Exhibit 10.28
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
June 12, 2006, among Monterey Gourmet Foods, Inc., a Delaware corporation (the
"Company"), and the investors identified on the signature pages hereto (each, an
"Investor" and collectively, the "Investors").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below)
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Investor, and each Investor, severally and not jointly, desires to purchase
from the Company certain securities of the Company, as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
ARTICLE 1.
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms shall
have the meanings indicated in this Section 1.1:
"Action" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed under Rule
144.
"Business Day" means any day except Saturday, Sunday and any
day which is a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.
"Buy-In" has the meaning set forth in Section 4.1(c).
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Article II.
"Closing Date" means the Business Day on which all of the
conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other
date as the parties may agree.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par
value $0.001 per share, and any securities into which such common stock may
hereafter be reclassified.
"Common Stock Equivalents" means any securities of the Company
or any Subsidiary which entitle the holder thereof to acquire Common Stock at
any time, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"Company Counsel" means Xxxxxxx Xxxxxxx Xxxxxxx Xxxxxx, LLP.
"Company Deliverables" has the meaning set forth in Section
2.2(a).
"Disclosure Materials" has the meaning set forth in Section
3.1(h).
"Effective Date" means the date that the Registration
Statement required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means U.S. generally accepted accounting principles.
"Intellectual Property Rights" has the meaning set forth in
Section 3.1(p).
"Investment Amount" means, with respect to each Investor, the
Investment Amount indicated on such Investor's signature page to this Agreement.
"Investor Deliverables" has the meaning set forth in Section
2.2(b).
"Investor Party" has the meaning set forth in Section 4.7.
"Lien" means any lien, charge, encumbrance, security interest,
right of first refusal or other restrictions of any kind.
"Material Adverse Effect" means any of (i) a material and
adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) a material and adverse effect on the results of operations,
assets, prospects, business or condition (financial or otherwise) of the Company
and the Subsidiaries, taken as a whole, or (iii) an adverse impairment to the
Company's ability to perform on a timely basis its obligations under any
Transaction Document.
"New York Courts" means the state and federal courts sitting
in the City of New York, Borough of Manhattan.
"Outside Date" means July 15, 2006.
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"Per Unit Purchase Price" equals $5.75.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of Exhibit A hereto.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Investors of the Shares and the Warrant Shares.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Reports" has the meaning set forth in Section 3.1(h).
"Securities" means the Shares, the Warrants and the Warrant
Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Share Delivery Date" has the meaning set forth in Section
4.1(c).
"Shares" means the shares of Common Stock issued or issuable
to the Investors pursuant to this Agreement.
"Short Sales" include, without limitation, all "short sales"
as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act
and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, swaps and similar arrangements (including on a total
return basis), and sales and other transactions through non-US broker dealers or
foreign regulated brokers.
"Subsidiary" means any "significant subsidiary" as defined in
Rule 1-02(w) of the Regulation S-X promulgated by the Commission under the
Exchange Act.
"Trading Day" means (i) a day on which the Common Stock is
traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the
Common Stock is not listed on a Trading Market (other than the OTC Bulletin
Board), a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is
not quoted on any Trading Market, a day on which the Common Stock is quoted in
the over-the-counter market as reported by the National Quotation Bureau
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Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
"Trading Market" means whichever of the New York Stock
Exchange, the American Stock Exchange, the NASDAQ National Market, the NASDAQ
Capital Market or OTC Bulletin Board on which the Common Stock is listed or
quoted for trading on the date in question (together in each case with the
successor to such exchange or market).
"Transaction Documents" means this Agreement, the Warrants,
the Registration Rights Agreement, and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
"Warrants" means the Common Stock purchase warrants in the
form of Exhibit B, which are issuable to the Investors at the Closing.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
ARTICLE 2.
PURCHASE AND SALE
2.1. Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Investor, and
each Investor shall, severally and not jointly, purchase from the Company, the
Shares and the Warrants representing such Investor's Investment Amount. The
Closing shall take place at the offices of Xxxxx Xxxx LLP, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, XX 00000 on the Closing Date or at such other location or
time as the parties may agree.
2.2. Closing Deliveries. (a) At the Closing, the Company shall
deliver or cause to be delivered to each Investor the following (the "Company
Deliverables"):
(i) a certificate evidencing a number of Shares
equal to such Investor's Investment Amount divided by the Per Unit Purchase
Price, registered in the name of such Investor;
(ii) a Warrant, registered in the name of such
Investor, pursuant to which such Investor shall have the right to acquire the
number of shares of Common Stock equal to 30% of the number of Shares issuable
to such Investor pursuant to Section 2.2(a)(i);
(iii) the legal opinion of Company Counsel, in
agreed form, addressed to the Investors; and
(iv) the Registration Rights Agreement, duly
executed by the Company.
(b) At the Closing, each Investor shall deliver or cause
to be delivered to the Company the following (the "Investor Deliverables"):
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(i) its Investment Amount, in United States
dollars and in immediately available funds, by wire transfer to an account
designated in writing by the Company for such purpose; and
(ii) the Registration Rights Agreement, duly
executed by such Investor.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to each Investor:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than as specified in the SEC Reports. Except as disclosed in
Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital
stock of each Subsidiary free and clear of any and all Liens, and all the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. The Company and each
Subsidiary are duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the
material provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. The Company and each
Subsidiary are duly qualified to conduct its respective businesses and are in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company in connection therewith. Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
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(d) No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing with the Commission of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, (ii) filings required by state securities laws, (iii) the
filing of a Notice of Sale of Securities on Form D with the Commission under
Regulation D of the Securities Act, (iv) the filings required in accordance with
Section 4.5 and (v) those that have been made or obtained prior to the date of
this Agreement.
(f) Issuance of the Securities. The Securities have been
duly authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock the shares of Common Stock issuable pursuant to this Agreement and
the Warrants in order to issue the Shares and the Warrant Shares.
(g) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company, and all shares
of Common Stock reserved for issuance under the Company's various option and
incentive plans, is specified in the SEC Reports. Except as specified in
Schedule 3.1(g), no securities of the Company are entitled to preemptive or
similar rights, and no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as specified in Schedule
3.1(g), there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not, immediately or with the passage
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of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investors) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has
filed all reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
twelve months preceding the date hereof (or such shorter period as the Company
was required by law to file such reports) (the foregoing materials being
collectively referred to herein as the "SEC Reports" and, together with the
Schedules to this Agreement (if any), the "Disclosure Materials") on a timely
basis or has timely filed a valid extension of such time of filing and has filed
any such SEC Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Subject to Section 3.1(s) below, the financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) Press Releases. The press releases disseminated by
the Company during the twelve months preceding the date of this Agreement taken
as a whole do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made and when made, not misleading.
(j) Material Changes. Since the date of the latest
audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables, accrued
expenses and other liabilities incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not altered
its method of accounting or the identity of its auditors, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock, and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option or employee stock purchase plans. The Company does
not have pending before the Commission any request for confidential treatment of
information.
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(k) Litigation. There is no Action which (i) adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) except as specifically disclosed
in the SEC Reports, could, if there were an unfavorable decision, individually
or in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof (in his or her capacity as such), is or has been the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty, except as specifically
disclosed in the SEC Reports. There has not been, and to the knowledge of the
Company, there is not pending any investigation by the Commission involving the
Company or any current or former director or officer of the Company (in his or
her capacity as such). The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(l) Labor Relations. No material labor dispute exists or,
to the knowledge of the Company, is imminent with respect to any of the
employees of the Company.
(m) Compliance. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred that has
not been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. The Company is in compliance
with all effective requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended,
and the rules and regulations thereunder, that are applicable to it, except
where such noncompliance could not have or reasonably be expected to result in a
Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such permits.
(o) Title to Assets. The Company and the Subsidiaries
have good and marketable title in fee simple to all real property owned by them
that is material to their respective businesses and good and marketable title in
all personal property owned by them that is material to their respective
businesses, in each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries. Any real property and facilities held under lease by the
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Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance,
except as could not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.
(p) Patents and Trademarks. The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC Reports and
which the failure to so have could, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
Except as set forth in the SEC Reports, to the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(q) Insurance. The Company and the Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged. The Company has no reason to
believe that it will not be able to renew its and the Subsidiaries' existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business on
terms consistent with market for the Company's and such Subsidiaries' respective
lines of business.
(r) Transactions With Affiliates and Employees. Except as
set forth in the SEC Reports, none of the officers or directors of the Company
and, to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(s) Internal Accounting Controls. Except as disclosed in
the SEC Reports, the Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
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which the Company's Form 10-K or 10-Q, as the case may be, is being prepared.
The Company's certifying officers have evaluated the effectiveness of the
Company's controls and procedures in accordance with Item 307 of Regulation S-K
under the Exchange Act for the Company's most recently ended fiscal quarter or
fiscal year-end (such date, the "Evaluation Date"). The Company presented in its
most recently filed Form 10-K or Form 10-Q the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as such
term is defined in Item 308(c) of Regulation S-K under the Exchange Act) or, to
the Company's knowledge, in other factors that could significantly and
materially adversely affect the Company's internal controls.
(t) Solvency. Based on the financial condition of the
Company as of the Closing Date (and assuming that the Closing shall have
occurred), (i) the Company's fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature, (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof, and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
(u) Certain Fees. Except as described in Schedule 3.1(u),
no brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Investors shall have no obligation as a
result of actions or commitments made by the Company with respect to any fees or
with respect to any claims (other than such fees or commissions owed by an
Investor pursuant to written agreements executed by such Investor which fees or
commissions shall be the sole responsibility of such Investor) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.
(v) Certain Registration Matters. Assuming the accuracy
of the Investors' representations and warranties set forth in Section
3.2(b)-(e), no registration under the Securities Act is required for the offer
and sale of the Shares and Warrants, and the offer of the Warrant Shares, by the
Company to the Investors under the Transaction Documents. The Company is
eligible to register its Common Stock for resale by the Investors under Form S-3
promulgated under the Securities Act. Except as specified in Schedule 3.1(v),
the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
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(w) Listing and Maintenance Requirements. Except as
specified in the SEC Reports, the Company has not, in the two years preceding
the date hereof, received notice from any Trading Market to the effect that the
Company is not in compliance with the listing or maintenance requirements
thereof. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the
Trading Market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Securities under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the Common
Stock is currently listed or quoted, and no approval of the shareholders of the
Company thereunder is required for the Company to issue and deliver to the
Investors the Securities contemplated by Transaction Documents.
(x) Investment Company. The Company is not, and is not an
Affiliate of, and immediately following the Closing will not have become, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(y) Application of Takeover Protections. The Company has
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's Certificate of Incorporation (or similar charter documents) or the
laws of its state of incorporation (except for provisions authorized by section
203 of the Delaware General Corporation Law) that is or could become applicable
to the Investors as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company's issuance of the Securities and the
Investors' ownership of the Securities.
(z) No Additional Agreements. The Company does not have
any agreement or understanding with any Investor with respect to the
transactions contemplated by the Transaction Documents other than as specified
in the Transaction Documents.
(aa) Disclosure. The Company confirms that neither it nor
any Person acting on its behalf has provided any Investor or its respective
agents or counsel with any information that the Company believes constitutes
material, non-public information except insofar as the existence and terms of
the proposed transactions hereunder may constitute such information. The Company
understands and confirms that the Investors will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Investors regarding the Company, its
business and the transactions contemplated hereby, furnished by or on behalf of
the Company (including the Company's representations and warranties set forth in
this Agreement) are true and correct and do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
3.2. Representations and Warranties of the Investors. Each Investor
hereby, for itself and for no other Investor, represents and warrants to the
Company as follows:
11
(a) Organization; Authority. Such Investor is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Investor of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or, if such Investor is not a corporation,
such partnership, limited liability company or other applicable like action, on
the part of such Investor. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Investor, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(b) Investment Intent. Such Investor is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Investor's right at all times to
sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Subject to the immediately
preceding sentence, nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Securities for any period of time. Such
Investor is acquiring the Securities hereunder in the ordinary course of its
business. Such Investor does not have any agreement or understanding, directly
or indirectly, with any Person to distribute any of the Securities.
(c) Investor Status. At the time such Investor was
offered the Securities, it was, and at the date hereof it is, and on each date
on which it exercises Warrants it will be, an "accredited investor" as defined
in Rule 501(a) under the Securities Act. Such Investor is not a registered
broker-dealer under Section 15 of the Exchange Act.
(d) General Solicitation. Such Investor is not purchasing
the Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges
that it has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Shares and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to rely on the truth, accuracy and completeness
12
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(f) Certain Trading Activities. Such Investor has not
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Investor, engaged in any transactions in the
securities of the Company (including, without limitations, any Short Sales
involving the Company's securities) since the earlier to occur of (1) the time
that such Investor was first contacted by the Company or Xxxx Capital Partners,
LLC regarding an investment in the Company and (2) the 30th day prior to the
date of this Agreement. Such Investor covenants that neither it nor any Person
acting on its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including Short Sales) prior to
the time that the transactions contemplated by this Agreement are publicly
disclosed.
(g) Independent Investment Decision. Such Investor has
independently evaluated the merits of its decision to purchase the Securities
pursuant to the Transaction Documents, and such Investor confirms that it has
not relied on the advice of any other Investor's business and/or legal counsel
in making such decision. Such Investor has not relied on the business or legal
advice of Xxxx Capital Partners, LLC or any of its agents, counsel or Affiliates
in making its investment decision hereunder, and confirms that none of such
Persons has made any representations or warranties to such Investor in
connection with the transactions contemplated by the Transaction Documents.
(h) Limited Ownership. The purchase by such Investor of
the Securities issuable to it at the Closing will not result in such Investor
(individually or together with any other Person with whom such Investor has
identified, or will have identified, itself as part of a "group" in a public
filing made with the Commission involving the Company's securities) acquiring,
or obtaining the right to acquire, in excess of 19.999% of the outstanding
shares of Common Stock or the voting power of the Company on a post transaction
basis that assumes that the Closing shall have occurred. Such Investor does not
presently intend to, alone or together with others, make a public filing with
the Commission to disclose that it has (or that it together with such other
Persons have) acquired, or obtained the right to acquire, as a result of the
Closing (when added to any other securities of the Company that it or they then
own or have the right to acquire), in excess of 19.999% of the outstanding
shares of Common Stock or the voting power of the Company on a post transaction
basis that assumes that the Closing shall have occurred.
The Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE 4.
OTHER AGREEMENTS OF THE PARTIES
4.1. (a) Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of the
Securities other than pursuant to an effective registration statement, to the
Company, to an Affiliate of an Investor or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor thereof
13
to provide to the Company an opinion of counsel selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act.
(b) Certificates evidencing the Securities will contain
the following legend, until such time as they are not required under Section
4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE
SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. [THESE SECURITIES AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES]
[THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that an Investor may from
time to time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection with a bona
fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval or consent of the Company and no legal opinion of legal counsel to the
pledgee, secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be required in connection with a subsequent
transfer following default by the Investor transferee of the pledge. No notice
shall be required of such pledge. At the appropriate Investor's expense, the
Company will execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a pledge
or transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder. Except as otherwise provided in Section
4.1(c), any Shares subject to a pledge or security interest as contemplated by
this Section 4.1(b) shall continue to bear the legend set forth in this Section
4.1(b) and be subject to the restrictions on transfer set forth in Section
4.1(a).
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(c) Certificates evidencing Shares shall not contain any
legend (including the legend set forth in Section 4.1(b)): (i) while a
registration statement covering the resale of such Shares is effective under the
Securities Act, (ii) following a sale or transfer of such Shares pursuant to an
effective registration statement (including a Registration Statement), (iii)
following a sale or transfer of such Shares pursuant to Rule 144 (assuming the
transferee is not an Affiliate of the Company), or (iv) while such Shares are
eligible for sale under Rule 144(k). Following such time as restrictive legends
are not required to be placed on certificates representing Shares pursuant to
the preceding sentence, the Company will, no later than three Trading Days
following the delivery by an Investor to the Company or the Company's transfer
agent of a certificate representing Shares containing a restrictive legend,
deliver or cause to be delivered to such Investor a certificate representing
such Shares that is free from all restrictive or other legends (such third
Trading Day, the "Share Delivery Date"). If by the Share Delivery Date, the
Company fails to deliver the required number of Shares free from all legends,
and if after the Share Delivery Date and prior to the receipt of such Shares
free from restrictive legends, the Investor, or any third party on behalf of
such Investor, purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Investor of such Shares
(a "Buy-In"), then the Company shall pay in cash to the Investor (for costs
incurred either directly by such Investor or on behalf of a third party) the
amount by which the total purchase price paid for Common Stock as a result of
the Buy-In (including brokerage commissions, if any) exceed the proceeds
received by such Investor as a result of the sale to which such Buy-In relates.
The Investor shall provide the Company written notice indicating the amounts
payable to the Investor in respect of the Buy-In.
4.2. Furnishing of Information. As long as any Investor owns the
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Investor owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell the Shares and Warrant
Shares under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell the Shares and
Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
4.3. Integration. The Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Investors, or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market in a manner that would require
stockholder approval of the sale of the securities to the Investors.
15
4.4. Subsequent Registrations. Other than pursuant to the
Registration Statement, prior to the Effective Date, the Company may not file
any registration statement (other than on Form S-8) with the Commission with
respect to any securities of the Company.
4.5. Securities Laws Disclosure; Publicity. By 8:30 a.m. (New York
time) on the Trading Day following the execution of this Agreement, and by 8:30
a.m. (New York time) on the Trading Day following the Closing Date, the Company
shall issue press releases disclosing the transactions contemplated hereby and
the Closing. On the Trading Day following the execution of this Agreement the
Company will file a Current Report on Form 8-K disclosing the material terms of
the Transaction Documents (and attach as exhibits thereto the Transaction
Documents), and on the Trading Day following the Closing Date the Company will
file an additional Current Report on Form 8-K to disclose the Closing. In
addition, the Company will make such other filings and notices in the manner and
time required by the Commission and the Trading Market on which the Common Stock
is listed. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
filing with the Commission (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of such Investor, except to
the extent such disclosure is required by law or Trading Market regulations.
4.6. Limitation on Issuance of Future Priced Securities. During the
six months following the Closing Date, the Company shall not issue any "Future
Priced Securities" as such term is described by NASD IM-4350-1.
4.7. Indemnification of Investors. In addition to the indemnity
provided in the Registration Rights Agreement, the Company will indemnify and
hold the Investors and their directors, officers, shareholders, partners,
employees and agents (each, an "Investor Party") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "Losses")
that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
4.8. Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Investor
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Investor shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.9. Listing of Securities. The Company agrees, (i) if the Company
applies to have the Common Stock traded on any other Trading Market, it will
include in such application the Shares and Warrant Shares, and will take such
16
other action as is necessary or desirable to cause the Shares and Warrant Shares
to be listed on such other Trading Market as promptly as possible, and (ii) it
will take all action reasonably necessary to continue the listing and trading of
its Common Stock on a Trading Market and will comply in all material respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the Trading Market.
4.10. Use of Proceeds. The Company will use the net proceeds from
the sale of the Securities hereunder for working capital purposes and for the
satisfaction of a portion of the Company's debt, but not to redeem any Common
Stock or Common Stock Equivalents.
4.11. Subsequent Financings(a) . From the Closing Date until the
three month anniversary of the Effective Date, neither the Company nor any of
its Subsidiaries shall issue Common Stock or Common Stock Equivalents, except
for Common Stock or Common Stock Equivalents (a) issued or issuable to
employees, officers or directors of the Company pursuant to any stock, option,
employee, or stock purchase plan duly adopted by the Board of Directors of the
Company or sub-committee thereof established for such purpose, (b) issued or
issuable upon the exercise or exchange of or conversion or otherwise of any
Securities issued hereunder, (c) outstanding on the date of this Agreement,
provided, that the terms of such securities have not been amended since the date
of this Agreement to provide for an increase of the number of such securities or
to decrease the exercise, exchange or conversion price of any such securities,
(d) issuable in accordance with existing obligations of the Company to Company
or Subsidiary employees, officers, directors or agents, or (e) issuable as part
of acquisitions or strategic transactions, as long as such transactions are not
for the primary purpose of capital raising.
ARTICLE 5.
CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to the Obligations of the Investors to
Purchase Securities. The obligation of each Investor to acquire Securities at
the Closing is subject to the satisfaction or waiver by such Investor, at or
before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date;
(b) Performance. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Adverse Changes. Since the date of execution of this
Agreement, no event or series of events shall have occurred that reasonably
could have or result in a Material Adverse Effect, provided that a decrease in
stock price shall not in and of itself constitute an adverse effect for such
purposes;
17
(e) No Suspensions of Trading in Common Stock; Listing.
Trading in the Common Stock shall not have been suspended by the Commission or
any Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
a Trading Market;
(f) Company Deliverables. The Company shall have
delivered the Company Deliverables in accordance with Section 2.2(a);
(g) Nasdaq Listing. If applicable, the Nasdaq Stock
Market shall have waived application of the 15 day prior notice contained in
NASD Marketplace Rule 4310(c)(17)(D) or such timeframe shall have expired
without objection; and
(h) Termination. This Agreement shall not have been
terminated as to such Investor in accordance with Section 6.5.
5.2. Conditions Precedent to the Obligations of the Company to sell
Securities. The obligation of the Company to sell Securities at the Closing is
subject to the satisfaction or waiver by the Company, at or before the Closing,
of each of the following conditions:
(a) Representations and Warranties. The representations
and warranties of each Investor contained herein shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made on and as of such date;
(b) Performance. Each Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by such Investor at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Investors Deliverables. Each Investor shall have
delivered its Investors Deliverables in accordance with Section 2.2(b);
(e) Nasdaq Listing. If applicable, the Nasdaq Stock
Market shall have waived application of the 15 day prior notice contained in
NASD Marketplace Rule 4310(c)(17)(D) or such timeframe shall have expired
without objection; and
(f) Termination. This Agreement shall not have been
terminated as to such Investor in accordance with Section 6.5.
18
ARTICLE 6.
MISCELLANEOUS
6.1. Fees and Expenses. Each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of the Transaction Documents. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Securities.
6.2. Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
6.3. Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile
(provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to 6:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number specified in this Section on a day that is not a Trading
Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as follows:
If to the Company: Monterey Gourmet Foods, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
With a copy to: Xxxxxxx Xxxxxxx Xxxxxxx & Xxxxxx, LLP
0000 Xxxxx Xxxxxxxxxx Xxxx., Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxx, Esq.
Facsimile: (000) 000-0000
If to an Investor: To the address set forth under such
Investor's name on the signature pages
hereof;
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4. Amendments; Waivers; No Additional Consideration. No provision
of this Agreement may be waived or amended except in a written instrument signed
by the Company and the Investors holding a majority of the Shares. No waiver of
19
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right. No
consideration shall be offered or paid to any Investor to amend or consent to a
waiver or modification of any provision of any Transaction Document unless the
same consideration is also offered to all Investors who then hold Shares.
6.5. Termination. This Agreement may be terminated prior to
Closing:
(a) by written agreement of the Investors and the
Company; and
(b) by the Company or an Investor (as to itself but no
other Investor) upon written notice to the other, if the Closing shall not have
taken place by 6:30 p.m. Eastern time on the Outside Date; provided, that the
right to terminate this Agreement under this Section 6.5(b) shall not be
available to any Person whose failure to comply with its obligations under this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such time.
In the event of a termination pursuant to this Section, the Company
shall promptly notify all non-terminating Investors. Upon a termination in
accordance with this Section 6.5, the Company and the terminating Investor(s)
shall not have any further obligation or liability (including as arising from
such termination) to the other and no Investor will have any liability to any
other Investor under the Transaction Documents as a result therefrom.
6.6. Construction. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party. This
Agreement shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement or any of the
Transaction Documents.
6.7. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Investors. Any Investor may
assign any or all of its rights under this Agreement to any Person to whom such
Investor assigns or transfers any Securities, provided such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Investors."
6.8. No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.7 (as to each
Investor Party).
20
6.9. Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys' fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
6.10. Survival. Subject to and as modified by any time-related
condition or qualification set forth therein, the representations, warranties,
agreements and covenants contained herein shall survive the Closing and the
delivery of the Securities.
6.11. Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.12. Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.13. Rescission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
21
its related obligations within the periods therein provided, then such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
6.14. Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
6.15. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
6.16. Payment Set Aside. To the extent that the Company makes a
payment or payments to any Investor pursuant to any Transaction Document or an
Investor enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
6.17. Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
22
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
6.18. Limitation of Liability. Notwithstanding anything herein to
the contrary, the Company acknowledges and agrees that the liability of an
Investor arising directly or indirectly, under any Transaction Document of any
and every nature whatsoever shall be satisfied solely out of the assets of such
Investor, and that no trustee, officer, other investment vehicle or any other
Affiliate of such Investor or any investor, shareholder or holder of shares of
beneficial interest of such a Investor shall be personally liable for any
liabilities of such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
MONTEREY GOURMET FOODS, INC.
By: ____________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]
24
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
NAME OF INVESTOR
___________________________________________
By: _______________________________________
Name:
Title:
Investment Amount: $______________________
Tax ID No.:________________________________
ADDRESS FOR NOTICE
c/o:_______________________________________
Street:____________________________________
City/State/Zip:____________________________
Attention:_________________________________
Tel:_______________________________________
Fax:_______________________________________
DELIVERY INSTRUCTIONS
(if different from above)
c/o:_______________________________________
Street:____________________________________
City/State/Zip:____________________________
Attention:_________________________________
Tel:_______________________________________
25
Monterey Gourmet Foods, Inc.
Securities Purchase Agreement
Schedules
Schedule 3.1(a) Subsidiaries:
----------------------------
--------------------------------------------------------------------------------
Subsidiary Percent Comment
---------- ------- -------
Ownership
---------
--------------------------------------------------------------------------------
Monterey Development 100% Dormant Corporation
Corporation
--------------------------------------------------------------------------------
CIBO Naturals LLC 100% Final Purchase on January 2006
--------------------------------------------------------------------------------
Casual Gourmet Foods, Inc. 70% The Company has an obligation to
purchase the remaining 30%. The
Company will purchase an
additional 10% at the end of 2006
calculated multiplying the 2006
EBITDA times 62.5%. The Company
will purchase the remaining 20% at
the end of 2006 by multiplying the
average EBITDA for calendar years
2005, 2006 and 2007 times 125%.
--------------------------------------------------------------------------------
Sonoma Foods, Inc. 80% The Company and the Sellers shall
have the following additional
rights with respect to the
purchase of the remaining 20%
ownership:
On April 2009, the Sellers shall
have a put option to sell to
Monterey their remaining Shares
(the "Put").
If the Put shall not have been
exercised, then on April 2013, the
Company shall have the option to
purchase all remaining Shares of
the Sellers (the "Purchase
Option").
The purchase price of the Put and
the Purchase Options shall be the
average of the two preceding years
of annual earnings of Sonoma
before interest, taxes,
depreciation and amortization
("EBITDA") multiplied by 6.25.
--------------------------------------------------------------------------------
Schedule 3.1(g) Capitalization:
------------------------------
Employee Stock Purchase plan:
In October 1994, the Company's Board of Directors adopted a qualified
employee stock purchase plan. Under the purchase plan, eligible employees (those
who have completed one year of continuous employment with the Company) may
purchase shares of the Company's common stock through payroll deductions not to
exceed 10% of gross wages. The Company has reserved 200,000 shares of its common
stock for issuance under the purchase plan, which remains in effect until
terminated by the Company's Board of Directors, or until all of the shares
reserved for under the purchase plan have been issued. Unless the Board has
otherwise provided a higher amount prior to the commencement of an offering
period, the offering exercise price for each purchase period is 85% of the
lesser of (a) the fair market value of the shares on the offering date of such
offering period or (b) the fair market value of the shares on the given purchase
date. At May 31, 2006, there were 133,401 available shares remaining under the
plan.
Employee Stock Option Plan:
The Company's 2002 Stock Option Plan, originally established in 1993
(the "Plan"), provides for the granting of incentive stock options or
non-qualified stock options to eligible employees, consultants and outside
directors. The Company initially reserved 1,200,000 shares of its common stock
for issuance under the Plan and in subsequent years increased the total shares
reserved to 3,240,000. The Plan provides that the option price shall not be less
than the fair market value of the shares on the date of grant. Options generally
vest over a period of one to three years and may be exercised for a period of up
to ten years. During 2001, the Company issued additional options to purchase up
to 155,200 shares outside of the Plan (the "Nonstatutory Plan"). The Plan
expires April 30, 2012. As of May 31, 2006, the Company had 658,538 shares
available for new grants under the Plan, and 33,800 shares available for new
grants under the Nonstatutory Plan.
As of May 31, 2006, there were 1,607,894 options outstanding with a weighted
average exercise price of $4.59 per option with an average of 6.7 years
remaining before expiration and an average intrinsic value of $4.1 million.
Schedule 3.1 (u) Certain Fees:
-----------------------------
Commission Fee Payable to: Xxxx Capital Partners
Schedule 3.1(v) Certain Registration Matters:
--------------------------------------------
Pursuant to a Second Amendment of Agreement for Purchase and Sale of
Limited Liability Company Units between the Company, CIBO Naturals LLC and
Suekat LLC (the "Amendment"), Suekat received 300,000 restricted shares of MGF
Common Stock. Under Article 5 of the Amendment, Suekat may exercise piggyback
rights with respect to these shares in any Company S-3 registration.
