Agreement and the Initial Holders to vote in favor of, or consent to,
the Merger, the Company has agreed to provide certain registration rights with
respect to the Shares as set forth in this Agreement.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Securities Subject to this Agreement1. Securities Subject to this
Agreement. The securities entitled to the benefits of this Agreement are the
Shares and any other securities issued by the company in exchange for any of
the Shares (collectively, the "Registrable Securities") but, with respect to
any particular Registrable Security, only so long as it continues to be a
Registrable Security. Registrable Securities shall include any securities
issued as a dividend or distribution on account of Registrable Securities or
resulting from a subdivision of the outstanding shares of Registrable
Securities into a greater number of shares (by reclassification, stock split or
otherwise). For the purposes of this Agreement, a security that was at one time
a Registrable Security shall cease to be a Registrable Security when (a) such
security has been effectively registered under the Securities Act and has been
disposed of pursuant to such registration statement, (b) such security has been
distributed, or may be distributed without any limitation on volume, to the
public pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, provided,
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that, for purposes of this Agreement, any Holder which, together with its
affiliates, holds at least 5% of the Company's issued and outstanding capital
shall be deemed to hold Registrable Securities hereunder whether or not such
Holder is subject to such volume limitations under Rule 144 or, (c) such
security has ceased to be outstanding.
2. Registration Under Securities Act.
2.1 Registration on Request.
(a) Shelf Registration. The Company agrees that it shall
cause to be filed as soon as reasonably practicable following the date hereof
but in no event later than 45 days after the date hereof a "shelf" registration
statement (a "Shelf Registration") on Form S-3 or any other appropriate form
under the Securities Act for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 thereunder or any similar rule that may be adopted
by the Securities and Exchange Commission (the "Commission") (and shall
register or qualify the shares to be sold in such offering under such other
securities or "blue sky" laws as would be required pursuant to Section 2.2
hereof) covering the entire issue of Registrable Securities. Prior to the
filing of the Shelf Registration or any supplement or amendment thereto, the
Company will furnish copies of the Shelf Registration or such amendment to one
counsel designated by the Holders of a majority of the Registrable Securities
participating in the offering (who shall provide copies to any Holder upon its
request), and will not file the Shelf Registration or such amendment without
the prior consent of such counsel, which consent shall not be unreasonably
withheld. The Company shall
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use its best efforts to (a) cause the Shelf Registration to be declared
effective by the Commission as soon as reasonably practicable after its filing,
but in any event on the 180th day following the date hereof, and (b) keep the
Shelf Registration continuously effective (and register or qualify the shares
to be sold in such offering under such other securities or "blue sky" laws as
would be required pursuant to Section 2.2 hereof) until the termination of this
Agreement pursuant to Section 18. Each Holder of Registrable Securities wishing
to sell Registrable Securities pursuant to a Shelf Registration agrees to
deliver a notice to the Company at least three Business Days prior to any
intended distribution of Registrable Securities under the Shelf Registration
Statement. The Company agrees, if necessary, to supplement or make amendments
to the Shelf Registration, if required by the registration form used by the
Company for the Shelf Registration or by the instructions applicable to such
registration form or by the Securities Act or the rules or regulations
thereunder or as may reasonably be requested by the Holders of a majority of
the Registrable Securities then outstanding. Notwithstanding the foregoing, if
(i) the Company shall furnish to the Holders a certificate signed by the Chief
Financial Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company it would be significantly disadvantageous to
the Company and its stockholders for any such Shelf Registration to be amended
or supplemented and (ii) the need for such an amendment or supplement is not
caused by a proposed public offering of any securities of the Company by any of
its shareholders (other than an offering made pursuant to a registration on
Form S-8), the Company may defer such amending or supplementing of such Shelf
Registration for not more than 60 days and in such event the Holders shall be
required to discontinue disposition of any Registrable Securities covered by
such Shelf Registration during such period; provided, however, that the Company
may not, in any 180 day period, defer
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such amendment or supplement for more than 60 days. Notwithstanding the
foregoing, in connection with any amendment or supplement required to effect a
public offering of securities by the Company, the Company shall file such
amendment or supplement no later than the same day that it files a registration
statement relating to such offering and shall provide written notice of the
filing of such amendment or supplement to the Holders of Registrable Securities
promptly following such filing. The Company shall pay all Registration Expenses
incurred in connection with the Shelf Registration and any supplements or
amendments thereto, whether or not it becomes effective, and whether all, none
or some of the Registrable Securities are sold pursuant to the Shelf
Registration. Each of the Holders that distributes Registrable Securities
pursuant to such registration shall pay its pro rata portion of any
underwriting discounts or commissions and transfer taxes relating to the sale
of its Registrable Securities. In no event shall the Shelf Registration include
securities other than Registrable Securities, unless the Holders of a majority
of the Registrable Securities then outstanding consent to such inclusion.
(b) Underwriting Procedures. If the Holders of 20% or
more of the Registrable Securities then outstanding, but not less than 5% of
the Company's issued and outstanding common stock, or any Holder, directly or
together with any permitted transferees (including, but not limited to,
affiliates) of such Holder, of at least 5% of the Company's issued and
outstanding common stock (the "Demanding Holders") so elect from time to time,
the offering of all or a portion of the Registrable Securities pursuant to such
Shelf Registration shall be in the form of an underwritten offering. Upon
receiving notification by the Demanding Holders of their election for an
underwritten offering, the Company shall promptly deliver a notification
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of such election to each Holder of Registrable Securities who is not a
Demanding Holder. All Holders of Registrable Securities shall be entitled to
participate in such offering in accordance with the terms hereof if they so
notify the Company of their desire to do so, specifying the amount of
Registrable Securities they wish to include, within 15 days of receipt of such
notice from the Company. The managing underwriter or managing underwriters of
the underwritten offering to which the Shelf Registration relates shall be a
firm or firms of nationally recognized standing selected by the Holders of a
majority of the Registrable Securities participating in such offering, and
shall be reasonably acceptable to the Company.
(c) Priority in Requested Registration. If a registration
under this Section 2.1 involves an underwritten public offering, and the
managing underwriter of such underwritten offering shall in good faith advise
the Company in writing (with a copy to each selling Holder) that, in its
opinion, the number of shares of Registrable Securities requested to be
included in such registration would materially and adversely affect the success
of such offering, then the number of shares of Registrable Securities to be
included in such offering shall be reduced to the amount recommended by such
managing underwriter, and the shares to be included in such registration shall
be determined in the following order of priority: first, the Put Shares (as
defined below) held by any Holder; and second, among the remaining number of
the Registrable Securities (the "Demand Share Balance") as provided below.
A Holder's amount of Registrable Securities to be included in an
underwritten public offering pursuant to clause second above shall equal the
product of the Demand Share Balance multiplied by a fraction, the numerator of
which is the sum
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(the "Sum") of (i) the number of C Shares (as defined below) held by such
Holder plus (ii) twice the number of P Shares held by such Holder, and the
denominator of which is the aggregate of the Sum calculated for all the Holders
participating in such offering.
"C Shares" means, as at any date, the number of shares of
Registrable Securities held by a Holder that were received by such Holder upon
the exchange of the common stock (or warrants exercisable into common stock),
of Holdings. The initial amount of C shares for each Initial Holder is set
forth on Schedule 2.1.
"P Shares" means, as at any date, the number of shares of
Registrable Securities held by a Holder that were received by such Holder upon
the exchange of the Series A and A-2 Exchangeable Preferred Stock of Holdings.
The initial amount of P Shares for each Initial Holder is set forth on Schedule
2.1.
"Put Shares" means, as at any date, the number of shares of
Registrable Securities held by a Holder that were received by such Holder upon
the exchange of the Series A-1 Exchangeable Preferred Stock of Holdings (plus
accrued dividends). The initial amount of Put Shares for each Initial Holder is
set forth on Schedule 2.1.
If any shares of a Holder cease to be Registrable Securities, the
Holder's Put Shares, P Shares and C Shares shall be reduced first by reducing
Put Shares, then P Shares and last C Shares.
2.2 Piggy-Back Registration.
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(a) Piggy-Back Rights. If the Company proposes to file a
registration statement for an underwritten public offering under the Securities
Act with respect to an offering by the Company of any class of security (other
than a registration statement on Form S-4 or S-8 (or any successor form
thereto)) under the Securities Act (a "Company Offering"), then the Company
shall give written notice of such proposed filing to each of the Holders at
least fifteen (15) days before the anticipated filing date, and such notice
shall describe in detail the proposed registration and distribution (including
those jurisdictions where registration under the securities or blue sky laws is
intended) and offer such Holders the opportunity to register the number of
Registrable Securities as each such Holder may request. The Company shall use
its best efforts to cause the managing underwriter or underwriters of an
underwritten Company Offering (the "Company Underwriter") to permit the Holders
who have requested to participate in the registration for the Company Offering
within fifteen (15) days of the notice provided for in the preceding sentence to
include such Registrable Securities in the Company Offering on the same terms
and conditions as the securities of the Company included therein.
Notwithstanding the foregoing, (i) if it is the Company Underwriter's opinion
that the total amount of securities which the Holders and the Company intend to
include in the Company Offering is sufficiently large so as to have a material
adverse effect on the distribution of the securities included in the Company
Offering, then the securities proposed to be included in the Company Offering by
all Holders shall be reduced, in accordance with Section 2.2(b) below, to the
extent necessary to reduce the securities included in the Company Offering to
the amount recommended by the Company Underwriter.
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(b) Priority in Piggy-Back Registration(b) Priority in
Piggy-Back Registration. The shares of Registrable Securities to be included in
the registration of a Company Offering shall be determined in the following
order of priority: first, the securities proposed to be registered by the
Company; second, the Put Shares held by any Holder; and third among the
remaining number of Registrable Securities of the Holders participating in such
registration (the "Piggy Back Share Balance") as provided below.
A Holder's amount of Registrable Securities to be included in a
Company Offering pursuant to clause third above shall equal the product of the
Piggy Back Share Balance multiplied by a fraction, the numerator of which is
the sum of (i) the number of C Shares held by such Holder plus (ii) twice the
number of P Shares held by such Holder and the denominator of which is the
aggregate of the Sum calculated for all the Holders participating in such
offering.
(c) Expenses(c) Expenses. The Company shall bear all
Registration Expenses in connection with any registration pursuant to this
Section 2.2; provided, however, that each of the Holders that distributes
Registrable Securities pursuant to a Shelf Registration shall pay its pro rata
portion of any underwriting discounts or commissions and transfer taxes
relating to the sale of its Registrable Securities.
2.3 Registration Procedures. In connection with the
registration statement filed pursuant to Section 2.1, the Company will, as
expeditiously as possible:
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(i) prepare and file with the Commission such
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 disposition of
all Registrable Securities covered by such registration statement or
as may be reasonably requested by the Holders of a majority of the
Registrable Securities participating in such offering, until such time
as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement;
(ii) furnish to each seller of Registrable Securities
covered by such registration statement, such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits) and such
number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request;
(iii) use its best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such States of the United States of America where an exemption is not
available and as the sellers
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of Registrable Securities covered by such registration statement shall
reasonably request, (y) to keep such registration or qualification in
effect for so long as such registration statement remains in effect,
and (z) to take any other action which may be reasonably necessary or
advisable to enable such sellers to consummate the disposition in such
jurisdictions of the securities to be sold by such sellers, except
that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision
(iii) be obligated to be so qualified, subject itself to taxation in
any such jurisdiction or to consent to general service of process in
any such jurisdiction;
(iv) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other federal or state governmental agencies
or authorities as may be necessary in the opinion of counsel to the
Company and counsel to the seller or sellers of Registrable Securities
to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities;
(v) use its best efforts to furnish at the effective date
of such registration statement and, if applicable, the date of the
closing under the underwriting agreement, to each seller of
Registrable Securities, and each such seller's underwriters, if any, a
signed counterpart of (x) an opinion of counsel for the Company, dated
the closing date of the offering under such registration statement
addressed to the underwriter(s), if any, and the participating Holders
and (y) in connection with an underwritten offering, a
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"comfort" letter signed by the independent public accountants who have
certified the Company's financial statements included or incorporated
by reference in such registration statement, covering substantially
the same matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the accountants'
comfort letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' comfort letters delivered to the
underwriters in underwritten public offerings of securities;
(vi) promptly notify each seller of Registrable
Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such
registration statement, as then in effect, includes 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, in the light of the circumstances under which
they were made, and promptly prepare and furnish to each such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which
they were made;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first full calendar
month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 promulgated thereunder, and promptly
furnish to each such seller of Registrable Securities a copy of any
amendment or supplement to such registration statement or prospectus;
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(viii) use its best efforts to list all Registrable
Securities covered by such registration statement on the NYSE, the
AMEX or such other national securities exchange on which Registrable
Securities of the same class and, if applicable, series, covered by
such registration statement are then listed or on the National
Association of Securities Dealers Automated Quotations System, Inc.
("NASDAQ") if the Registrable Securities are quoted on NASDAQ; and
(ix) In connection with an underwritten offering,
participate, to the extent reasonably requested by the managing
underwriter for the offering, in customary efforts to sell the
securities under the offering, including, without limitation,
participating in "road shows".
The Company may (i) require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company
may from time to time reasonably request in writing and (ii) require each
seller of Registrable Securities to
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agree to comply with the Securities Act and the Exchange Act in connection with
the registration and distribution of the Registrable Securities.
Notwithstanding the foregoing, if any such registration or
comparable statement refers to any Holder by name or otherwise as the Holder of
any securities of the Company and in its sole and exclusive judgment such
Holder is or might be deemed to be a controlling person of the Company, such
Holder shall have the right to require the insertion therein of language, in
form and substance reasonably satisfactory to such Holder and the Company, to
the effect that the holding by such Holder of such securities is not to be
construed as a recommendation by such Holder of the investment quality of the
Company's securities covered thereby and that such holding does not imply that
such Holder will assist in meeting any future financial requirements of the
Company.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (vi) of this
Section 2.3, such Holder will forthwith discontinue such Holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vi) of this
Section 2.3 and, if so directed by the Company, will promptly deliver to the
Company (at the Company's expense) all copies, other than permanent file
copies, then in such Holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice.
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2.4 (a) Underwritten Offerings. If requested by the
underwriters for any underwritten offering by Holders of Registrable Securities
pursuant to the Shelf Registration, the Company will use its best efforts to
enter into an underwriting agreement with such underwriters for such offering,
such agreement to be reasonably satisfactory in form and substance to each such
Holder, the Company and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of that type, including, without limitation, indemnities to the
effect and to the extent provided in Section 2.6. The Holders of the Registrable
Securities proposed to be sold by such underwriters will reasonably cooperate
with the Company in the negotiation of the underwriting agreement. Such Holders
of Registrable Securities to be sold by such underwriters shall be parties to
such underwriting agreement and may, at their option, require that any or all of
the representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such Holders of Registrable Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
Holders of Registrable Securities. Any such Holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company other than representations, warranties or agreements regarding
such Holder and such Holder's Registrable Securities and such Holder's intended
method of distribution.
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(b) Holdback Agreement. The Company agrees (i) not to
effect any public offering or distribution of any capital stock of the Company
during the 10 days prior to the date on which any underwritten registration
pursuant to Section 2.1 has become effective and until 90 days after the
effective date of such underwritten registration, except as part of such
underwritten registration, and (ii) to cause each holder of any capital stock
acquired from the Company at any time on or after the date of this Agreement
(other than in a public offering), to agree not to effect any public offering
or distribution of such securities, during such period.
2.5 Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company (i) shall give a
representative Holder designated in writing to the Company by the Holders of a
majority of the Registrable Securities participating in the offering (the
"Representative"), such Holders' underwriters, if any, and counsel and
accountants designated by the Representative, as the case may be, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, (ii) shall give each of them such
reasonable access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of the Representative and such underwriters or such counsel or
accountants, to conduct a reasonable investigation within the meaning of the
Securities Act and (iii) shall promptly notify the Representative and its
counsel of any stop order issued or threatened by the Commission and promptly
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
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2.6 Indemnification.
(a) Indemnification by the Company. The Company will, and
hereby does, indemnify, hold harmless and defend, in the case of any
registration statement filed pursuant to, or otherwise covered by, Sections
2.1, 2.2 or 2.3, each seller of any Registrable Securities covered by such
registration statement and each other Person who participates as an underwriter
in the offering or sale of such securities and each other Person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act, and their respective directors, officers, partners,
shareholders, employees and affiliates against any losses, claims, damages or
liabilities, joint or several, to which such seller or underwriter or any such
director, officer, partner, shareholder, employee, affiliate or controlling
person may become subject under the Securities Act or otherwise, including,
without limitation, the fees and expenses of legal counsel, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, or any violation by the
Company of the Securities Act, the Exchange Act, any state securities laws or
other laws or any rule or regulation thereunder applicable to the Company and
the Company will reimburse each
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such seller or underwriter and each such director, officer, partner,
shareholder, employee, affiliate and controlling Person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by or
on behalf of such seller or underwriter, as the case may be, specifically
stating that it is for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of any such seller or any such director, officer, employee, affiliate,
partner or controlling person and shall survive the transfer of such securities
by such seller.
(b) Indemnification by the Sellers. As a result of
including any Registrable Securities in any registration statement, each
prospective seller of such Registrable Securities shall severally, and not
jointly, indemnify, hold harmless and defend (in the same manner and to the
same extent as set forth in subdivision (a) of this Section 2.6) the Company,
and each director, officer, employee and shareholder of the Company and each
other Person, if any, who participates as an underwriter in the offering or
sale of such securities and each other Person who controls the Company or any
such underwriter within the meaning of the Securities Act, with respect to any
untrue statement or alleged untrue statement of a material fact
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contained in or any omission or alleged omission to state therein a material
fact in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such seller
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided, however, that the liability of such
indemnifying party under this Section 2.6(b) shall be limited to the amount of
proceeds received by such indemnifying party in the offering giving rise to
such liability.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
2.6, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 2.6, except to the extent that the indemnifying party is materially
prejudiced by such failure to give notice and provided, further, that the
failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 2.6. In case any such action is brought against an indemnified party
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified
to the extent that it may wish, with counsel
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reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, and so assuming such defense in a timely manner, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that if the indemnified party reasonably believes it is advisable for
it to be represented by separate counsel because there exists a conflict of
interest between its interests and those of the indemnifying party with respect
to such claim, or there exist defenses available to such indemnified party
which may not be available to the indemnifying party, or if the indemnifying
party shall fail to assume responsibility for such defense, the indemnified
party may retain counsel satisfactory to it and the indemnifying party shall
pay all fees and expenses of such counsel. No indemnifying party shall be
liable for any settlement of any action or proceeding effected without its
written consent, which consent shall not be unreasonably withheld or delayed.
No indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation or which requires action other than the payment of
money by the indemnifying party. Each indemnified party shall furnish such
information regarding itself or the claim in question as an indemnifying party
may reasonably request in writing and as shall be reasonably requested in
connection with the defense of such claim and litigation resulting therefrom.
The obligations of the Company and the Holders of Registrable
Securities under this Section 2.6 shall survive the completion of any offering
of
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Registrable Securities in a registration statement under this Agreement and
the termination of this Agreement.
(d) Contribution. If the indemnification provided for in
this Section 2.6 shall for any reason be held by a court of competent
jurisdiction to be unavailable to an indemnified party under subparagraph (a)
or (b) hereof in respect of any loss, claim, damage or liability, or any action
in respect thereof, then, in lieu of the amount paid or payable under
subparagraph (a) or (b) hereof, the indemnified party and the indemnifying
party under subparagraph (a) or (b) hereof shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating the same), (i) in such
proportion as is appropriate to reflect the relative fault of the Company and
the prospective sellers of Registrable Securities covered by the registration
statement in connection with the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations (the relative fault of the Company and
such prospective sellers to be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or such prospective sellers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission) or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as shall be
appropriate to reflect the relative benefits received by the Company and such
prospective sellers from the offering of the securities covered by such
registration statement. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
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shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to
the relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld or delayed.
(e) Indemnification Payments. The indemnification and
contribution required by this Section 2.6 shall be made by prompt periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or expense, loss, damage or liability
is incurred.
3. Lock Up. Each of the Holders of the Registrable Securities agrees
that it shall not, for a period of 180 days from the date hereof (the "Lock Up
Period"), without the prior written consent of the Company, directly or
indirectly, offer to sell, pledge, contract to sell, grant any option to
purchase, or otherwise dispose of (each a "Transfer"), pursuant to a
registration statement filed under the Securities Act or Rule 144 under the
Securities Act, any shares of Registrable Securities of which the Holder is now
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act);
provided, however, that each Holder of Registrable Securities may Transfer any
shares of Registrable Securities in any other transaction but not in a
transaction where the transferee reduces its risk by directly or indirectly
engaging in a hedging or similar transaction through selling shares in the
public market.
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4. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"AMEX" means the American Stock Exchange Inc.
"Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in New York City are authorized or required by
law to be closed.
"Commission" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of any
such successor federal statute.
"NYSE" means the New York Stock Exchange, Inc.
"Person" means any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency, department or political subdivision thereof) or other
entity of any kind.
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"Registration Expenses" means all costs, fees and expenses incident
to the Company's performance of or compliance with Section 2, including,
without limitation, all registration, filing and NASD fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees
and disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters required by or
incident to such performance and compliance, any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (excluding
any underwriting discounts or commissions or transfer taxes with respect to the
Registrable Securities) and the reasonable fees and expenses of one counsel to
Holders of a majority of the Registrable Securities participating in an
offering as contemplated herein.
"Securities Act" means the Securities Act of 1933, or any successor
federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time. References to a particular
section of the Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such successor federal statute.
50 Rule 144. The Company shall take all actions reasonably necessary
to enable Holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, (b) any similar rules or regulations hereafter adopted by the
Commission,
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including, without limiting the generality of the foregoing, filing on a timely
basis all reports required to be filed by the Exchange Act. Upon the request of
any Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
60 Amendments and Waivers. This Agreement may be amended with the
written consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of each Holder of the Registrable Securities then
outstanding affected by such amendment, action or omission to act, provided,
however, that, such consent need not be obtained from any Holder owning less
than 2% of the Company's issued and outstanding common stock. Each Holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Section 6, whether or not such Registrable
Securities shall have been marked to indicate such consent.
70 Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the Holder of such Registrable Securities for purposes of
any request, consent, waiver or other action by any Holder or Holders of
Registrable Securities pursuant to this Agreement or any determination of any
number or percentage of shares of Registrable Securities held by any Holder or
Holders of Registrable Securities contemplated by this Agreement. If the
beneficial owner of any
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Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
80 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telex,
telegram, telecopier, reputable courier service or personal delivery to the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) if to
(ii) if to the Company, to
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; one business day after being
sent by reputable courier service; three business days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if telexed; and when
receipt is acknowledged, if telecopied.
90 Assignment. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by the parties hereto and, with respect to
the Company, its respective successors and assigns and, with respect to any
Holder of any Registrable Securities, subject to the provisions respecting the
minimum numbers of percentages of shares of Registrable Securities required in
order to be entitled to certain rights, or to take certain actions, contained
herein. Any Holder may assign its rights with respect to the registration of any
Registrable Securities to any
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transferee of such securities.
100 Calculation of Percentage Interests in Registrable Securities.
For purposes of this Agreement, all references to a percentage of the
Registrable Securities shall be calculated based upon the total number of shares
of Common Stock included in the definition of the Registrable Securities
outstanding at the time such calculation is made.
110 No Inconsistent Agreements. The Company will not hereafter enter
into any agreement, or amend any existing agreement, with respect to its
securities which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement. The Holders hereby acknowledge that
the Xxxx Xxxxxxx entities are the beneficiaries of certain registration rights
pursuant to the Warrant Agreement dated as of May 4, 1998 among the Company and
the Purchasers named therein.
120 Remedies. Each Holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
130 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason,
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the validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended and understood that all of the rights
and privileges of the Holders shall be enforceable to the fullest extent
permitted by law.
140 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
150 Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
160 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE.
170 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
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180 Term of Agreement. This Agreement shall become effective upon the
execution hereof and shall continue in effect until the earlier of (i) the third
anniversary of the date hereof, or (ii) such time as all Registrable Securities
shall cease to be Registrable Securities; provided, however, that, Sections 2.6,
8, 9, 12, 13, 14, 15, 16, 17 and 19 of this Agreement shall survive such
termination.
190 No Third Party Beneficiaries. Nothing contained in this
Agreement, express or implied, is intended to or shall confer upon anyone other
than the parties hereto (and their permitted successors and assigns) any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
FRESHPOINT AMERICA, INC.
By:
---------------------------------
Name:
Title:
RIGHTHOLDERS
ROSECLIFF RCD MANAGEMENT, L.P.
By:
---------------------------------
Name:
Title:
ROSECLIFF XXXXXX XXXXXX PARTNERS, L.P.
By:
---------------------------------
Name:
Title:
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ROSECLIFF RCD PARTNERS
By:
---------------------------------
Name:
Title:
XXXXXX XXXXXX NORTH AMERICA, INC.
By:
---------------------------------
Name:
Title:
ROSECLIFF RCD PARTNERS BENEFIT RESERVE
TRUST
By:
---------------------------------
Name:
Title:
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Schedule 2.1
Holder Put Shares P Shares C Shares
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