EXHIBIT 10.5
SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 17th day of November, 1999, by and between HARRY'S FARMERS
MARKET, INC., a Georgia corporation ("Harry's"), and ASHFORD CAPITAL PARTNERS,
L.P. ("Ashford Capital").
BACKGROUND
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WHEREAS, on December 30, 1994, Ashford Capital purchased 44,444 shares of
Series A Redeemable Convertible Preferred Stock, stated value $9.00 per share,
of Harry's (the "Series A Stock");
WHEREAS, on December 30, 1994, Ashford Capital purchased warrants to
purchase an aggregate of 17,222 shares of Series A Stock as represented by that
certain Warrant Certificate dated December 30, 1994 to purchase up to 15,000
shares of the Class A Common Stock, no par value, of Harry's (the "Common
Stock") and that certain Performance Warrant Certificate dated December 30, 1994
to purchase up to 2,222 shares of Common Stock (collectively, the "Warrants").
WHEREAS, on January 31, 1997, in contemplation of Harry's entering into a
relationship with Progressive Food Concepts, Inc., Harry's and Ashford Capital
entered into that certain Preferred Stock Exchange Agreement dated January 31,
1997 pursuant to which each share of Series A Stock held by Ashford Capital was
exchanged for one share of Series AA Preferred Stock, stated value $9.00 per
share, of Harry's (the "Preferred Stock") and the shares of Series A Stock
previously held by Ashford Capital were canceled;
WHEREAS, on January 31, 1997, the Warrants were amended to change the
exercise price to $4.00 per share;
WHEREAS, Ashford Capital owns and desires to sell to Harry's, and Harry's
desires to purchase from Ashford Capital, the 44,444 shares of Preferred Stock,
which is all of the Preferred Stock owned by Ashford Capital, and the Warrants,
which, together, comprise all the securities of Harry's owned by Ashford
Capital.
In consideration of the foregoing, the mutual representations, warranties,
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. TERMS OF ACQUISITION
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1.1 Sale and Transfer of Securities.
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(a) The closing for the purchase and sale contemplated by this
Agreement shall be held at the offices of Xxxxxx & Bird, One Atlantic Center,
0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx, 00000, as soon as practicable
following the satisfaction of the conditions set forth in Section 8 herein, but
in no event later than December 15, 1999, or at such other place as the parties
hereto may agree in writing (the date on which the closing actually occurs is
hereinafter referred to as the "Closing Date").
(b) On the Closing Date and upon the terms and subject to the
conditions of this Agreement, Ashford Capital will sell, convey, transfer,
assign and deliver to Harry's, and Harry's will purchase and accept from Ashford
Capital, 44,444 shares of Preferred Stock (the "Shares"), as evidenced by stock
certificate number P-2, and the Warrants (collectively, the Shares and the
Warrants are referred to herein as the "Securities").
(c) On the Closing Date, Ashford Capital will convey to Harry's good,
valid and marketable title to the Securities free and clear of any and all
liabilities, obligations, liens, encumbrances, restrictions or rights of others
of any character whatsoever. On the Closing Date, Ashford Capital will deliver
to Harry's (i) stock certificate number P-2 evidencing the Shares registered in
the name of Ashford Capital, duly endorsed in blank on the reverse thereof or
accompanied by a duly executed stock power and (ii) the original executed
Warrants.
2. PURCHASE PRICE
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2.1 Purchase Price. In full payment of the purchase price for the
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Securities, on the Closing Date, Harry's will pay Ashford Capital Ninety Nine
Thousand Thirty Seven Dollars ($99,037) (the "Purchase Price") by wire transfer
of immediately payable funds to an account previously designated in writing by
Ashford Capital.
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
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Ashford Capital represents and warrants to Harry's as follows:
3.1 Ownership of Securities. Ashford Capital is the record and beneficial
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owner of the Securities free and clear of any liens, claims, options, charges,
encumbrances or rights of others. At no time since December 30, 1994 has
Ashford Capital assigned the Warrants in whole or in part or transferred the
Warrants. The Securities constitute Ashford Capital's only interest in or to
Harry's, its business or any of its assets.
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3.2 Consents. Ashford Capital may enter into this Agreement and perform
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its obligations under this Agreement without the necessity of obtaining any
consent from anyone, including any governmental authority, and all of the
Securities may be sold by it to Harry's without the imposition of any lien,
charge or encumbrance with respect to such Securities.
3.3 Authorization and Binding Effect. Ashford Capital has the corporate
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power and authority to execute, deliver, enter into and perform this Agreement
and to consummate the transactions contemplated by this Agreement. The officers
executing this Agreement are the duly elected officers of Ashford Capital and
are duly authorized to execute this Agreement on Ashford Capital's behalf. This
Agreement constitutes a legal, valid and binding agreement enforceable against
Ashford Capital in accordance with the terms hereof. Upon consummation of the
transactions contemplated herein, Harry's will own the Securities sold by
Ashford Capital pursuant to this Agreement free and clear of any liens, claims,
options, charges, encumbrances or rights of others.
3.4 No Breach. The execution, delivery and performance of this Agreement
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and the consummation of the transactions contemplated hereby will not violate or
result in a breach of or default under (i) any instrument or agreement to which
Ashford Capital is a party or is bound, (ii) Ashford Capital's corporate
documents or (iii) any law, rule, regulation, judgment, order, injunction,
decree, or award against or binding upon Ashford Capital.
3.5 Access to Information. Ashford Capital has owned the Securities since
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December 30, 1994 and at all times since such date has had full and free access
to Harry's, its management personnel and its financial statements and
information. Ashford Capital has had the opportunity to ask questions of and
receive answers or obtain additional information from Harry's concerning the
financial and other affairs and prospects of Harry's and the terms and
conditions of the sale of the Securities. Ashford Capital is familiar with
Harry's and the business in which it is engaged. Ashford Capital is fully aware
that future events could impact the value of the Securities, and Ashford Capital
has conducted its own analysis in deciding to enter into this Agreement.
Ashford Capital acknowledges that the negotiations culminating in this Agreement
have been at arm's length. Ashford Capital has made its own investigation of
Harry's, its business, its financial statements and information, has solely
relied on the results of such investigation in entering into this Agreement and
has not relied on any statements or representations by Xxxxx`s or any of its
representatives, counsel or agents other than those representations and
warranties contained in Section 4 of this Agreement.
3.6 Certain Prior Actions. Prior to the date of this Agreement, Ashford
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Capital has not taken any actions, or failed to take any actions, that if taken
or not taken immediately after the execution and delivery of this Agreement
would violate the provisions of Section 5 hereof.
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4. REPRESENTATIONS AND WARRANTIES OF HARRY'S
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Harry's represents and warrants to Ashford Capital as follows:
4.1 Consents. Harry's may enter into this Agreement and perform its
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obligations under this Agreement without the necessity of obtaining any consent
from anyone, including any governmental authority.
4.2 Authorization and Binding Effect. Harry's has the corporate power and
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authority to execute, deliver, enter into and perform this Agreement and to
consummate the transactions contemplated by this Agreement. The officers
executing this Agreement are the duly elected officers of Harry's and are duly
authorized to execute this Agreement on Harry's behalf. This Agreement
constitutes a legal, valid and binding obligation of Harry's enforceable against
Harry's in accordance with its terms.
4.3 No Breach. The execution, delivery and performance of this Agreement
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and the consummation of the transactions contemplated hereby will not violate or
result in a breach of or default under (i) any instrument or agreement to which
Harry's is a party or is bound, (ii) its Articles of Incorporation or its
Bylaws, or (iii) any law, rule, regulation, judgment, order, injunction, decree,
or award against or binding upon Harry's.
4.4 Corporate Existence, Power and Authority.
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(a) Harry's is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Harry's is duly
qualified, licensed and authorized to do business and is in good standing in
each jurisdiction in which it owns or leases any property or in which the
conduct of its business requires it to so qualify or be so licensed, except for
such jurisdictions where the failure to so qualify or be so licensed would not
have a material adverse effect on Harry's assets, properties, liabilities,
business, results of operations or condition (financial or otherwise).
(b) No proceeding has been commenced looking toward the dissolution or
merger of Harry's or the amendment of its certificate of incorporation. Harry's
is not in violation in any material respect of its certificate of incorporation
or by-laws.
(c) Harry's has all requisite power, authority (corporate and other) and
legal right to own or to hold under lease and to operate the properties it owns
or holds and to conduct its business as now being conducted.
4.5 Litigation. Other than has been disclosed in its filings with
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the Securities and Exchange Commission, there is no action, suit, proceeding,
investigation or claim pending, to which Harry's has received any oral or
written notice, or, to the best
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knowledge of Harry's, threatened in law, equity or otherwise before any court,
administrative agency or arbitrator which questions the validity of this
Agreement or any action taken or to be taken pursuant hereto.
5. COVENANTS OF ASHFORD CAPITAL From and after the date hereof, Ashford
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Capital shall perform and comply with the following covenant:
5.1 Nondisclosure of Trade Secrets and Confidential Information. As
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used in this Agreement, the term "Confidential Information" shall mean all
information regarding Harry's or its activities, business and current or
prospective customers or suppliers that are not generally known to persons not
employed by Harry's, including without limitation, information regarding Harry's
products, contracts, corporate records or proceedings, current or prospective
employees, pricing, costs, financial results or condition, relationships with
its customers and suppliers, and relationships with its employees. Confidential
Information shall not include information that has become generally available to
the public by the act of one who has the right to disclose such information
without violating any right or privilege of Harry's. For one (1) year after the
date hereof with respect to Confidential Information, Ashford Capital shall not
directly or indirectly transmit or disclose any Confidential Information to any
person, concern or entity, and shall not make use of any such Confidential
Information, directly or indirectly, for itself or others. In the event that
Ashford Capital is requested in any proceeding to disclose any Confidential
Information, Ashford Capital shall give Harry's prompt notice of such request so
that Harry's may seek an appropriate protective order. If, in the absence of a
protective order, Ashford Capital is nonetheless compelled by law to disclose
Confidential Information, Ashford Capital may disclose such information in such
proceeding without liability hereunder; provided, however, that Ashford Capital
gives Harry's written notice of the Confidential Information to be disclosed as
far in advance of its disclosure as is practicable and, upon Harry's request and
at Harry's expense, uses its best good faith efforts to obtain assurances that
confidential treatment will be accorded to the information provided by Ashford
Capital or its agents.
5.2 Injunctive Relief. Ashford Capital acknowledges that the
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nondisclosure covenant contained in this Section 5 is a reasonable means of
protecting and preserving Harry's interests and the confidentiality of the
Confidential Information. Ashford Capital agrees that any breach of this
covenant will result in irreparable damage and injury to Harry's and that
Harry's will be entitled to injunctive relief in any court of competent
jurisdiction without the necessity of posting any bond. Ashford Capital also
agrees that any injunctive relief shall be in addition to any damages that may
be recoverable by Harry's.
5.3 Enforceability of Covenants. Ashford Capital and Harry's agree
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that Ashford Capital's obligations under the nondisclosure covenant are separate
and distinct from its obligations under other provisions of this Agreement, are
material, and a failure or
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alleged failure of Harry's to perform its obligations under any provision of
this Agreement shall not constitute a defense to the enforceability of the
nondisclosure covenant.
6. INDEMNIFICATION
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6.1 Indemnity by Ashford Capital. Ashford Capital hereby agrees to
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indemnify Harry's, and each of its officers, directors, shareholders, employees,
agents and counsel against, and to hold each of the foregoing harmless from, any
and all losses, liabilities, costs, damages and expenses (including but not
limited to reasonable attorneys' fees, including attorneys' fees necessary to
enforce its rights to indemnification hereunder) arising from or resulting by
reason of any material inaccuracy in any of the representations or warranties,
or any breach of any of the covenants or agreements, made or to be performed by
Ashford Capital pursuant to this Agreement.
6.2 Indemnity by Harry's. Harry's hereby agrees to indemnify Ashford
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Capital and each of its officers, directors, shareholders, employees, agents and
counsel against, and to hold each of the foregoing harmless from, any and all
losses, liabilities, costs, damages and expenses (including but not limited to
reasonable attorneys' fees, including attorneys' fees necessary to enforce his
rights to indemnification hereunder) arising from or resulting by reason of any
material inaccuracy in any of the representations or warranties, or any breach
of any of the covenants or agreements, made or to be performed by Harry's
pursuant to this Agreement.
6.3 Termination of Existing Agreements. Subject to the foregoing
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sentence, on and as of the Closing Date all agreements of any kind and nature
between Ashford Capital and Harry's, including, without limitation, that certain
Amended and Restated Investors Agreement dated January 31, 1997 and that certain
Registration Rights Agreement dated December 30, 1994, as amended, will be
terminated and of no further force or effect without any further action on the
part of the parties hereto.
7. NEGATIVE COVENANT OF ASHFORD CAPITAL From the date hereof to the Closing
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Date, which shall be no later than December 15, 1999, Ashford Capital shall not
sell any of the Shares, assign the Warrants in whole or in part or transfer the
Warrants.
8. CONDITIONS PRECEDENT TO PARTIES' OBLIGATIONS TO CLOSE The obligations of
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Ashford Capital and Harry's to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction of each of the following
conditions, unless waived in whole or in part by the parties.
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8.1 Financing Commitments. Harry's shall have obtained financing in
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such amount and on such terms as the Board of Directors of Harry's, in its
reasonable discretion, shall have determined is acceptable.
8.2 Ashford Capital Representations and Warrants. The
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representations and warranties made by Ashford Capital in Article 3 hereof shall
be true and correct on and as of the Closing Date with the same force and effect
as though such representations and warranties had been made on and as of the
Closing Date.
8.3 Harry's Representations and Warrants. The representations and
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warranties made by Harry's in Article 4 hereof shall be true and correct on and
as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
8.4 Compliance by Ashford Capital. Ashford Capital shall have duly
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performed in all material respects all of the covenants and negative covenants
contained in this Agreement to be performed by Ashford Capital.
9. MISCELLANEOUS
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9.1 Representations and Warranties. All of the representations,
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warranties, covenants and agreements made by any of the parties in or pursuant
to this Agreement shall survive the consummation of the transactions
contemplated by this Agreement.
9.2 Successors and Assigns. No party may assign any of its rights
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hereunder without the prior written consent of the other party hereto.
9.3 Governing Law. This Agreement shall be controlled, construed and
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enforced in accordance with the substantive laws of the State of New York,
without regard to the laws related to choice or conflict of laws.
9.4 Counterparts. This Agreement may be executed in one or more
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counterparts, all of which shall be one and the same Agreement and shall become
effective when one or more counterparts have been signed by all of the parties
and delivered to the other parties.
9.5 Further Assurances. Ashford Capital shall at any time and from
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time to time after the date hereof take whatever actions Harry's may reasonably
request to effectuate, record or perfect its transfer of the Securities to
Harry's pursuant to this Agreement or to otherwise effectuate or consummate any
of the transactions contemplated hereby.
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9.6 Interpretations. Neither this Agreement nor any uncertainty or
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ambiguity herein shall be construed or resolved against Harry's or Ashford
Capital, whether under any rule of construction or otherwise. No party to this
Agreement shall be considered the draftsman. On the contrary, this Agreement
has been reviewed, negotiated and accepted by both parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
9.7 Notices. All notices, requests, demands and other communications
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hereunder shall be (i) delivered by hand, (ii) mailed by registered or certified
mail, return receipt requested, first class postage prepaid and properly
addressed, (iii) sent by national overnight courier service, or (iv) sent by
facsimile, graphic scanning or other telegraphic communications equipment to the
parties, addressed as follows:
To Ashford Capital: Ashford Capital Partners, L.P.
0000 Xxxxxxx Xxxx, Xxxxx X-000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxxxx Xxxxxxx
Telecopy: (000) 000-0000
To Harry's: Harry's Farmers Market, Inc.
0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxx
Telecopy: (000) 000-0000
with copies to: Xxxxxx & Bird LLP
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
(b) All notices, requests, instructions or documents given to any
party in accordance with this Section 9.7 shall be deemed to have been given (i)
on the date of receipt if delivered by hand, overnight courier service or if
sent by facsimile, graphic scanning or other telegraphic communications
equipment or (ii) on the date three (3) business days after depositing with the
United States Postal Service if mailed by United States registered or certified
mail, return receipt requested, first class postage prepaid and properly
addressed.
(c) Any party hereto may change its address specified for notices
herein by designating a new address by notice in accordance with this Section
9.7.
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9.8 Entire Agreement. This Agreement constitutes the entire
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agreement among the parties relating to the subject matter hereof and thereof
and supersedes all prior oral and written, and all contemporaneous oral
negotiations, discussions, writings, correspondence and agreements relating to
the subject matter of this Agreement.
9.9 Modifications, Amendments and Waivers. The failure or delay of
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any party at any time or times to require performance of any provision of this
Agreement shall in no manner affect its right to enforce that provision. No
single or partial waiver by any party of any condition of this Agreement, or the
breach of any term, agreement or covenant or the inaccuracy of any
representation or warranty of this Agreement, whether by conduct or otherwise,
in any one or more instances shall be construed or deemed to be a further or
continuing waiver of any such condition, breach or inaccuracy or a waiver of any
other condition, breach or inaccuracy.
9.10 Severability. Should any one or more of the provisions of this
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Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith to replace any provisions determined to be invalid,
illegal or unenforceable with valid, legal and enforceable provisions the
economic effect of which comes as close as practicable to that of the invalid,
illegal or unenforceable provisions.
[SIGNATURES CONTINUED ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties have caused this Securities Purchase
Agreement to be duly executed and delivered under seal as of the date first
above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Xxxx X. Xxxxxx
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Name: Xxxx X. Xxxxxx
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Title: Sr. Vice President and CFO
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[CORPORATE SEAL]
ASHFORD CAPITAL PARTNERS, L.P.
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
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Title: President, Ashcap Corp., General
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Partner
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[SEAL]
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