EXHIBIT 10.4
SUNBELT NURSERY GROUP, INC.
SERIES A CUMULATIVE CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
(the "Agreement"), is made and entered into as of the 30th day of December, 1997
by and among Sunbelt Nursery Group, Inc. (the "Company"), a Delaware
corporation, with offices at ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and the persons and entities listed on the Schedule of
Investors attached as Exhibit A hereto (each individually is referred to as an
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"Investor" and collectively as the "Investors").
WITNESSETH:
ARTICLE I
AUTHORIZATION OF PREFERRED STOCK,
PURCHASE AND SALE OF PREFERRED STOCK
Section 1.1. Authorization of Preferred Stock. The Company has authorized
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the issue and sale of up to 1,300,000 shares of its Series A Cumulative
Convertible Preferred Stock, $.01 par value (such Series A Cumulative
Convertible Preferred Stock being hereinafter referred to as the "Series A
Preferred Stock") to be issued under this Agreement. The rights, privileges, and
preferences of the Series A Preferred Stock are as set forth in the Company's
Certificate of Designations, Preferences and Rights of Series A Cumulative
Convertible Preferred Stock (the "Certificate of Designation") in the form
attached to this Agreement as Exhibit B.
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Section 1.2. Private Offering. The offer and sale of the Series A Preferred
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Stock is being made by the Company in an offering (the "Offering") exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities
laws.
Section 1.3. Purchase and Sale of the Preferred Stock. Subject to the
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terms and conditions of this Agreement and on the basis of the representations
and warranties set forth herein, the Company agrees to sell to each Investor and
each Investor agrees to purchase from the Company the number of shares of Series
A Preferred Stock (the "Shares") at a purchase price of one dollar ($1.00) per
share of Series A Preferred Stock set forth opposite such Investor's name on
Exhibit A hereto.
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Section 1.4. The Closing. Subject to Sections 4.1 and 4.2 hereof, the
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closing of the transactions contemplated hereby (the "Closing") shall occur
contemporaneous with the funding of the Loan and Security Agreements by and
among Paragon Capital LLC ("Paragon") and the Company's wholly-owned
subsidiaries, ▇▇▇▇▇ Nursery, Inc., Tip Top Nurseries, Inc. and Nurseryland
Garden Centers (hereinafter the "Paragon Financing"), or at such other time and
place as the parties shall mutually agree. At the Closing, the Company shall
deliver to each Investor a certificate or certificates, registered in such
Investor's name, representing the number of shares to be purchased by such
Investor pursuant to this Agreement against payment of the purchase price
thereof in lawful money of the United States of America by wire transfer or, if
acceptable to the Company check payable to the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Representations and Warranties. The Company hereby represents and warrants
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to the Investors as follows:
Section 2.1. Organization and Good Standing. Each of the Company and its
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subsidiaries listed on Schedule 2.10 hereto (the "Subsidiaries") is a
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corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation which, in the case of the Company, is the
State of Delaware. Except as otherwise reflected on Schedule 2.10, each of the
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Company and the Subsidiaries has all requisite corporate power and authority and
holds all licenses, permits and other required authorizations from governmental
authorities necessary to conduct its business as it is now being conducted and
to own or lease the properties and assets it now owns or holds under lease, and
is duly qualified and in good standing as a foreign corporation in each
jurisdiction where the nature of the business transacted or the character of the
properties owned or leased makes such qualification necessary and where the
failure to qualify would have a material adverse effect upon the Company's
consolidated operations or consolidated financial condition.
Section 2.2. Capital Stock. The total authorized capital stock of the
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Company presently consists of (i) 25,000,000 shares of Common Stock, $.01 par
value per share (the "Common Stock"), of which 8,500,000 shares are issued and
outstanding, all of which have been duly authorized and are validly issued,
fully paid and nonassessable, and (ii) 5,000,000 shares of Preferred Stock, $.01
par value per share (the "Preferred Stock"), of which 1,300,000 shares have been
designated Series A Preferred Stock. No shares of the Preferred Stock are
presently issued and outstanding. The Shares when issued pursuant to this
Agreement will be duly authorized, fully paid and nonassessable.
Except for the conversion provisions of the Preferred Stock and as set
forth on Schedule 2.2 hereto, there are no outstanding warrants, options or
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other rights to purchase or acquire, or exchangeable for or convertible into,
any shares of Common Stock. There are no preemptive rights with respect to the
issuance or sale by the Company of the Shares. Except as provided in this
Agreement, there are no restrictions on the transfer or voting of any shares of
the Common Stock. Other than as set forth in this Agreement and on Schedule 2.2
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hereto, there are no existing rights with respect to registration under the
Securities Act, of any of the Company's Common Stock or Preferred Stock. No
shares of Common Stock or Preferred Stock that have been issued were issued in
violation of the preemptive rights of any person. Except as reflected on
Schedule 2.4 hereto, the issuance of the Shares in accordance with the
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provisions of this
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Agreement has been duly authorized by all necessary corporate action before the
Closing, and the Shares when issued and sold to the Investors and upon payment
in full of the Purchase Price as provided herein, will be duly authorized and
validly issued, fully paid and nonassessable, will be evidenced by certificates
duly and validly authorized by the Company, and will constitute valid and
legally binding obligations of the Company enforceable against it in accordance
with the terms of issuance, subject to the effect of equitable principals and
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
Section 2.3. Financial Statements. The Company's audited financial
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statements as of and for the year ended June 29, 1997, included in its Form 10-K
for such year (the "10-K"), filed with the Securities and Exchange Commission
(the "Commission") and the unaudited financial statements as of and for the
three month period ending September 28, 1997, included in its Form 10-Q for such
three month period (the "10-Q") filed with the Commission, filed copies of
which 10-K and l0-Q's have heretofore been delivered to the Investors, are in
conformity with the books and records of the Company and the Subsidiaries, and
fairly present the consolidated financial condition of the Company and the
Subsidiaries as of each such date and fairly present the consolidated results of
the operations of the Company and the Subsidiaries for each period then ended,
in conformity with generally accepted accounting principles consistently
applied; provided, however, that the unaudited financial statements included in
the l0-Q are subject to year-end audit adjustments and do not contain all
footnotes required under generally accepted accounting principles.
Section 2.4. Compliance with Other Instruments. Except as reflected on
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Schedule 2.4 hereto, neither the execution and delivery of this Agreement nor
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the fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby will: (i) conflict with the Certificate of
Incorporation or Bylaws of the Company; (ii) conflict with or constitute a
material breach of; or constitute a material default under or an event which,
with notice or lapse of time or both, would be a material breach of or material
default under or violation of any material agreement, indenture, mortgage, deed
of trust, loan agreement or other instrument or undertaking by which the Company
is bound or to which any of its properties are subject, or constitute a
violation of any law, administrative regulation, judgment, order decree or award
applicable to the Company; (iii) result in the creation or imposition of any
material lien or encumbrance upon any property or assets of the Company or any
of the Subsidiaries; (iv) result in the loss of any material license or
certificate enjoyed or possessed by the Company or any of the Subsidiaries, or
(v) give any party to any material agreement to which the Company is party the
right of termination.
Section 2.5. Authorization. Subject to the matters set forth on Schedule
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2.4 hereof; the Company has the full corporate power and authority to enter into
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this Agreement and to perform all of its obligations hereunder. Subject to
Schedule 2.4 hereto, the execution, delivery and performance of this Agreement
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by the Company has been duly authorized by all necessary corporate action, and
this Agreement constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to the
effect of
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equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application relating to or affecting the
enforcement of creditors' rights generally.
Section 2.6. Taxes. Except as reflected on Schedule 2.l0 hereto, each of
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the Company and the Subsidiaries has filed all necessary or appropriate federal,
state, local and foreign tax returns and reports and all taxes, fees,
assessments and governmental charges of a material nature which are due and
payable have been paid, except those being contested in good faith or for which
an adequate reserve has been set aside, and there is no material tax deficiency
which has been or, to the knowledge of the Company, might be asserted against
the Company or any of the Subsidiaries which would materially affect the
business or operations of the Company and the Subsidiaries considered as a
whole.
Section 2.7. Litigation. Except as otherwise reflected in the Disclosure
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Documents (defined below) and on Schedule 2.7 hereto, there is not now pending
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nor, to the knowledge of the Company, threatened, any litigation, action, suit
or proceeding to which the Company or any of the Subsidiaries is or will be a
party before or by any governmental or regulatory agency or body or arbitration
tribunal (i) which questions or affects the Company's ability to enter into and
perform its obligations under this Agreement or (ii) which, if adversely
determined, would have a material adverse effect on the Company and the
Subsidiaries considered as a whole for which the Company has not taken an
adequate reserve. In addition to the foregoing, there is no judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against the Company or any of
the Subsidiaries having, or that can be reasonably expected to have, any
material adverse effect on the business, properties, assets or condition,
financial or otherwise, of the Company and the Subsidiaries taken as a whole.
Section 2.8. Compliance with Law. To the best of the Company's knowledge,
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each of the Company and the Subsidiaries is, in the conduct of its business, in
compliance with all federal, state, local and other laws, statutes, ordinances
and regulations, the enforcement of which would materially adversely affect the
business or the value of the properties or assets of the Company and the
Subsidiaries taken as a whole.
Section 2.9. Licenses. Permits. Etc. To the best of the Company's
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knowledge, each of the Company and the Subsidiaries has all approvals,
authorizations, consents, licenses, orders and other permits of all governmental
agencies, whether federal, state or local, required to permit the operation of
its business as presently conducted. Except as otherwise reflected on
Schedule 2.9 hereto, there are no proceedings pending or, to the knowledge of
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the Company, threatened, looking toward revocation or limitation of any such
approvals, authorizations, consents, licenses, orders or permits, nor, to the
Company's knowledge, is there any basis or grounds for any such revocation or
limitation.
Section 2.10. Subsidiaries. Schedule 2.l0 to this Agreement sets forth all
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of the wholly owned Subsidiaries of the Company as of the date of this
Agreement. Other than as stated above, "Subsidiaries" shall include all
companies in which the Company owns a majority interest.
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Section 2.11. Securities Laws. Neither the Company nor any other person,
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firm or corporation acting on its behalf has offered any of the Shares for sale
to, or solicited any offers to purchase any thereof from, or otherwise
approached or negotiated (nor will the Company or any other person, firm or
corporation acting on its behalf sell, offer, solicit or otherwise approach or
negotiate) in respect thereof with, such number or character of persons in the
aggregate or in such manner, as would result in bringing the Shares, or any
part thereof, within the provisions of Section 5 of the Securities Act. The
offer, issuance and sale of the Shares are and will be exempt from the
registration requirements under the Securities Act, and have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws. The Company has not retained a broker or finder in connection
with the sale of the Shares.
Section 2.12 Reports. To the best of the Company's knowledge, for the
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period commencing one (1) year prior to the date of Closing under this
Agreement, the Company reports filed under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and all amendments and supplements thereto
(collectively, the "Reports") complied as to form in all material respects with
the requirements of the 1934 Act, and the rules and regulations of the
Securities and Exchange Commission thereunder, as of their respective file
dates, except that the Company failed to timely file its amendment to the
Company's Annual Report on Form l0-K for the fiscal year ended June 29, 1997.
ARTICLE III
REPRESENTATIONS OF THE INVESTORS
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Representations of the Investors. Each Investor represents and warrants to
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the Company as follows:
Section 3.1. Purchase for Own Account. Such Investor is acquiring the
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Shares for its own account for investment and not with a view to or in
connection with any distribution or resale thereof, provided that such Investor
retains the right to dispose of the Shares in accordance with applicable law,
including without limitation the Securities Act.
Section 3.2. Restrictions on Transfers. Such Investor understands that the
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Shares are not, and any Common Stock acquired on conversion thereof at the time
of issuance may not, be registered under either the Securities Act or any
applicable state securities laws and further understands that the Shares
constitute "restricted securities" within the meaning of Rule 144 under the
Securities Act. Such Investor understands that the Shares (or the Common Stock
issued on conversion thereof) may not be sold or otherwise transferred unless
subsequently registered under the Securities Act and registered or qualified
under any applicable state securities laws or, in the opinion of counsel (at the
expense of the Investor or transferee) for or reasonably acceptable, to the
Company, an exemption from registration is available; provided, however, that no
such registration statement or opinion of counsel shall be necessary for a
transfer by an Investor pursuant to a Rule 144(k) promulgated under the
Securities Act or a
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transfer by an Investor to an affiliate (as defined in Rule 405 of the
Securities Act) of such Investor, if such affiliate is an accredited investor.
Such Investor further understands that, except pursuant to subsection (k) of
Rule 144, any routine sales of Shares (and any Common Stock issued upon
conversion thereof) made in reliance on Rule 144 can only be made if current
information about the Company is publicly available and then only in limited
amounts in accordance with that rule. Pursuant to the terms of the Certificate
of Designation no holder of shares of Series A Preferred Stock may transfer any
such shares except to an "accredited investor" as such term is defined in Rule
501(a) adopted by the Securities and Exchange Commission under the Securities
Act and then only in transactions involving the transfer of at least 50,000
shares of Series A Preferred Stock.
Section 3.3. Restrictive Legends. Until such time as the Shares have been
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registered under the Securities Act and registered or qualified under any
applicable state securities laws or until such time as the Company is provided
by the Purchaser with an opinion of counsel reasonably acceptable to the Company
to the effect that the transfer of the Shares may be made without any such
registration or qualification, the certificates representing the Shares shall be
imprinted with a legend in substantially the following form:
"The shares of stock represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, (the "Act") or
registered or qualified under any applicable state securities laws, and the
holder hereof cannot make any sale, assignment or other transfer of any
shares of such stock except pursuant to an offering of such shares duly
registered under the Act and registered or qualified under any applicable
state securities laws, or under such other circumstances as in the opinion
of counsel for or reasonably acceptable to the issuer shall not (by virtue
of any applicable exemption under the Act and any applicable state
securities laws, any rule or regulation thereunder or the federal
bankruptcy laws) require such registration or qualification."
Section 3.4. Access to Information. Such Investor is able to fend for
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itself in the transactions contemplated by this Agreement, has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment, and has the ability to bear the economic
risks of its investment. Such Investor has had access, during the course of the
transaction and prior to its purchase of its Shares, to the same kind of
information that would be provided in a registration statement filed by the
Company under the 1933 Act and that it has had, during the course of the
transaction and prior to its purchase of its Shares, the opportunity to ask
questions of; and receive answers from, the Company concerning the terms and
conditions of the offering and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to it or to which it had access.
Section 3.5. Accredited Investor. Such Investor is an "Accredited Investor"
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as such term is defined in Rule 501(a) as adopted by the Securities and Exchange
Commission pursuant to the Securities Act, and has a net worth of at least
$l,000,000.
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Section 3.6. Authorizations. Such Investor has full power and authority to
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enter into this Agreement and to fully perform the terms of this Agreement
hereunder. The execution, delivery, and performance of this Agreement by such
Investor has been (or will be) duly authorized by all necessary action of such
Investor prior to Closing, and this Agreement constitutes the legal, valid and
binding obligation of such Investor enforceable in accordance with its terms,
and the execution and delivery of this Agreement and the purchase of the Shares
contemplated thereby by such Investor will not violate any applicable federal or
state law, regulation or rule.
Section 3.7. Broker's or Finder's Fees. Such Investor has not retained a
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broker or finder in connection with the purchase of the Shares.
Section 3.8. Receipt of Disclosure Documents. Such Investor acknowledges
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receipt of a copy of each of the following documents (the Disclosure Documents):
(i) The Company's Annual Report on Form l0-K for the fiscal year ended
June 29, 1997, and Form l0-KA-l filed with the Securities and
Exchange Commission on October 29, 1997;
(ii) The Company's Quarterly Report on Form l0-Q for the quarterly
period ended September 28, 1997; and
(iii) The Company's Notice of Annual Meeting and Proxy Statement for the
annual meeting of Stockholders to be held December 12, 1997.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1. Conditions to the Obligations of the Investors. The
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obligation of the Investors to be bound by the provisions of this Agreement and
to purchase the Shares is subject to satisfaction of the following conditions
precedent, any or all of which may be waived in whole or in part by the
Investors:
(a) Representations and Warranties Correct. All of the representations
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and warranties of the Company contained in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or otherwise delivered
to the Investors shall be true and correct on the date of Closing.
(b) Performance of Obligations. All of the obligations of the Company
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shall have been performed pursuant to the terms and conditions hereof on or
prior to the date of Closing.
(c) Paragon Financing. All conditions to the closing of the Paragon
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Financing shall have been satisfied or waived by Paragon.
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(d) Amex Listing. The Company shall have received written notice of
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approval for the listing of the Shares by the American Stock Exchange.
(e) Certificate of Designation. The Certificate of Designation shall
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have been duly filed and accepted by the Delaware Secretary of State.
(f) Opinion of Counsel to the Company. The Investors shall have received
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an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Farrier, L.L.P., counsel to the Company,
based upon such counsel's best knowledge, addressed to the Purchaser, dated such
date, substantially in the form as set forth below:
1) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and that it has full
corporate power and authority to execute the Agreement and to consummate
the transactions contemplated thereby;
2) The Agreement has been duly authorized by the Company and its Board
of Directors and duly executed and delivered by an authorized officer of
the Company and constitutes a legal, valid, and binding obligation of the
Company and is enforceable in accordance with its terms, subject to
bankruptcy and other laws of general application affecting the rights and
remedies of creditors;
3) The offer, issuance, sale and delivery of the Shares in conformity
with the terms of the Agreement does not violate any provision of the
Company's Certificate of Incorporation or Bylaws;
4) To such counsel's knowledge, other than the conditions to closing
and the matters set forth on Schedule 2.4 hereto, no order, authorization,
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consent or approval of; or registration, declaration or filing with any
state or federal governmental authority or agency is required in connection
with the execution and delivery of the Agreement or the offer, sale or
issuance of the Shares by the Company or the consummation by the Company of
the transactions contemplated by the Agreement.
5) To such counsel's knowledge, except as otherwise set forth in the
Disclosure Documents and Schedule 2.7, neither Sunbelt nor any of its
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subsidiaries is a party to any pending or threatened action, suit,
proceeding or investigation before any court or governmental agency.
6) Except as set forth on Schedule 2.4 hereto, neither the execution,
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delivery or performance of the Agreement nor compliance by the Company with
all provisions thereof; nor consummation by the Company of the transactions
contemplated thereby conflicts or will conflict with or constitutes or will
constitute a breach of; or a default under, the Certificate of
Incorporation or bylaws of the Company, or, to such counsel's knowledge,
any material contract to which it is a party, or will result in the
creation or
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imposition of any lien, charge or encumbrance upon any property or assets
of the Company under any such material contract nor will any such action
result in any violation of any existing Delaware or Federal law, rule
regulation (assuming compliance with all applicable state securities and
Blue Sky laws), or any ruling, judgment, injunction, order or decree of any
court or government entity or instrumentality known to such counsel, and
applicable to the Company or any of its properties;
7) To such counsel's knowledge, without undertaking any independent
investigation, the authorized, issued and outstanding capital stock of the
Company (i) is as set forth in Section 2.2 of the Agreement, (ii) has been
duly and validly authorized and issued and are fully paid and
nonassessable, and (iii) has not been issued in violation of any preemptive
right, co-sale right, or registration right.
8) Once issued and delivered for the consideration stated in the
Agreement, the Shares shall be duly and validly issued, fully paid and non-
assessable. To such counsel's knowledge, without undertaking any
independent investigation, there are no outstanding subscriptions, options
(other than employee stock options), warrants, rights or other written
agreements obligating the Company to issue or sell any shares of Common or
Preferred Stock of the Company other than as set forth on Schedule 2.2.
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(g) Consents Obtained. The Company shall have obtained in writing all
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consents, if any, needed to enable the Company to observe and comply with all of
its obligations hereunder.
(h) Other Documents. All instruments, documents and legal matters
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reasonable and necessary to consummate the transactions contemplated by this
Agreement shall be satisfactory in form and substance to the respective counsels
for the Investors and the Investors shall have received all documents reasonably
requested in connection with the purchase of the Shares.
Section 4.2. Conditions to the Obligations of the Company. The obligation
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of the Company to be bound by the provisions of this Agreement and to sell the
Shares is subject to satisfaction of the following conditions precedent:
(a) Representations and Warranties Correct. All of the representations
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and warranties of the Investors contained in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or otherwise delivered
to the Company shall be true and correct on the date of Closing.
(b) Consents Obtained. Each Investor shall have obtained in writing all
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consents, if any, needed to enable such Investor to observe and comply with all
of its obligations hereunder.
(c) Corporate Resolutions Compliance Certificate and Certain Other
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Documents. Each Investor that is a corporation or other business entity shall
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have delivered to the Company on such date certified copies of the resolutions
adopted by such Investor's Board of Directors or other governing body
authorizing the execution, delivery and performance of this Agreement and the
purchase and acceptance of the Shares.
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(d) Other Documents. All instruments, documents and legal matters
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reasonable and necessary to consummate the transactions contemplated by this
Agreement shall be satisfactory in form and substance to counsel for the Company
and the Company shall have received all documents reasonably requested in
connection with the sale thereby of the Shares.
ARTICLE V
REGISTRATION RIGHTS
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Section 5.1. "Holder." As used in this Article V, the term "holder" shall
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mean any person owning or having the right to acquire Registrable Securities (as
defined below), including any transferee of Registrable Securities to whom the
Purchaser has assigned its registration rights under this Article V, but only if
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
Registrable Securities with respect to which such registration rights are being
assigned; provided, however, that such assignment shall be effective only if
immediately following such transfer the transferee or assignee is the holder of
at least 50,000 Registrable Securities and the further disposition of such
Registrable Securities by the transferee or assignee is restricted under the
Securities Act.
Section 5.2. "Registrable Securities." As used in this Article V, the term
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"Registrable Securities" shall mean (1) the Common Stock issued or issuable upon
conversion of the Shares and (2) any Common Stock issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of; such Shares; provided, however, that any shares previously
sold to the public pursuant to a registered public offering or pursuant to Rule
144 under the Securities Act shall cease to be Registrable Securities.
Section 5.3. Piggy-Back Registration. Whenever the Company proposes to
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register any shares of its capital stock for its own or others account under the
Securities Act for a public offering for cash, on a form that would also permit
the registration of the Registrable Securities, the Company shall give each
holder of Registrable Securities prompt written notice of its intent to do so.
Upon the written request of any such holder given within 15 days after receipt
of such notice, the Company will use its best efforts to cause to be included in
such registration all of the Registrable Securities which such holder requests.
If the Company is advised in writing in good faith by any managing underwriter
of the securities being offered pursuant to any registration statement under
this Section 5.3 that the number of shares to be sold by persons other than the
Company is greater than the number of such shares which can be offered without
adversely affecting the offering, the Company may reduce pro rata (based upon
the number of shares of the Company's capital stock held by all persons other
than the Company, who hold Registrable Securities) the number of shares offered
for the accounts of such persons to a number deemed satisfactory by such
managing underwriter. No agreement of the Company shall permit any person other
than the Company or holders of Registrable Securities to participate in any
registration under this paragraph except on the basis that any offering
limitation either applies
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only to such other persons or is apportioned according to the number of shares
held by each participant. Rights under this Section 5.3 are subject to the terms
and provisions of outstanding demand registration rights which are referenced in
Schedule 2.2.
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Section 5.4. Demand Registrations. If at any time after December 31, 1998,
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and prior to January 1, 2006, the holder(s) of at least twenty-five percent
(25%) of the Registrable Securities shall notify the Company in writing that
such holders intend to offer or cause to be offered for sale at least twenty-
five percent (25%) of such Registrable Securities and shall request the Company
to cause such Registrable Securities to be registered under the Securities Act,
the Company will use its best efforts as soon as practicable thereafter to
register such Registrable Securities (together with any other Registrable
Securities requested by the holders thereof to be included in such registration
pursuant to Section 5.3 within 15 days after receipt of a notice from the
Company pursuant to Section 5.3) in accordance with the registration procedures
set forth in Section 5.5. hereof.
Such rights to require registration shall be in addition to the rights of
the holders under Sections 5.3 and 5.5 and shall be available to holders, acting
pursuant to this Agreement, on not more than a cumulative total of two (2)
occasions; provided, however, that each such registration right shall be deemed
to have been used only upon such registration statement becoming and remaining
effective in accordance with the provisions hereof. The Company shall, within
five days of receipt of a request for registration pursuant to this Section 5.4,
notify each holder of such request and permit each holder to join such request;
provided, that such holder, within 15 days of receipt of such notification, so
indicates in writing to the Company. Notwithstanding the foregoing, the Company
shall not be obligated to effect a registration pursuant to this Section 5.4
during the period starting with the date thirty (30) days prior to the Company's
estimated date of filing of, and ending on a date three (3) months following the
effective date of; a registration statement pertaining to an underwritten public
offering of securities for the account of the Company provided that the Company
is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; provided,
however, that no such registration statements filed by the Company shall
preclude the holders of the Registrable Securities from exercising a
registration right hereunder this Section 5.4 for more than 90 days.
Section 5.5. Registration Procedures.
-----------------------
(a) All registration expenses incurred in connection with registrations
under Sections 5.3 and 5.4 (including all registration, filing, qualification,
printer's, accounting and legal fees) shall be borne by the Company. All selling
expenses, including underwriting commissions and discounts, relating to the
Registrable Securities shall be borne pro rata by the holders whose Registrable
Securities are to be registered.
(b) In connection with registrations under this Article 5, the Company
shall (i) use its best efforts to prepare and file with the Securities and
Exchange Commission (the "Commission") as soon as reasonably practicable, but
not later than 90 days, a registration statement with respect to the Registrable
Securities and use its best efforts to cause such
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registration to promptly become and remain effective for a period of at least 12
months or such shorter period during which holders shall have sold all
Registrable Securities which they requested to be registered); (ii) furnish to
each holder such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as such
holder may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such holder; (iii) use its best efforts to
register and qualify the Registrable Securities covered by such registration
statement under applicable state securities laws as shall be reasonably
appropriate for the distribution of the Registrable Securities; and (iv) take
such other actions as are reasonable and necessary to comply with the
requirements of the Securities Act and the regulations thereunder, or the
reasonable request of any holder, with respect to the registration and
distribution of the Registrable Securities. The Company is not obligated to
effect registration or qualification under this Article S in any jurisdiction
requiring it to qualify to do business or to execute a general consent to
service of process.
Section 5.6. Certain Delays: Notification.
----------------------------
(a) The Company shall have the right, on not more than two occasions, to
defer for a reasonable period (not to exceed 90 days) the filing of any
registration statement requested under Sections 5.4 or 5.5 if, in the reasonable
judgment of the Company's board of directors, such registration would materially
interfere with or materially and adversely affect any then existing negotiations
for financing arrangements or financing plans of the Company, or any arrangement
or plan of the Company, then pending or being negotiated in good faith, relating
to any acquisition, disposition, merger or similar transaction, or would require
an audit of the Company or any Subsidiary other than the regularly scheduled
annual audit (unless the requesting holder or holders and other parties joining
such request or otherwise participating in such registration agree to bear the
expenses of such audit), such right to defer a registration to be exercised by
the Company not more than once in any year period.
(b) The Company shall promptly notify each holder of Registrable
Securities covered by any registration statement of any event which results in
the prospectus included in such registration statement, as then in effect,
containing an untrue statement of a material fact or omitting 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 then existing. The
Company shall forthwith prepare and furnish, after securing such approvals as
may be necessary, to such holder a reasonable number of copies of any supplement
to or amendment of such prospectus that may be necessary so that, as thereafter
delivered to the purchasers of such Registrable 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 then existing.
(c) The Company shall promptly notify all selling holders of any stop
order or similar proceeding initiated by state or federal regulatory bodies and
use its best efforts to take all necessary steps expeditiously to remove such
stop order to similar proceeding.
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Section 5.7. Indemnification by the Company. To the extent permitted by
------------------------------
law, the Company will indemnify and hold harmless each participating holder and
each underwriter of the Registrable Securities being sold by such holder, and
each controlling person of such holder and underwriter, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement relating to such Registrable
Securities (or in any related registration statement, notification or the like)
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such holder and each such underwriter and
controlling person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action and will enter into an indemnification agreement with each
such holder and underwriter containing customary provisions, including
provisions for contribution, as any holder or underwriter shall reasonably
request; provided, however, that, the Indemnity Agreement contained in this
Section 5.7 shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if such settlement is effected without the
consent of the Company (which consent will not be unreasonably withheld, nor
shall the Company be liable in any such case to the extent that any such claim,
loss, damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such holder
or underwriter and stated to be specifically for use therein.
Section 5.8. Indemnification by Holders. To the extent permitted by law,
--------------------------
each participating holder of Registrable Securities will indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the registration statement, each person, if any, who controls the Company within
the meaning of Section l5 of the Securities Act, and each agent and any
underwriter for the Company (within the meaning of the Act) against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) or a material
fact contained in any registration statement relating to the Registrable
Securities (or in any related registration statement, notification or the like)
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such director, officer or controlling
person for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action and will enter into an indemnification agreement with the Company and
each such person containing customary provisions, including provisions for
contribution, as the Company or each such person shall reasonably request;
provided, however, that no holder of Registrable Securities will be liable in
any such case except to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such holder and stated to
be specifically for use therein; and provided, further, that no holder of
Registrable Securities will be liable under this section for any losses, costs,
damages or expenses exceeding in aggregate the proceeds to such 'holder in such
offering; and, provided further, however, that the indemnity contained in this
Section 5.8 shall not apply to amounts paid in settlement of any such loss,
claim, damage,
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liability, or action (if such settlement is effected without the consent of such
holder, which consent will not be unreasonably withheld).
Section 5.9. Reports under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the holders of Registrable Securities the benefits of Rule
l44 promulgated under the Securities Act and any other rule or regulation of the
Commission that may at any time permit a holder to sell securities of the
Company to the public without registration or pursuant to registration on Form
S-3, the Company agrees to use its best efforts to satisfy the requirements of
all such rules and regulations (including the requirements for public
information, registration Under the Securities Exchange Act of l934 and timely
reporting to the Commission).
Section 5.10. Preparation of Registration Statements. Whenever the Company
--------------------------------------
is registering any Common Stock under the Securities Act and a holder of
Registrable Securities is selling any securities under such registration or
determines that it may be a controlling person under such Act, the Company will
allow such holder to participate in the preparation of the registration
statement, will include in the registration statement such information as such
holder may reasonably request and will take all such other action as such holder
may reasonably request.
ARTICLE VI
INDEMNIFICATION
---------------
Section 6.1. Indemnification by the Company. The Company agrees to
------------------------------
indemnify and hold harmless each Investor from and against, and to reimburse
each Investor with respect to any and all loss, damage, liability, cost and
expense, including reasonable attorney's fees incurred by such Investor, by
reason of or arising out of or in connection with: (i) a material breach of any
representation or warranty contained in Article II hereof or in any certificate
delivered to the Investor pursuant to the provisions of this Agreement; or (ii)
the failure of the Company to perform any material agreement required by this
Agreement.
Section 6.2. Indemnification by the Investors. The Investors agree to
--------------------------------
indemnify and hold the Company harmless from and against, and to reimburse the
Company with respect to any and all loss, damage, liability, cost and expense,
including reasonable attorney's fees incurred by the Company by reason of or
arising out of or in connection with: (i) a material breach of any
representation or warranty contained in Article III hereof made by such Investor
or (ii) the failure of such Investor to perform any material agreement required
by this Agreement to be performed by it.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.1. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties contained herein or made in writing by the
Company and the Investors in connection
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with the transactions contemplated hereby shall survive any investigations made
by the Investors and the execution and delivery of this Agreement and the
Closing Date for a period of one year.
Section 7.2. Entire Agreement. This Agreement and the Exhibits and
----------------
Schedules hereto and thereto constitute the entire agreement among the Company
and the Investors with respect to the subject matter hereof. There are no
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein. This
Agreement supersedes all prior agreements between the parties with respect to
the Shares purchased hereunder and the subject matter hereof. The terms and
provisions of this Agreement may not be modified or amended, or any of the
provisions hereof waived, temporarily or permanently, except in the case of
modifications and amendments pursuant to the written consent of the parties to
this Agreement and in the case of waiver pursuant to a writing by the person so
waiving.
Section 7.3. Notices. All notices, requests, demands and other
-------
communications called for or contemplated hereunder shall be in writing and
shall be deemed duly given three days from the date such notice is deposited in
the United States mail, postage-paid and addressed to the proper parties at the
following addresses, or at such other addresses as the parties may designate by
written notice in the manner aforesaid:
If to an Investor: At such investor's address set forth
on Exhibit A hereto.
If to the Company: Sunbelt Nursery Group, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Farrier, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇.▇▇▇▇▇▇▇
Section 7.4. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and their respective legal successors.
Nothing contained herein, express or implied, is intended to confer upon any
person or entity other than the parties hereto and their legal successors, any
rights or remedies under or by reason of this Agreement unless so stated herein
to the contrary.
Section 7.5. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 7.6. Headings. The headings in this Agreement are for reference
--------
purposes only and shall not be deemed to have any substantive effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
COMPANY:
SUNBELT NURSERY GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Title: President
----------------------------
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SUNBELT NURSERY GROUP, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE
▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇
HEALTHY AMERICAN PRODUCTS, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: Vice President
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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SUNBELT NURSERY GROUP, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇
HEALTHY AMERICAN PRODUCTS INC.
By:
-------------------------------
Title:
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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