AGREEMENT
THIS AGREEMENT is made this 22nd day of November, 2000 by and between
PINNACLE FOODS, INC., a Pennsylvania corporation (the "Company"), and XXXXXX X.
XXXXXXXX, an individual domiciled in the State of Connecticut ("Xxxxxxxx").
BACKGROUND:
WHEREAS, Xxxxxxxx is a shareholder of the Company;
WHEREAS, pursuant to the terms of that certain Loan Agreement (the
"Loan Agreement") and related Promissory Note dated June 29, 2000, Xxxxxxxx has
loaned the Company Three Hundred Thousand Dollars ($300,000) (the "Outstanding
Loan");
WHEREAS, the Company wishes to engage Xxxxxxxx as a financial advisor
on the terms and conditions set forth below and the parties wish to modify the
terms of the Outstanding Loan.
NOW, THEREFORE, for and in consideration of the mutual promises
contained in this Agreement and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto, each
intending to be legally bound, hereby agree as follows:
1. Debt Financing.
(a) The Company hereby employs Xxxxxxxx and Xxxxxxxx agrees to serve
the Company as a financial advisor on the terms and subject to the conditions
set forth in this Agreement. Xxxxxxxx shall and hereby agrees to use his best
efforts to assist the Company in procuring debt financing (including forgivable
loans), the aggregate gross proceeds of which shall be not less than Nine
Million Five Hundred Thousand Dollars ($9,500,000) (the "Debt Financing"). "Best
efforts," as used in the preceding sentence, shall not include action that would
require Xxxxxxxx to register under any Federal, state, or other law or
regulation.
(b) The Debt Financing shall be advanced by or through one or more
banks, trust companies, insurance companies, industrial development authorities
or agencies, economic development authorities or agencies, or other
institutional lenders. The Company shall be under no obligation to accept the
Debt Financing (or any portion thereof) if the permitted use of proceeds,
interest rate, amortization schedule, security provisions (including any
required guaranties), or any other material term or provision thereof is not
reasonably acceptable to the Company.
(c) Xxxxxxxx acknowledges that in performing his duties under this
Agreement, he is an agent of the Company, and is therefore not authorized to
make any commitments or promises on behalf of the Company unless expressly
authorized to do so in writing. Xxxxxxxx
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agrees not to take any action pursuant to this Agreement which is contrary to
the direction or wishes of the Company.
(d) In consideration of the execution of this Agreement, Xxxxxxxx
shall be entitled to receive, and the Company shall and hereby agrees to deliver
to Xxxxxxxx, on February 1, 2001, One Million One Hundred Thousand (1,100,000)
shares of the Common Stock of the Company.
(e) Upon the closing of the Debt Financing, Xxxxxxxx shall be
immediately entitled to receive, and the Company shall and hereby agrees to
deliver to Xxxxxxxx as promptly as possible but in no event more than fifteen
(15) days after such closing an additional One Million One Hundred Thousand
(1,100,000) shares of the Common Stock of the Company.
2. Modification of Outstanding Loan.
(a) The Outstanding Loan shall stop accruing interest under section
3.1 of the Loan Agreement as of the date of this Agreement and the Company shall
have no obligation to pay such interest on the Outstanding Loan for any time
period after the date of this Agreement. The Company shall also be relieved of
the obligation to deliver to Xxxxxxxx any additional interest payable in shares
of Company common stock pursuant to the terms of section 3.3(c) or (d) of the
Loan Agreement.
(b) Xxxxxxxx shall be entitled to convert, at his option, on or
before July 31, 2001, the principal and accrued interest (if any) due as of the
date of this Agreement under the Outstanding Loan into shares of Common Stock at
the rate of one share for each One Dollar ($1.00) owed under the Outstanding
Loan. If the conversion right set forth in the previous sentence has not been
exercised before August 1, 2001, Xxxxxxxx shall contribute the principal and
accrued interest (if any) due under the Outstanding Loan to the Company in
exchange for the issuance of shares of Common Stock at the rate of one share for
each One Dollar ($1.00) owed under the Outstanding Loan. In either such case,
Xxxxxxxx shall return the promissory note to the Company marked "PAID" in
exchange for the shares issued upon such conversion or upon such exchange. The
maturity date of the Outstanding Loan is hereby extended to August 1, 2001 to
accommodate the foregoing provisions.
3. Term. Either party can terminate this Agreement at any time if no
Debt Financing acceptable to the Company has been closed on or before March 31,
2001. Notwithstanding the foregoing, in the event that within six months of the
date this Agreement terminates or expires for any reason, the Company closes a
Debt Financing with a lender to whom Xxxxxxxx introduced the Company or with
respect to a loan application with which Xxxxxxxx assisted the Company, the
Company shall deliver to Xxxxxxxx the shares described in Paragraph 1(e) hereof.
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4. Stock Options.
(a) The Company hereby issues to Xxxxxxxx an option (the "Option")
to acquire up to Two Million (2,000,000) additional shares of Common Stock of
the Company on the terms and subject to the conditions and adjustments (if
applicable) set forth in this Paragraph 4 and in Paragraph 8.
(b) Xxxxxxxx shall not be entitled to exercise the Option unless, on
or before June 30, 2006, the lender of any Debt Financing for which Xxxxxxxx
earned the shares described in Paragraph 1(e) hereof unconditionally and
irrevocably (i) forgives all or a portion of such Debt Financing or (ii)
otherwise does not require repayment thereof (or a portion thereof).
(c) The exact number of shares as to which the Option will become
exercisable will be the amount of Debt Financing so forgiven or for which
payment is not so required (up to a maximum of Five Million Dollars
($5,000,000)) divided by the Measuring Amount (as hereinafter defined).
(d) The Option may be exercised by delivering written notice to the
Company at its principal office on or before June 30, 2006. No exercise price is
payable with respect to such exercise. A certificate or certificate(s)
representing the shares of Common Stock covered by such Option exercise shall be
issued as soon as practicable thereafter.
(e) If the Company shall issue any additional shares of Common Stock
by way of a stock dividend on, or split-up, subdivision, or reclassification of,
its outstanding shares of Common Stock, or the like prior to the exercise of the
Option, then the number of shares subject to the Option shall be proportionately
adjusted. Such adjustments shall be made successively each time so required by
the terms of this subparagraph (e).
(f) If there shall be any capital reorganization, consolidation,
merger or other reorganization of the Company with any other entity or entities,
or any sale of all or substantially all of the Company's property and assets to
any other entity or entities prior to exercise of the Option, the Company shall
take appropriate action to enable Xxxxxxxx to receive upon any subsequent
exercise of such Option, in whole or in part, in lieu of any shares of Common
Stock of the Company, the shares, securities, or other assets which he would
have received if such exercise had been effected immediately before such capital
reorganization, consolidation, merger, or other reorganization.
(g) The Company shall at all times maintain a sufficient number of
authorized but unissued shares of Common Stock to satisfy its obligations under
this Agreement.
(h) The Company shall use reasonable commercial efforts to satisfy
any employment or other requirement necessary to obtain such debt forgiveness or
such lender's agreement not to require repayment, but shall have no liability to
Xxxxxxxx under this Paragraph 4 for its failure to satisfy such requirement in
spite of such efforts.
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(i) No adjustment shall be made under subparagraph (e) or (f) of
this Paragraph 4 by reason of the issuance of shares of Common Stock of the
Company for cash, property or services, by way of stock options or warrants,
subscription rights or otherwise. However, the provisions of this subparagraph
(i) shall not affect the operation of Paragraph 8.
(j) "Measuring Amount" means Two Dollars Fifty Cents ($2.50) or the
Weighted Average Amount determined pursuant to the terms of Paragraph 8,
whichever is lower.
(k) The provisions of this Paragraph 4 shall survive termination of
the Agreement.
5. Company Representations. The Company represents and warrants to
Xxxxxxxx as follows:
(a) The Company has the power to execute, deliver and perform its
obligations pursuant to this Agreement, and has taken all necessary action to
authorize the execution, delivery and performance by the Company of this
Agreement.
(b) The execution and delivery of this Agreement and compliance by
the Company with the terms and provisions hereof or of any of the other
agreements or instruments referred to herein do not and will not violate any
provision of any existing law or regulation or any writ or decree of any court
or governmental instrumentality, or any agreement or instrument to which the
Company is a party or which is binding upon it or its assets, and will not
result in the creation or imposition of any lien, security interest, charge or
encumbrance of any nature whatsoever upon or in any of its assets; and no
consent of any other party, and no consent, license, approval or authorization
of or registration (other than the possible requirement that the Company
register to do business in the State of Connecticut in order to enforce this
Agreement) or declaration with any governmental bureau or agency, is required in
connection with the execution, delivery, performance, validity and
enforceability of this Agreement; and this Agreement is the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms.
(c) The Company is a Pennsylvania corporation having authorized
capital stock consisting solely of 50,000,000 shares of voting common stock, of
which Eleven Million Three Hundred Ten Thousand Six Hundred Forty (11,310,640)
shares are issued and outstanding. Upon issuance of the shares referred to in
this Agreement to be issued to Xxxxxxxx, all of such shares shall be duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding options, puts, calls or warrants to acquire any stock of the Company
except as set forth on Annex A attached hereto.
6. Xxxxxxxx' Representations. Xxxxxxxx represents and warrants to the
Company as follows:
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(a) The shares of Common Stock of the Company to be acquired by him
pursuant to the terms of this Agreement (collectively, the "Shares") are being
acquired by him for investment and not with a view to the distribution or resale
thereof;
(b) In connection with the acquisition of the Shares, he has relied
solely on investigations made by him, and he acknowledges that he has had
sufficient time to conduct the due diligence he deems necessary to evaluate the
potential benefits and risks associated with the acquisition of the Shares;
(c) He understands that the Shares to be acquired by him have not
been registered under the Securities Act of 1933 (the "Act") or under the
securities laws of any state and, therefore, cannot be sold or otherwise
transferred unless they are registered under the Act and applicable state
securities laws or unless an exemption from registration is available;
(d) He understands that he has no right to require such
registration, and hereby agrees that he will not sell or otherwise transfer the
Shares acquired by him until such time, if ever, that such Shares are either
registered or qualified under applicable law or the Company receives to its
satisfaction an opinion of counsel (unless waived by the Company) to the effect
that an exemption from registration and qualification is available;
(e) He has read the definition of "accredited investor" contained in
Rule 501 promulgated under the Act, a copy of which has been given to him, and
that he is an "accredited investor" in accordance with such definition;
(f) He has been provided access to all information which he
requested to evaluate his prospective acquisition of the Shares;
(g) He has been given and has acted upon the opportunity to ask
questions of and to receive answers from the Company relating to the Company's
operations and to his contemplated acquisition of the Shares, and to obtain any
additional information necessary to verify the accuracy of the information made
available to him;
(h) He has received and reviewed the Company's financial statements
at December 31, 1999 and for the period from inception through such date as
audited by Larson, Allen, Weishair & Co., LLP and the internally prepared,
unaudited financial statements of the Company at August 31, 2000 and for the
eight months then ended, which he acknowledges are subject to year-end and other
audit adjustments;
(i) He is domiciled in the State of Connecticut and has a mailing
address of 00 Xxx Xxxxxx, Xxx Xxxxx, XX 00000; and
(j) His Social Security number is ###-##-####.
7. Break-Up Fee. In the event that, prior to the completion of the Debt
Financing and prior to the termination of this Agreement, more than Thirty
Percent (30%) of the Company's outstanding shares of Common Stock shall be sold
in a single transaction or series of
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related transactions (excluding any such shares sold directly or indirectly by
Xxxxxxxx) or the Company shall be merged or consolidated with another entity
such that the shareholders of the Company immediately before such merger or
consolidation own less than Fifty Percent (50%) of the voting securities of the
surviving corporation after such merger or consolidation, or the Company shall
sell all or substantially all of the Company's assets, Xxxxxxxx shall
immediately receive the shares set forth in Paragraph 1(e) hereof.
8. Anti-Dilution.
(a) If the Company issues (the "Share Issuance") any shares of its
capital stock without consideration or for a consideration per share less than
Two Dollars Fifty Cents ($2.50) at any time after Xxxxxxxx becomes entitled to
receive the shares set forth in Paragraph 1(e) (whether pursuant to Paragraph 3
or 7 or otherwise), then and in such event the number of shares Xxxxxxxx shall
be entitled to receive pursuant to each of Paragraphs 1(d) and 1(e) shall be
increased to the quotient of Two Million Seven Hundred Fifty Thousand Dollars
($2,750,000) divided by the Weighted Average Amount (as defined below). (If any
shares have already been delivered to Xxxxxxxx pursuant to Paragraph 1(d) or
1(e) prior to Xxxxxxxx' retroactively becoming entitled to such an increase then
only such increased number shall subsequently be delivered to Xxxxxxxx.) All
shares to which Xxxxxxxx becomes entitled pursuant to the terms of this
Paragraph 8 shall be delivered to him simultaneously with the Share Issuance.
(b) The "Weighted Average Amount" shall mean a fraction, the
numerator of which is the sum of Five Million Dollars ($5,000,000) plus the
aggregate consideration received in all such Share Issuances, and the
denominator of which is the sum of Two Million (2,000,000) plus the number of
shares of Common Stock of the Company issued in all such Share Issuances.
(c) If the Company issues shares without consideration or for a
consideration per share less than One Dollar ($1.00) at any time prior to
January 1, 2002, then and in such event the number of shares Xxxxxxxx shall be
entitled to receive pursuant to Paragraph 2 shall be increased to the product of
Three Hundred Thousand (300,000) shares multiplied by a fraction, the numerator
of which is the sum of 300,000 plus the number of shares issued without
consideration or for a consideration of less than One Dollar ($1.00) per share
and the denominator of which is the sum of $300,000 plus the aggregate
consideration received for such shares issued without consideration or for a
consideration of less than One Dollar ($1.00) per share. (If any shares have
already been delivered to Xxxxxxxx pursuant to Paragraph 2 prior to Xxxxxxxx'
retroactively becoming entitled to such an increase, then only such increased
number shall subsequently be delivered to Xxxxxxxx.)
(d) The provisions of this Paragraph 8 shall survive termination of
this Agreement.
9. Information. The Company agrees that all information furnished to
Xxxxxxxx shall be accurate and complete in all material respects and that if
such information, in whole or in part, shall become inaccurate, misleading or
incomplete, the Company shall promptly so advise Xxxxxxxx in writing and correct
such information. Accordingly, the Company recognizes and confirms that Xxxxxxxx
assumes no responsibility for the accuracy or completeness of such
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information and that, in rendering his services hereunder, Xxxxxxxx will be
using and relying upon such information without independent verification
thereof.
10. Indemnification.
(a) The Company agrees to hold Xxxxxxxx harmless from and against
all claims, liabilities, losses, damages and expenses as they are incurred
(including reasonable fees to Xxxxxxxx' counsel) related to or arising out of
this Agreement or Xxxxxxxx' role in connection therewith except for actions
taken by Xxxxxxxx which have not been specifically authorized hereunder, which
are in contravention of any written direction of the Company, or which violate
any obligation of Xxxxxxxx hereunder. Notwithstanding the foregoing, the Company
shall have no obligation to reimburse Xxxxxxxx for the fees of his counsel in
connection with any bona fide dispute between them arising under this Agreement.
The Company's obligations under this Paragraph 10 shall survive termination or
expiration of this Agreement.
(b) Xxxxxxxx shall and hereby agrees to hold the Company, its
directors and officers, jointly and severally, harmless from and against all
claims, liabilities, losses, damages and expenses as they are incurred
(including reasonable fees to the attorneys of the foregoing) related to or
arising out of any material misrepresentation or material misstatement made by
Xxxxxxxx hereunder or in representing the Company pursuant hereto.
Notwithstanding the foregoing, Xxxxxxxx shall have no obligation to reimburse
the Company for the fees of its counsel in connection with any bona fide dispute
between them arising under this Agreement. Xxxxxxxx' obligations under this
Paragraph 10 shall survive termination or expiration of this Agreement
11. Successors and Assigns. This Agreement shall be binding upon the
parties and their respective heirs, successors and assigns.
12. Governing Law. This Agreement shall be governed by the laws of the
State of Connecticut.
13. Board Observation Rights.
(a) As long as Xxxxxxxx is a shareholder of the Company, the Company
shall notify Xxxxxxxx at the same time as the Company notifies the members of
its Board of Directors of the date of each meeting of the Board of Directors of
the Company or a meeting of a committee thereof, and Xxxxxxxx shall be permitted
to attend (or appoint a representative to attend) each such meeting as an
observer. Xxxxxxxx shall receive the same information provided to the Board of
Directors.
(b) Xxxxxxxx acknowledges that, as a result of such board
observations rights or as a result of his ownership of shares of Common Stock,
he may become privy to certain material non-public information about the
Company. Xxxxxxxx covenants and agrees that he will abide by applicable
securities law limitations on his ability to purchase and sell shares of
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Company Common Stock as a result of the possession of any such information, and
shall not, directly or indirectly, disclose any such information to any person
if such disclosure would violate any applicable securities laws.
14. Counterpart Signatures. This Agreement may be signed in
counterparts and shall be effective when one or more counterparts bear(s) the
signatures of both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
PINNACLE FOODS, INC.
By: ________________________________
Xxxxxxx Xxxxx, President
___________________________(SEAL)
Xxxxxx X. Xxxxxxxx
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Annex A
Company Capitalization
Options
Date Issued Number of Shares Exercise Price Per Share
December 10, 1999 50,000 $0.16
August 1, 2000 400,000 0.16
August 1, 2000 350,000 0.30
August 1, 2000 450,000 0.33
August 1, 2000 163,000 1.00
-------
1,413,000
=========
Convertible Debentures
Date Face Amount Conversion Price
July 31, 2000 $370,239.66 $0.75
September 20, 2000 100,000.00 1.25
September 22, 2000 200,000.00 1.25
September 27, 2000 50,000.00 1.25
-----------
$720,239.66
===========
Other Loans
Date Face Amount Special Provisions
June 29, 2000 $400,000 * Equity Kickers Issuable
with Cash Interest
* $300,000 of this amount is being modified pursuant to the terms of
Paragraph 2 of this Agreement.
