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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JANUARY 31, 1997
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HARRY'S FARMERS MARKET, INC.
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(Exact Name of Registrant as Specified in Charter)
GEORGIA 0-21486 58-2037452
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
1180 UPPER HEMBREE ROAD
ROSWELL, GEORGIA 30076
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(Address of Principal Executive Offices, including Zip Code)
(770) 664-6300
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
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On January 31, 1997, Harry's Farmers Market, Inc. (the "Company") entered
into a series of agreements with HFMI Acquisition Corporation, a Delaware
corporation which subsequently changed its name to Progressive Food Concepts,
Inc. ("PFCI"), pursuant to which, as more particularly described below, (i) PFCI
has agreed to invest in the Company in the form of a $12 million loan funded at
the closing, which is exchangeable, on the terms provided therein, for shares of
convertible preferred stock of the Company convertible into 3,000,000 shares of
the Company's Class A common stock, no par value ("Class A Common Stock"), and a
commitment to loan up to an additional $8 million, which would be optionally
exchangeable for shares of convertible preferred stock of the Company
convertible into an aggregate of 2,000,000 shares of Class A Common Stock,
together with a warrant to purchase up to an additional 2,000,000 shares of
Class A Common Stock at various exercise prices (the "Warrant"), (ii) the
Company transferred to PFCI certain intellectual property rights of the
Company outside the States of Georgia and Alabama, (iii) the Company and PFCI
entered into a five-year mutual consulting arrangement, and (iv) the Company
received a 2.5% interest in PFCI (collectively, the "Transactions").
The Loan. Pursuant to a Secured Loan Agreement (the "Loan Agreement"), the
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Company has received a commitment from PFCI for certain loans in an aggregate
principal amount not to exceed $20 million outstanding. The aggregate amount
includes a term loan to the Company in the principal amount of $12 million,
which loan was funded at the closing and used by the Company to repay certain
indebtedness (the "Refinancing Loan"), and an $8 million development loan to be
used by the Company for general corporate purposes and to fund development costs
relating to the development of a business model for the improvement of the
Company's business and facilities as contemplated by the Consulting Agreement,
described below (the "Development Loan" and together with the Refinancing Loan,
the "Loans"). Such Loans shall accrue interest at a rate of 5% per annum for a
period of five years and at the "reference rate," as set by the Bank of America,
Illinois, plus 1%, thereafter. The Loans are subordinated in right of payment to
certain indebtedness of the Company and are secured by a second priority lien on
substantially all of the assets of the Company and its subsidiaries.
In accordance with the terms of the Loan Agreement and subject to certain
conditions, at any time and from time to time after the earlier of (i) the
acceleration of either of the Loans or (ii) July 30, 1998 and until the first
day of the fiscal quarter of the Company commencing after January 31, 2002, PFCI
shall have the option (the "Option") to convert the outstanding loan amounts
into that number of shares of the Company's Series B Preferred Stock, stated
value $40.00 per share ("Series B Preferred Stock"), at a purchase price equal
to $40.00 per share, as may be adjusted in accordance with the terms of the Loan
Agreement (the "Option Price"), equal to (i) $20 million divided by (ii) the
Option Price; provided, PFCI shall be permitted to exercise such option in
excess of 300,000 shares of Series B Preferred Stock only to the extent that
PFCI has initially funded the Development Loan (at a rate of one share becoming
exercisable for each $40 of funding), unless such Development Loan was not
funded due to a material breach by the Company thereunder or under certain other
agreements between the Company and PFCI. In addition, subject to certain
conditions provided in the Loan Agreement, PFCI is required to exercise the
Option with respect to an amount equal to (x) $12 million divided by (y) the
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Option Price, not later than January 31, 2002, provided that at such time there
exists no uncured event of default under the Refinancing Loan. The purchase
price payable upon any exercise of such Option is to be paid by a contribution
to the Company of a principal amount of the Loans equal to the purchase price,
or to the extent the principal amount of the Loans is insufficient for this
purpose, by cash.
The Series B Preferred Stock, stated value of $40.00 per share, ranks (i)
senior to all classes of common stock of the Company and to any other class or
series of capital stock that does not expressly provide that it ranks senior to
or on a parity with the Series B Preferred Stock with respect to dividends and
upon liquidation, dissolution and winding-up, (ii) on parity with the Company's
Series AA Preferred Stock, stated value $9.00 per share, and with each other
class or series of the Company's capital stock that expressly provides that it
ranks on a parity with the Series B Preferred Stock with respect to dividends
and upon liquidation, dissolution and winding-up (collectively, "Parity
Securities"), and (iii) junior to each class or series of the Company's capital
stock that expressly provides that it ranks senior to the Series B Preferred
Stock with respect to dividends and upon liquidation, dissolution and winding-up
(collectively, "Senior Securities"). The terms of the Series B Preferred Stock
provide that the Company shall not (a) create, authorize or issue any Senior
Securities or Parity Securities, (b) reclassify any class or series of its
capital stock into Senior Securities or Parity Securities, (c) increase the
number of Series B Preferred Stock authorized for issuance, or (d) amend, modify
or repeal its Articles of Incorporation, Articles of Amendment to the Articles
of Incorporation, By-laws or any other specified designation, right, preference
or power of the Series B Preferred Stock in a manner adverse to holders of
Series B Preferred Stock without the approval of holders of at least two-thirds
of the then outstanding Series B Preferred Stock.
The holders of the Series B Preferred Stock will be entitled, at any time
the Company shall declare and pay a dividend or distribution with respect to any
class of the Company's common stock, to receive with respect to each share of
Series B Preferred Stock held, a dividend or distribution that is the same
dividend or distribution that would be received by a holder of the number of
shares of Class A Common Stock into which such share of Series B Preferred Stock
is convertible on the record date for such dividend or distribution. In the
event of certain defaults with respect to redemption of the Series AA Preferred
Stock, the Series B Preferred Stock will become entitled to receive, when, as
and if declared by the Company's Board of Directors out of funds legally
available therefor, cash dividends at an annual rate of 15% of the liquidation
preference to which each share of Series B Preferred Stock is entitled.
Each share of Series B Preferred Stock will be convertible at any time
into that number of shares of Class A Common Stock obtained by dividing (i) the
aggregate Liquidation Preference (as defined) of the shares to be converted by
(ii) the then-applicable Conversion Price (as defined). The initial Conversion
Price is $4.00 per share and shall be subject to adjustment with respect to
transactions occurring after January 31, 1997 (regardless of whether any shares
of Series B Preferred Stock are then outstanding) pursuant to customary anti-
dilution provisions, including provisions that require adjustment to the
Conversion Price in the event the Company issues Class A Common Stock (or
options to the purchase, rights to subscribe for, or securities convertible into
or exchangeable for, Class A Common Stock) for no consideration or for
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consideration per share (determined as provided in the Series B Preferred Stock)
less than either the Conversion Price or the Market Price (as defined) in effect
immediately prior to such issuance of Class A Common Stock; provided, however,
no adjustment shall be made to the Conversion Price in the case of the issuance
of (i) the Warrants and certain other warrants issued by the Company, and the
Class A Common Stock issuable upon the exercise of the Warrants and such other
warrants, (ii) the Option, the Series B Preferred Stock issuable upon exercise
of the Option and the Class A Common Stock issuable pursuant to the conversion
of all or any portion of such Series B Preferred Stock, and (iii) the Series AA
Preferred Stock of the Company and Class A Common Stock issuable upon conversion
of such Series AA Preferred Stock.
The holders of Series B Preferred Stock will vote with the holders of the
Class A Common Stock, the holders of the Class B Common Stock, and the holders
of the Series AA Preferred Stock, voting together as a single voting group, on
any matter required or permitted to be voted upon by the holders of the
Company's common stock. Each share of Series B Preferred Stock shall entitle
the holder thereof such number of votes per share in each matter as
shall equal the number of shares of Class A Common Stock into which such share
of Series B Preferred Stock is convertible as of the record date for the
determination of holders entitled to vote on such matters.
Warrants. Pursuant to a Transaction Agreement (the "Transaction Agreement"),
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PFCI has paid to the Company $1,000,000 in exchange for the issuance of the
Warrant. The Warrant, which expires on January 31, 2001,is exercisable at
prices ranging from $4.00 to $5.50 per share, subject to adjustment in certain
circumstances.
Other Financings. Pursuant to the Transaction Agreement, the Company has
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agreed that at any time the Company desires to seek additional financing
(whether debt or equity financing), the Company will negotiate in good faith
with PFCI for a period of 20 days with regard to any portion of the entire
amount (at the option of PFCI) of such financing prior to negotiating with any
other entity with regard thereto. In the event the Company has engaged in good
faith negotiations with PFCI and such negotiations have been unsuccessful, the
Company must notify PFCI of the existence of any other financing arrangement it
proposes to consummate and the terms and conditions thereof and shall grant PFCI
a right of first refusal with respect to such proposed financing on the same
terms and subject to the same conditions contained therein, in which event PFCI
shall have 30 days thereafter in which to agree to provide all of the financing
on the same terms and conditions of such proposed financing. In addition, in the
event PFCI does not provide the financing as proposed by the Company and the
Company enters into any financing other than a pure debt financing in which the
debt instrument proposed to be offered has no equity-type features, the Company
shall grant to PFCI a right to participate therein, on such basis as will permit
PFCI to maintain the same percentage equity interest in the Company, on a fully-
diluted basis, after such financing is completed as PFCI had prior to such
financing.
The Transaction Agreement also provides that if at any time the Company
desires to sell substantially all of its assets, merge, consolidate or engage in
any other business combination transaction (a "Business Combination"), the
Company agrees to negotiate in good faith with PFCI for a period of 20 days with
regard to any such Business Combination prior to negotiating with any other
entity with regard thereto.
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In the event the Company has engaged in good faith negotiations with PFCI and
such negotiations have been unsuccessful, the Company shall make a final offer
to PFCI (the "Final Company Offer") prior to engaging in negotiations with,
soliciting offers from or accepting any offer of, any third party with respect
to a Business Combination. In the event PFCI does not accept the Final
Company Offer within 20 days after the date it is received by PFCI, the Company
shall thereupon have the right, during the six-month period following the
expiration of such 20-day period, to enter into an agreement relating to a
Business Combination (which Business Combination shall be consummated within the
nine-month period following the expiration of such 20-day period) with any third
party at a price and on terms no less favorable to the Company than the Final
Company Offer. In the event the Company does not enter into a Business
Combination within such six-month period or consummate the Business Combination
within such nine-month period, as the case may be, PFCI shall again have the
rights described above with respect to a proposed Business Combination.
Transfer of Intellectual Property Rights. The Company has transferred to a
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newly organized business trust (the "Trust") certain federal and state
registered and unregistered trademarks, trademark applications, registered and
unregistered service marks, service mark applications, trade names, trade name
rights, copyrights, trade secrets and know-how and other proprietary information
of the Company (the "Intellectual Property"). The Trust issued to the Company
two ownership certificates, one of which entitles the holder thereof to
beneficial ownership of the Intellectual Property in the States of Georgia and
Alabama and one of which (the "Worldwide Certificate") entitles the holder
thereof to beneficial ownership of the Intellectual Property throughout the rest
of the world. Neither the Company nor either certificate holder is entitled to
any continuing royalties or other fees associated with the use of the
Intellectual Property by the other party. The Trust also granted to the Company
and PFCI licenses to use the Intellectual Property in their respective
territories.
The Company then sold the Worldwide Certificate to PFCI for $1,500,000 in
cash and 712.3746 shares of the common stock, par value $.01 per share, of PFCI
("PFCI Common Stock"), representing 2.5% of the PFCI Common Stock on a fully
diluted basis, taking into account (i) all shares of outstanding PFCI Common
Stock, (ii) all shares of PFCI Common Stock issuable upon the exchange or
conversion of outstanding debt, stock or other securities of PFCI and (iii) all
shares of PFCI Common Stock issuable upon the exercise of outstanding options
(other than unvested employee options), warrants or similar rights to acquire
PFCI Common Stock. The Company also received certain anti-dilution rights with
respect to the issuance in the future of additional PFCI Common Stock. PFCI,
which was formed for the purpose of engaging in the Transactions, has been
funded with a $17 million loan from Boston Chicken, Inc., convertible
into shares of PFCI Common Stock, and equity and equity commitments from
management and private investors. Harry A. Blazer, the Company's Chairman,
President and Chief Executive Officer, has been elected a director of PFCI.
Consulting Agreement. The Company, Harry A. Blazer and PFCI have entered
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into a five year Consulting Services Agreement (the "Consulting Agreement"),
pursuant to which the Company has agreed to provide, for the period ending on
January 31, 2002, certain consulting services and access to personnel,
information and facilities of the Company for the purpose of developing a
business model based on the current businesses (and certain businesses related
to the current businesses) of the Company, including the creation of new
organizational, systems, human resources, accounting and financial structures
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and models. A portion of the expenses of such development by the Company will
be funded by the Company through the Development Loan. In addition, PFCI has
agreed to make available its general business know-how and the information and
know-how it acquires under the Consulting Agreement to the Company during the
term of the Consulting Agreement. PFCI has paid the Company a consulting
services fee of $500,000 under the Consulting Agreement.
Registration Rights. The Company and PFCI are parties to a registration
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rights agreement dated January 31, 1997 (the "Registration Agreement"), pursuant
to which the Company granted to PFCI unlimited piggyback registration rights
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Class A Common Stock now owned or hereafter acquired by
PFCI or which are issuable upon the conversion, exercise or exchange of any
security of the Company now owned or hereafter acquired by PFCI or which PFCI
has the right to acquire, including preferred stock, notes or other evidences of
indebtedness convertible into, exercisable or exchangeable for, Class A Common
Stock, and Class A Common Stock issuable upon exercise of any warrant, and all
other securities issued with respect thereto by reason of dividends, stock
splits, combinations or similar transactions ("Registrable Securities"). In
addition, the Company is obligated to file, within 18 months after January 31,
1997, a registration statement under the Securities Act (the "Resale
Registration") in which PFCI will be entitled to include the Registrable
Securities then held by PFCI and that will permit PFCI to make public resales of
the Registrable Securities; provided, that such 18-month period may be extended
for an additional 12-months if the Company has been advised in writing by a
nationally recognized independent investment banking firm that, in such firm's
opinion, the filing of such resale registration statement immediately prior to
the end of the 18-month period might materially and adversely affect the Company
(including the price of the Class A Common Stock). Upon the effectiveness of
the Resale Registration and for a period of two years thereafter, PFCI has
agreed not to effect the sale of more than 25% of the Registrable Securities
beneficially owned by it on the effective date of the Resale Registration during
any period of six consecutive months. The Company will bear substantially all
of the expenses in connection with any registrations under the Registration
Agreement (other than underwriting discounts or commissions).
Exchange of Series A Preferred Stock for Series AA Preferred Stock.
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Concurrent with the Transactions, the Company entered into an agreement with the
holders of the Company's outstanding Series A preferred stock, stated value
$9.00 per share ("Series A Preferred Stock"), pursuant to which each holder of
Series A Preferred Stock exchanged such holder's shares of Series A Preferred
Stock for an equal number of the Company's newly issued Series AA Preferred
Stock (the "Exchange"). As set forth above, the holders of Series AA Preferred
Stock will vote with the holders of Class A Common Stock, the holders of Class B
Common Stock and the holders of the Series B Preferred Stock, voting together as
a single group, on any matter required or permitted to be voted upon by the
holders of the Company's common stock. Each share of Series AA Preferred Stock
shall entitle the holder thereof the right to such number of votes per share in
each matter as shall equal the number of shares of Class A Common Stock into
which such share of Series AA Preferred Stock is convertible as of the record
date for the determination of holders entitled to vote on such matters. Each
share of Series AA Preferred Stock will be convertible at any time into that
number of shares of Class A Common Stock obtained by dividing the aggregate
liquidation preference of the Series AA Preferred Stock by the then applicable
conversion
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price. The initial conversion price of the Series AA Preferred Stock is $6.50
per share and is subject to adjustment in certain circumstances.
In addition, as further consideration for the Exchange, the Company and the
holders of Series AA Preferred Stock have agreed to reduce from $10.00 per share
to $4.00 per share the exercise price of certain warrants to purchase shares of
Class A Common Stock that were issued in connection with the original issuance
of the Series A Preferred Stock and to amend certain other agreements among the
Company, Harry A. Blazer and certain of the holders of Series AA Preferred
Stock.
Amendment of Credit Agreement and Related Matters. In connection with the
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above-described transactions, the Company used $13,016,086.48 of proceeds,
$12,000,000 of which was funded by the Refinancing Loan advanced under the Loan
Agreement and the remainder of which was funded by moneys that the Company
received for the sale of the Worldwide Certificate to PFCI and in exchange for
the Warrant issued under the Transaction Agreement, to repay in full all of the
obligations owing under the Amended and Restated Credit Agreement (as amended,
the "Senior Credit Agreement") to NationsBank, N.A. (South), formerly known as
NationsBank of Georgia, National Association ("NationsBank"). In addition, the
Company and other related parties consummated the following transactions: (i)
NationsBank assigned to Creditanstalt-Bankverein ("Creditanstalt") all of its
revolving commitment and its interest in the revolving loans advanced under the
Senior Credit Agreement; (ii) NationsBank resigned as agent under the Senior
Credit Agreement; (iii) Creditanstalt was appointed successor agent; and (iv)
NationsBank transferred to Creditanstalt all of its warrants to purchase shares
of Class A Common Stock, of which Creditanstalt retained 72,000 warrants (having
an exercise price of $3.00 per share) and surrendered to the Company for
cancellation 144,000 warrants.
Further, the Company and Creditanstalt amended the Senior Credit Agreement
to, among other things: (i) provide for the consummation of
the transactions set forth in the Transaction Agreement, including without
limitation, the commitment of the Loans and the grant of the Option under the
Secured Loan Agreement, the issuance of the Warrants under the Transaction
Agreement, the sale of the Worldwide Certificate, and all other transactions
contemplated therein and thereby; and (ii) amend certain provisions thereof,
including certain negative covenants and certain financial covenants. In
addition, the Company and Creditanstalt agreed to reduce the exercise price of
warrants to purchase 48,000 shares of Class A Common Stock from $6.00 to $3.00.
As a result of these transactions, Creditalstalt now holds warrants to purchase
an aggregate of 216,000 shares of Class A Common Stock, all at an exercise
price of $3.00 per share.
The Company owns and operates five stores in the Atlanta area, including
three Harry's Farmers Markets, which are mega-markets specializing in high
quality fresh fruits and vegetables, meats and seafood, fresh-bakery goods,
freshly-made, ready-to-heat and ready-to-eat prepared foods, and deli, cheese
and dairy products, and two Harry's-In-A-Hurry stores which are smaller than the
mega-markets, with more emphasis on fresh, ready-to-heat and ready-to-eat
prepared foods of high quality. The Company's line of over 300 prepared food
products and meals are made in the Company's 28,000 square foot USDA-approved
manufacturing facility, while over 200 proprietary bakery items are baked fresh
daily in the Company's 55,000 square foot bakery.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
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Exhibit Description
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3.1 Articles of Amendment to Articles of Incorporation of the Company
regarding Series AA Preferred Stock.
3.2 Articles of Amendment to Articles of Incorporation of the Company
regarding Series B Preferred Stock
4.1 Preferred Stock Exchange Agreement dated January 31, 1997 among
the Company and Robert Fleming Nominees Ltd., AXA Equity & Law
Life Assurance Society, Orbis Pension Trustees Ltd., Ashford
Capital Partners, L.P. and Theodore H. Ashford.
4.2 Amendment to Registration Rights Agreement dated as of January 31,
1997 between the Company and Robert Fleming Nominees Ltd.
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4.3 Amendment to Registration Rights Agreement dated as of January 31,
1997 between the Company and AXA Equity & Law Life Assurance
Society, Orbis Pension Trustees Ltd., Ashford Capital Partners,
L.P. and Theodore H. Ashford.
4.4 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and Robert Fleming Nominees Ltd.
4.5 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and AXA Equity & Law Life Assurance Society.
4.6 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and Orbis Pension Trustees Ltd.
4.7 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and Ashford Capital Partners, L.P.
4.8 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and Theodore H. Ashford.
4.9 Amended and Restated Stockholders Agreement dated as of
January 31, 1997 by and among the Company, Harry A. Blazer and
Robert Fleming Nominees, Ltd.
4.10 Amended and Restated Investors' Agreement dated as of January 31,
1997 by and among the Company, Harry A. Blazer and AXA Equity &
Law Life Assurance Society, Orbis Pension Trustees Ltd., Ashford
Capital Partners, L.P. and Theodore H. Ashford.
4.11 Registration Rights Agreement dated as of January 31, 1997 by and
between the Company and HFMI Acquisition Corporation ("PFCI").
4.12 Warrant certificate issued on January 31, 1997 to PFCI.
4.13 Amended and Restated Warrant Certificate issued on December
30, 1994 to Creditanstalt-Bankverein.
4.14 Amended and Restated Warrant Certificate issued on May 8, 1996 to
Creditanstalt-Bankverein.
10.1 Transaction Agreement dated as of January 31, 1997 among PFCI and
the Company.
10.2 Secured Loan Agreement dated as of January 31, 1997 between PFCI
and the Company.
10.3 Acquisition Agreement dated January 31, 1997 between the Company
and PFCI.
10.4 Trust Agreement dated as of January 30, 1997 between and among
Wilmington Trust Company, PFCI and the Company.
10.5 PFCI License Agreement dated as of January 31, 1997 between HFMI
Trust and PFCI.
10.6 HFMI License Agreement dated as of January 31, 1997 between HFMI
Trust and the Company.
10.7 Transfer Agreement dated as of January 31, 1997 between and among
the Company, HFMI Trust and PFCI.
10.8 Trust Certificate dated January 30, 1997 issued to HFMI Trust
regarding the Georgia Class Interests.
10.9 Trust Certificate dated January 30, 1997 issued to HFMI Trust
regarding the Worldwide Class Interests.
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10.10 Administration and Servicing Agreement dated as of January 31,
1997 between HFMI Trust, PFCI and the Company.
10.11 Assignment of Intellectual Property dated January 31, 1997, by and
between the Company and HFMI Trust.
10.12 Consulting Services Agreement dated as of January 31, 1997 between
PFCI, the Company and Harry A. Blazer.
10.13 Ninth Amendment to Loan Agreement dated January 31, 1997, by and
among the Company, NationsBank, N.A. and Creditanstalt-Bankverein
(Acknowledgement and Consent of the Guarantors dated as of January
31, 1997 by Marthasville Trading Company and Karalea, Inc.
attached thereto).
10.14 Conditional Assignment and Security Agreement dated as of January
31, 1997 between the Company and Creditanstalt-Bankverein.
10.15 Intercreditor Agreement dated January 31, 1997 between
Creditanstalt-Bankverein and HFMI Acquisition Corporation.
10.16 First Amendment to Amended and Restated Warrant Agreement dated as
of January 31, 1997 between the Company and Creditanstalt-
Bankverein.
10.17 Fourth Modification of Deed to Secure Debt and Security Agreement
dated as of January 31, 1997 between the Company and
Creditanstalt-Bankverein.
10.18 Pledge Agreement dated as of January 31, 1997 between the Company
and Creditanstalt-Bankverein.
10.19 Revolving Credit Note for $12,000,000, dated January 31, 1997
between the Company and Creditanstalt-Bankverein.
99.1 Press Release of the Company dated January 31, 1997.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HARRY'S FARMERS MARKET, INC.
(Registrant)
By /s/ Harry A. Blazer
---------------------------------
Harry A. Blazer
President and Chief Executive Officer
Date: February , 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------
EXHIBITS
TO
CURRENT REPORT
ON
FORM 8-K
DATED FEBRUARY , 1997
--
HARRY'S FARMERS MARKET, INC.
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INDEX TO EXHIBITS
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Exhibit Sequential
No. Description Page
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3.1 Articles of Amendment to Articles of Incorporation of the Company
regarding Series AA Preferred Stock.
3.2 Articles of Amendment to Articles of Incorporation of the Company
regarding Series B Preferred Stock
4.1 Preferred Stock Exchange Agreement dated January 31, 1997 among
the Company and Robert Fleming Nominees Ltd., AXA Equity & Law
Life Assurance Society, Orbis Pension Trustees Ltd., Ashford
Capital Partners, L.P. and Theodore H. Ashford.
4.2 Amendment to Registration Rights Agreement dated as of January 31,
1997 between the Company and Robert Fleming Nominees Ltd.
4.3 Amendment to Registration Rights Agreement dated as of January 31,
1997 between the Company and AXA Equity & Law Life Assurance
Society, Orbis Pension Trustees Ltd., Ashford Capital Partners,
L.P. and Theodore H. Ashford.
4.4 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and Robert Fleming Nominees Ltd.
4.5 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and AXA Equity & Law Life Assurance Society.
4.6 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and Orbis Pension Trustees Ltd.
4.7 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and Ashford Capital Partners, L.P.
4.8 Amendment to Warrant Certificate dated January 31, 1997 between
the Company and Theodore H. Ashford.
4.9 Amended and Restated Stockholders Agreement dated as of
January 31, 1997 by and among the Company, Harry A. Blazer and
Robert Fleming Nominees, Ltd.
4.10 Amended and Restated Investors' Agreement dated as of January 31,
1997 by and among the Company, Harry A. Blazer and AXA Equity &
Law Life Assurance Society, Orbis Pension Trustees Ltd., Ashford
Capital Partners, L.P. and Theodore H. Ashford.
4.11 Registration Rights Agreement dated as of January 31, 1997 by and
between the Company and HFMI Acquisition Corporation ("PFCI").
4.12 Warrant certificate issued on January 31, 1997 to PFCI.
4.13 Amended and Restated Warrant Certificate issued on December
30, 1994 to Creditanstalt-Bankverein.
4.14 Amended and Restated Warrant Certificate issued on May 8, 1996 to
Creditanstalt-Bankverein.
10.1 Transaction Agreement dated as of January 31, 1997 among PFCI and
the Company.
10.2 Secured Loan Agreement dated as of January 31, 1997 between PFCI
and the Company.
10.3 Acquisition Agreement dated January 31, 1997 between the Company
and PFCI.
10.4 Trust Agreement dated as of January 30, 1997 between and among
Wilmington Trust Company, PFCI and the Company.
10.5 PFCI License Agreement dated as of January 31, 1997 between HFMI
Trust and PFCI.
10.6 HFMI License Agreement dated as of January 31, 1997 between HFMI
Trust and the Company.
10.7 Transfer Agreement dated as of January 31, 1997 between and among
the Company, HFMI Trust and PFCI.
10.8 Trust Certificate dated January 30, 1997 issued to HFMI Trust
regarding the Georgia Class Interests.
10.9 Trust Certificate dated January 30, 1997 issued to HFMI Trust
regarding the Worldwide Class Interests.
<PAGE>
10.10 Administration and Servicing Agreement dated as of January 31,
1997 between HFMI Trust, PFCI and the Company.
10.11 Assignment of Intellectual Property dated January 31, 1997, by and
between the Company and HFMI Trust.
10.12 Consulting Services Agreement dated as of January 31, 1997 between
PFCI, the Company and Harry A. Blazer.
10.13 Ninth Amendment to Loan Agreement dated January 31, 1997, by and
among the Company, NationsBank, N.A. and Creditanstalt-Bankverein
(Acknowledgement and Consent of the Guarantors dated as of January 31,
1997 by Marthasville Trading Company and Karalea, Inc. attached
thereto).
10.14 Conditional Assignment and Security Agreement dated as of January
31, 1997 between the Company and Creditanstalt-Bankverein.
10.15 Intercreditor Agreement dated January 31, 1997 between
Creditanstalt-Bankverein and HFMI Acquisition Corporation.
10.16 First Amendment to Amended and Restated Warrant Agreement dated as
of January 31, 1997 between the Company and Creditanstalt-
Bankverein.
10.17 Fourth Modification of Deed to Secure Debt and Security Agreement
dated as of January 31, 1997 between the Company and
Creditanstalt-Bankverein.
10.18 Pledge Agreement dated as of January 31, 1997 between the Company
and Creditanstalt-Bankverein.
10.19 Revolving Credit Note for $12,000,000, dated January 31, 1997
between the Company and Creditanstalt-Bankverein.
99.1 Press Release of the Company dated January 31, 1997.
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
HARRY'S FARMERS MARKET, INC.
============================
Series AA Preferred Stock
1. The name of the corporation is Harry's Farmers Market, Inc.
2. Article II of the Articles of Incorporation authorizes the issuance of
up to 3,000,000 shares of Preferred Stock by the Company, with such preferences,
limitations, and relative rights as may be determined by the Board of Directors
in accordance with (S) 14-2-602 of the Georgia Business Corporation Code.
3. On January 30, 1997, the Board of Directors of the Company duly adopted
an amendment to the Company's Articles of Incorporation designating a series of
Preferred Stock as the Series AA Preferred Stock, and determining the terms of
such series.
4. The text of the amendment so adopted, which amends Article II by adding
a new Section F, is as follows.
F. SERIES AA PREFERRED STOCK
1. GENERAL. There is designated herein a single series of preferred stock
-------
having the preferences, limitations, and relative rights set forth below.
Capitalized terms not otherwise defined shall have the meanings assigned by
Section 10.
2. DESIGNATION.
-----------
The series of Preferred Stock shall be designated as the "Series AA
Preferred Stock." The number of shares constituting such series shall be
1,222,221, having a stated value of $9.00 per share. All shares of Series AA
Preferred Stock shall be identical with each other in all respects.
3. RANK.
----
The Series AA Preferred Stock shall rank, with respect to dividend rights
and rights on liquidation, dissolution and winding-up of the affairs of the
Company:
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(i) senior to all classes or series of Common Stock of the Company and
to any other class or series of Capital Stock that does not
expressly provide that it ranks senior to or on a parity with the
Series AA Preferred Stock as to dividends and upon liquidation,
dissolution and winding-up (collectively referred to as "Junior
Securities");
(ii) on parity with the Series B Preferred Stock, stated value $40.00, of
the Company (the "Series B Preferred Stock") and with each other
class or series of Capital Stock that expressly provides that it
ranks on a parity with the Series AA Preferred Stock as to dividends
and upon liquidation, dissolution and winding-up (collectively
referred to as "Parity Securities"); and
(iii) junior to each class or series of Capital Stock which expressly
provides that it ranks senior to the Series AA Preferred Stock as to
dividends and upon liquidation, dissolution and winding-up
(collectively referred to as "Senior Securities").
The Company shall not create, authorize or issue any Senior Securities or
Parity Securities or reclassify any class or series of Capital Stock into Senior
Securities or Parity Securities, without the approvals required by Section 8
hereof.
4. DIVIDENDS.
---------
4.1 Amount and Payment. If the Company shall at any time or from time to
------------------
time declare, order, pay, or make a dividend or other distribution (whether in
cash, securities, rights to purchase securities, or other property) with respect
to its Common Stock, the Holders of outstanding shares of Series AA Preferred
Stock shall be entitled to receive, with respect to each share of Series AA
Preferred Stock held, a dividend or distribution that is the same dividend or
distribution that would be received by a holder of the number of shares of Class
A Common Stock into which such share of Series AA Preferred Stock is convertible
under Section 9 on the record date for such dividend or distribution. Any such
dividend or distribution shall be declared, ordered, paid, or made on the Series
AA Preferred Stock at the same time such dividend or distribution is declared,
ordered, paid, or made on the Common Stock.
4.2 Cumulative Default Dividends. Beginning on the date of any
----------------------------
Redemption Default, and until such Redemption Default has been cured in full by
the Company and all dividends provided by this Section 4.2 have been paid in
full, the Holders of outstanding shares of Series AA Preferred Stock shall be
entitled to receive, when, as, and if declared by the Board of Directors, out of
funds legally available for the payment of dividends, cash dividends at the
annual rate equal to fifteen percent of the Liquidation Preference. All
dividends shall be cumulative and shall be payable in equal quarterly
installments in arrears on each Dividend Payment Date commencing on the first
Dividend Payment Date for which the Dividend Record Date occurs after the
Redemption Default Date, in preference to and with priority over dividends on
Junior Securities. The dividend payable on any share of Series AA Preferred
Stock on any Dividend Payment Date in respect of the Quarterly Dividend Period
2
<PAGE>
then ended shall be calculated by multiplying the Liquidation Preference of such
share on the immediately preceding Dividend Payment Date (after giving effect to
any dividend payment actually made on such preceding Dividend Payment Date, if
any) by 3.75 percent. Dividends per share of Series AA Preferred Stock payable
in respect of the Initial Dividend Period shall be equal to the product of the
Liquidation Preference and 3.75 percent times a fraction, the numerator of which
is the number of days in the Initial Dividend Period and denominator of which is
90. The amount of dividends accrued on the Series AA Preferred Stock for any
period less than a full Quarterly Dividend Period shall be equal to a pro rata
portion of the total dividend payable for the Quarterly Dividend Period during
which such period occurs, based on the actual number of days elapsed in such
period for which payable and the total number of days in the applicable
Quarterly Dividend Period. Dividends shall accrue on a daily basis during each
Dividend Period as provided above, and the Liquidation Preference of each
outstanding share of Series AA Preferred Stock shall be correspondingly
increased on a daily basis. Each such dividend shall be payable to Holders of
record as their names shall appear on the stock books of the Company on the
Dividend Record Date for such dividends, except that dividends in arrears for
any past Payment Date may be declared and paid at any time without reference to
such regular Dividend Payment Date to Holders of record on such date not more
than 60 days or less than 10 days prior to the date of payment as shall be
determined by the Board of Directors.
4.3 Limitation on Dividends, Repurchases and Redemptions. So long as any
----------------------------------------------------
shares of Series AA Preferred Stock shall be outstanding, the Company shall not
declare or pay or set apart for payment any dividends or make any other
distributions on any Junior Securities, whether in cash, property or otherwise
(other than dividends or distributions payable in shares of the class or series
upon which such dividends or distributions are declared or paid), nor shall the
Company or any of its Subsidiaries purchase, redeem or otherwise acquire for any
consideration or make payment on account of the purchase, redemption, or other
retirement of any Parity Securities or Junior Securities, nor shall any monies
be paid or made available for a sinking fund for the purchase or redemption of
any Parity Securities or Junior Securities, unless with respect to all of the
foregoing all dividends or other distributions to which the holders of Series AA
Preferred Stock shall have been entitled, pursuant to Section 4.1 or 4.2 hereof,
shall have been paid or declared and a sum of money has been set apart for the
full payment thereof.
4.4 Pro Rata Payments. All dividends paid with respect to shares of the
-----------------
Series AA Preferred Stock shall be paid pro rata to the Holders entitled
thereto.
5. LIQUIDATION PREFERENCE.
----------------------
5.1 Amount. Upon any voluntary or involuntary liquidation, dissolution or
------
winding-up of the affairs of the Company, the Holders of Series AA Preferred
Stock will be entitled to receive out of the assets of the Company available for
distribution to the holders of its Capital Stock, whether such assets are
capital or surplus, an amount in cash equal to the Liquidation Preference
determined as of the date of such voluntary or involuntary liquidation,
dissolution or winding-up, before any payment or other distribution is made on
3
<PAGE>
any Junior Securities, including Common Stock of the Company. Holders of Series
AA Preferred Stock shall not be entitled to any other distribution in the event
of voluntary or involuntary liquidation, dissolution or winding-up of the
affairs of the Company.
5.2 Proration. If upon any voluntary or involuntary liquidation,
---------
dissolution or winding-up of the affairs of the Company, the assets of the
Company are not sufficient to pay in full the liquidation preference payable to
the holders of outstanding shares of the Series AA Preferred Stock and all
Parity Securities, then the holders of all such shares shall share equally and
ratably in any distribution of assets in proportion to the full liquidation
preference determined as of the date of such voluntary or involuntary
liquidation, dissolution or winding-up, to which they are entitled.
5.3 Sale Not Liquidation. For the purposes of this Section 5 only,
--------------------
neither the sale, lease, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with or into one or more companies shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the Company.
6. REDEMPTION
----------
6.1 Redemption Price. Any redemption of the Series AA Preferred Stock
----------------
pursuant to Section 6.2 or Section 6.3.1 shall be at a price equal to $9.00 per
share, plus in each case an amount equal to accrued and unpaid dividends, if
any, to (and including) the redemption date, whether or not earned or declared.
Any redemption of the Series AA Preferred Stock pursuant to Section 6.3.2 or
Section 6.4 shall be at a price equal to $9.00 per share, plus an amount equal
to accrued and unpaid dividends, if any, to (and including) the redemption date,
whether or not earned or declared, but in no event less than an amount per share
equal to $9.00 plus the amount of dividends that would be accrued thereon if
such dividends accrued at an annual rate of 15%, compounded annually, from the
date of issuance of the Series AA Preferred Stock. The redemption price
provided for in this Section 6.1 is herein referred to as the "Redemption
Price."
6.2 Mandatory Redemption. The Company shall redeem all of the then
--------------------
outstanding shares of Series AA Preferred Stock at the Redemption Price on
December 1, 2001.
6.3 Redemption at Company's Option.
------------------------------
6.3.1 In the event (i) the Market Price of the Class A Common Stock is
equal to or greater than $11.00, on or prior to July 31, 1998, or $20.00, after
such date, (ii) the actual number of shares of Class A Common Stock traded on
any securities exchange or the NASDAQ Stock Market on each of the twenty (20)
days which are used in the determination of Market Price is at least 5,000 and
(iii) the average number of shares of Class A Common Stock traded on any
securities exchange or the NASDAQ Stock Market on each such day is at least
15,000, the Company may, at its option (subject to the other provisions of this
Section 6), redeem all, but not less than all, of the outstanding shares of
Series AA Preferred Stock.
4
<PAGE>
6.3.2 The Company may redeem some or all of the Series A Preferred
Stock at any time after July 31, 1998.
6.4 Redemption at Holders' Option. If a Public Market Event occurs, the
-----------------------------
Holders of the Series AA Preferred Stock shall have the right, at their option,
to require the Company to purchase some or all of the Series AA Preferred Stock
held by such Holders on the date (the "Repurchase Date") selected by the Company
that is not less than ten (10) nor more than twenty (20) days after delivery by
the Company of notice of such Public Market Event (which notice shall be given
within thirty (30) days after such Public Market Event). An election by a
Holder to require the Company to repurchase shares of Series AA Preferred Stock
pursuant to this Section 6.4 shall become irrevocable at the close of business
on the relevant Repurchase Date.
6.5 Procedures for Redemption. In the event the Company shall be required
-------------------------
to redeem shares of Series AA Preferred Stock pursuant to Section 6.2 or 6.4, or
shall elect to redeem shares of Series AA Preferred Stock pursuant to Section
6.3, the Company shall give written notice of such redemption by first class
mail, postage prepaid, mailed not less than thirty (30) nor more than ninety
(90) days prior to the redemption date, to each holder of record of the shares
to be redeemed, at such holder's address as the same appears on the stock
records of the Company. Each such notice shall state: (i) the redemption date;
(ii) the number of shares of Series AA Preferred Stock to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number of
such shares to be redeemed from such holder; (iii) the Redemption Price; (iv)
the place or places where certificates for such shares are to be surrendered for
payment of the Redemption Price; (v) that payment will be made upon presentation
and surrender of such Series AA Preferred Stock; (vi) the then current
Conversion Price and the date on which the right to convert such shares of
Series AA Preferred Stock will expire; (vii) that dividends on the shares to be
redeemed shall cease to accrue following such redemption date; (viii) that such
redemption is mandatory, if pursuant to Section 6.2, is at the option of the
Company, if pursuant to Section 6.3, or at the option of the holders if pursuant
to Section 6.4; and (ix) that dividends accrued to and including the date fixed
for redemption will be paid as specified in such notice. Notice having been
mailed as aforesaid, from and after the redemption date, unless the Company
shall be in default in the payment of the Redemption Price (including any
accrued and unpaid dividends to (and including) the date fixed for redemption),
(A) dividends on the shares of the Series AA Preferred Stock so called for
redemption shall cease to accrue, (B) such shares shall be deemed no longer
outstanding and (C) all rights of the holders thereof as stockholders of the
Company (except the right to receive from the Company any moneys payable upon
redemption without interest thereon) shall cease.
Upon surrender in accordance with such notice of the certificates for any
such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Company at the applicable Redemption Price. If fewer
than all the outstanding shares of Series AA Preferred Stock are to be
redeemed, shares to be redeemed shall be selected by the Company from holders of
outstanding shares of Series AA Preferred Stock not previously called for
redemption in proportion to the respective number of shares held by each holder.
If fewer than all the shares represented by any certificate are redeemed,
5
<PAGE>
a new certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
Notwithstanding the foregoing, if notice of redemption has been given
pursuant to this Section 6 and any holder of shares of Series AA Preferred Stock
shall, prior to the close of business on the third (3rd) Business Day preceding
the redemption date, give written notice to the Company pursuant to Section 9.5
hereof of the conversion of any or all of the shares to be redeemed held by such
holder (accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Company), then the conversion of such shares to be
redeemed shall become effective as provided in Section 9 hereof.
7. CERTAIN REPURCHASES
-------------------
Repurchase of Series AA Preferred Stock by the Company. Neither the
------------------------------------------------------
Company nor any of its Subsidiaries shall repurchase any outstanding shares of
Series AA Preferred Stock unless the Company on the same terms either (i) offers
to purchase all of the then outstanding shares of Series AA Preferred Stock or
(ii) offers to purchase shares of Series AA Preferred Stock from the holders in
proportion to the respective number of shares of Series AA Preferred Stock held
by each holder. In any such repurchase by the Company, if all shares of Series
AA Preferred Stock are not being repurchased, then the number of shares of
Series AA Preferred Stock to be repurchased shall be allocated among all shares
of Series AA Preferred Stock held by holders which accept the Company's
repurchase offer so that the shares of Series AA Preferred Stock are repurchased
from such holders in proportion to the respective number of shares of Series AA
Preferred Stock held by each such holder which accepts the Company's offer (or
in such other proportion as agreed by all such holders who accept the Company's
offer). Nothing in this Section 7 shall (i) obligate a holder of shares of
Series AA Preferred Stock to accept the Company's repurchase offer or (ii)
prevent the Company from redeeming shares of Series A Preferred Stock in
accordance with the terms of Section 6.1 through 6.4 hereof.
8. VOTING RIGHTS
-------------
8.1 General.
-------
8.1.1 Holders of Series AA Preferred Stock shall be permitted to vote
with the holders of Common Stock and the holders of Series B Preferred Stock,
voting together as a single voting group, on any matter required or permitted to
be voted upon by the holders of Common Stock. Each share of Series AA Preferred
Stock shall entitle the holder thereof to such number of votes per share on each
such matter as shall equal the number of shares of Class A Common Stock
(including fractions of a share) into which each share of Series AA Preferred
Stock is convertible as of the record date for the determination of holders
entitled to vote on such matters.
6
<PAGE>
8.1.2 Notwithstanding the foregoing, without the approval of Holders of
at least two-thirds of the shares of Series AA Preferred Stock then outstanding,
voting or consenting, as the case may be, as a separate voting group,, given in
person or by proxy, either in writing or by resolution adopted at an annual or
special meeting called for the purpose, the Company will not, and will not
permit any of its Subsidiaries to:
a. issue any Senior Securities or Parity Securities;
b. reclassify any Junior Securities into any Senior Securities or
Parity Securities;
c. amend, modify or repeal the Articles of Incorporation, the By-
Laws of the Company, or these Articles of Amendment to the
Articles of Incorporation or any other specified designations,
rights, preferences or powers of the Series AA Preferred Stock
in a manner adverse to Holders of Series AA Preferred Stock;
or
d. increase the number of shares of Series AA Preferred Stock
authorized for issuance.
8.2 Shares Deemed Outstanding. For the purpose of this Section 8 and for
-------------------------
purposes of exercising any vote, election or consent hereunder or under
applicable law, shares of Series AA Preferred Stock held by the Company or any
of its Subsidiaries shall not be deemed to be outstanding and shall not be
counted in determining the outcome of any such vote, election or consent
solicitation.
9. Conversion.
----------
9.1 Conversion Ratio. The shares of Series AA Preferred Stock shall be
----------------
convertible into the number of fully paid and nonassessable shares of Class A
Common Stock obtained by dividing (i) the aggregate Liquidation Preference of
the shares to be converted, by (ii) the Conversion Price, subject to adjustment
--
of such number of shares as provided herein. The initial Conversion Price shall
be $6.50 per share.
9.2 Reserved Shares. The Company shall at all times reserve and keep
---------------
available out of its authorized but unissued shares of Class A Common Stock for
the purpose of issuance upon conversion of shares of Series AA Preferred Stock,
1,692,306 shares of Class A Common Stock and shall take all action necessary so
that shares of Class A Common Stock so issued will be validly issued, fully paid
and nonassessable.
9.3 Changes in Common Stock. Upon any change in the Common Stock after
-----------------------
the date of issuance of Series AA Preferred Stock by reason of stock dividends,
split-ups, stock splits, reverse stock splits, recapitalization, exchanges of
shares or the like, the number of shares of Class A Common Stock that a holder
7
<PAGE>
of Series AA Preferred Stock is entitled to receive upon conversion shall be
adjusted proportionately.
9.4 Recapitalizations, Reorganizations, Etc. If the Company shall effect
----------------------------------------
any capital reorganization or reclassification of its Class A Common Stock
(other than changes in par value or as a result of a change described in Section
9.3 above), or shall consolidate or merge with or into any other company (other
than where the Company is the surviving corporation and each share of Class A
Common Stock outstanding immediately prior to such consolidation or merger is to
remain outstanding immediately after such consolidation or merger) or shall sell
or transfer all or substantially all its assets to any other company for a
consideration consisting in whole or in part of equity securities of such other
company, lawful provision shall be made as a part of the terms of such
transaction whereby the holders of shares of the Series AA Preferred Stock
shall receive upon conversion thereof, in lieu of each share of Class A Common
Stock issuable upon conversion of such shares immediately prior to such
consummation, the same kind and amount of stock (or other securities, cash or
property, if any) as may be issuable or distributable in connection with such
transaction with respect to each outstanding share of Class A Common Stock
subject to adjustments for subsequent stock dividends and distributions,
subdivisions or combinations of shares, capital reorganizations,
reclassifications, consolidations or mergers as nearly equivalent as possible to
the adjustments provided for in this Section 9, as would have been distributed
to a holder of Series AA Preferred Stock upon such reorganization,
reclassification, consolidation or merger had such holder converted such Series
AA Preferred Stock immediately prior to such reorganization, reclassification,
consolidation or merger.
9.5 Mechanics of Conversion. Each holder of Series AA Preferred Stock
-----------------------
that desires to convert the same into shares of Class A Common Stock shall
surrender the certificate or certificates therefor, duly endorsed, at the
principal office of the Company or of any transfer agent for the Series AA
Preferred Stock or Class A Common Stock, accompanied by written notice to the
Company that such holder elects to convert the same and stating therein the
number of shares of Series AA Preferred Stock being converted and setting forth
the name or names in which such holder wishes the certificate or certificates
for shares of Class A Common Stock to be issued if such name or names shall be
different than that of such holder. In case such notice shall specify a name or
names other than that of such holder, such notice shall be accompanied by
payment of all transfer taxes payable upon the issuance and delivery of shares
of Class A Common Stock in such name or names. Thereupon, the Company shall
issue and deliver at such office on the fifth (5th) succeeding Business Day
(unless such conversion is in connection with an underwritten public offering of
Class A Common Stock, in which event concurrently with such conversion) to such
holder or on such holder's written order, (i) a certificate or certificates for
the number of validly issued, fully paid and nonassessable full shares of Class
A Common Stock to which such holder is entitled and (ii) if less than the full
number of shares of Series AA Preferred Stock evidenced by the surrendered
certificate of certificates are being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares converted.
8
<PAGE>
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date of such surrender of the shares to be
converted (except that if such conversion is in connection with an underwritten
public offering of Class A Common Stock, then such conversion shall be deemed to
have been effected upon such surrender) so that the rights of the holder thereof
as to the shares being converted shall cease at such time except for the right
to receive shares of Class A Common Stock and accrued but unpaid dividends in
accordance herewith, and the person entitled to receive the shares of Class A
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Class A Common Stock at such time.
9.6 Conditional Conversion. Notwithstanding any other provision hereof,
----------------------
if conversion of any shares of Series AA Preferred Stock is to be made in
connection with a public offering of Class A Common Stock or any transaction
described in Section 9.4 hereof, the conversion of any shares of Series AA
Preferred Stock may, at the election of the holder thereof, be conditioned upon
the consummation of the public offering or such transaction, in which case such
conversion shall not be deemed to be effective until the consummation of such
public offering or transaction.
9.7 Adjustment of the Conversion Price. The Conversion Price shall be
----------------------------------
adjusted from time to time as follows:
9.7.1 [RESERVED.]
9.7.2 Issuance of Additional Shares of Stock. If at any time the Company
--------------------------------------
shall (except as hereinafter provided) issue or sell any Additional Shares of
Stock either (A) in exchange for consideration in an amount per Additional Share
of Stock less than the Conversion Price in effect immediately prior to such
issuance or sale of Additional Shares of Stock or (B) in exchange for
consideration in an amount per Additional Share of Stock less than the Market
Price in effect immediately prior to such issuance or sale of Additional Shares
of Stock, then the Conversion Price as to the Class A Common Stock into which
the Series AA Preferred Stock is convertible immediately prior to such
adjustment shall be adjusted to equal the price determined by multiplying the
Conversion Price by a fraction, of which
(x) the numerator shall be (1) the number of shares of Class A
Common Stock outstanding immediately prior to such issuance or sale of
Additional Shares of Stock plus (2) the number of shares of Common Stock
which the aggregate amount of consideration, if any, received by the
Company for the total number of such Additional Shares of Stock so issued
or sold would purchase at the greater of (I) the Market Price in effect
immediately prior to such issuance or sale of Additional Shares of Stock or
(II) the Conversion Price in effect immediately prior to such issuance or
sale of Additional Shares of Stock, and
(y) the denominator shall be the number of shares of Common Stock
outstanding immediately after such issuance or sale of Additional Shares of
Stock;
9
<PAGE>
provided, however, that such adjustment shall be made only if the Conversion
Price determined from such Adjustment shall be less than the Conversion Price in
effect immediately prior to the issuance of such Additional Shares of Stock.
The provisions of this Section 9.7.2 shall not apply to any issuance of
Additional Shares of Stock for which an adjustment is provided under Section
9.7.2 or which are dividends or distributions received by the holders of the
Series AA Preferred Stock pursuant to Section 4.1 hereof.
9.7.3 Issuance of Warrants or Other Rights. If at any time the Company
------------------------------------
shall in any manner (whether directly or by assumption in a merger in which the
Company is the surviving corporation) issue or sell any warrants or other rights
to subscribe for or purchase any Additional Shares of Stock or any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the consideration received for such warrants or
other rights or such Convertible Securities shall be less than the Conversion
Price or the Market Price in effect immediately prior to the time of such issue
or sale, then the Conversion Price shall be adjusted as provided in Section
9.7.2. No further adjustments of the Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such Convertible Securities.
9.7.4 Issuance of Convertible Securities. If at any time the Company
----------------------------------
shall in any manner (whether directly or by assumption in a merger in which the
Company is the surviving corporation) issue or sell any Convertible Securities,
whether or not the rights to convert thereunder are immediately exercisable, and
the consideration received for such stock shall be less than the Conversion
Price or the Market Price in effect immediately prior to the time of such issue
or sale, then the Conversion Price shall be adjusted as provided in Section
9.7.2. No adjustment of the Conversion Price shall be made under this Section
9.7.4 upon the issuance of any Convertible Securities which are issued pursuant
to the exercise of any warrants or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights pursuant to Section 9.7.3. No further
adjustments of the Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion of such Convertible Securities and, if any issue or
sale of such Convertible Securities is made upon exercise of any warrant or
other right to subscribe for or to purchase any such Convertible Securities for
which adjustments of the Conversion Price have been or are to be made pursuant
to other provisions of this Section 9, no further adjustments of the Conversion
Price shall be made by reason of such issue or sale.
9.7.5 Superseding Adjustments. If, at any time after any adjustment of
-----------------------
the Conversion Price which the Series AA Preferred Stock is convertible shall
have been made pursuant to Section 9.7.3 or Section 9.7.4 as the result of any
issuance of warrants, rights or Convertible Securities,
10
<PAGE>
(i) such warrants or rights, or the right of conversion or exchange
in such other Convertible Securities, shall expire, and all or a portion of
such warrants or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the
case may be, shall not have been exercised, or
(ii) the consideration per share for which shares of Common Stock
are issuable pursuant to such warrants or rights, or the terms of such
other Convertible Securities, shall be increased solely by virtue of
provisions therein contained for an automatic increase in such
consideration per share upon the occurrence of a specified date or event,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(iii) treating the number of Additional Shares of Stock or other
property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and receivable
therefor, and
(iv) treating any such warrants or rights of any such other
Convertible Securities which then remain outstanding as having been granted
or issued immediately after the time of such increase of the consideration
per share for which shares of Common Stock or other property are issuable
under such warrants or rights or other Convertible Securities;
whereupon a new adjustment of the Conversion Price at which the Series AA
Preferred Stock is convertible shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
9.7.6 Antidilution Adjustments Under Other Securities. Without limiting
-----------------------------------------------
any other rights available hereunder to the holders of the Series AA Preferred
Stock, if there is an antidilution adjustment (i) under any Convertible
Securities, whether issued prior to or after the Issue Date or (ii) under any
rights, options or warrants to purchase Additional Shares of Stock, whether
issued prior to or after the Issue Date which, in either case, results in a
reduction in the exercise or purchase price with respect to such security or
rights or results in an increase in the number of Additional Shares of Stock
obtainable under such Convertible Security, right, option or warrant, then an
adjustment shall be made to the Conversion Price hereunder. Any such adjustment
pursuant to this Section 9.7.6 shall be whichever of the following results in a
lower Conversion Price: (A) a reduction in the Conversion Price equal to the
percentage reduction in such exercise or purchase price with respect to such
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Convertible Security, right, option or warrant or (B) a reduction in the
Conversion Price which will result in the same percentage increase in the number
of shares of Class A Common Stock available hereunder as the percentage increase
in the number of Additional Shares of Stock available under such Convertible
Security, right, option or warrant. Any such adjustment under this Section
9.7.6 shall only be made if it would result in a lower Conversion Price than
that which would be determined pursuant to any other antidilution adjustment
otherwise required hereunder as a result of the event or circumstance which
triggered the adjustment to such Convertible Security, right, option or warrant,
and if an adjustment is made pursuant to this Section 9.7.6, such other
antidilution adjustment otherwise required hereunder shall not be made as a
result of such event or circumstance.
9.7.7 Other Provisions Applicable to Adjustments under this Section. The
-------------------------------------------------------------
following provisions shall be applicable to the making of adjustments of the
shares of Class A Common Stock into which the Series AA Preferred Stock is
convertible and the Conversion Price at which the Series AA Preferred Stock is
convertible provided for in this Section 9:
a. Computation of Consideration. To the extent that any Additional
----------------------------
Shares of Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any Additional Shares of Stock or any Convertible
Securities shall be issued for cash consideration, the consideration received by
the Company therefor shall be the amount of the cash received by the Company
therefor, or, if such Additional Shares of Stock or Convertible Securities are
offered by the Company for subscription, the subscription price, or, if such
Additional Shares of Stock or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends and any compensation, discounts or
expenses paid or incurred by the Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company. In case any
Additional Shares of Stock or any Convertible Securities or any warrants or
other rights to subscribe for or purchase such Additional Shares of Stock or
Convertible Securities shall be issued in connection with any merger in which
the Company issues any securities, the amount of consideration therefor shall be
deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving company as such Board in good faith shall determine to be
attributable to such Additional Shares of Stock, Convertible Securities,
warrants or other rights, as the case may be. The consideration for any
Additional Shares of Stock issuable pursuant to any warrants or other rights to
subscribe for or purchase the same shall be the consideration received by the
Company for issuing such warrants or other rights plus the additional
consideration payable to the Company upon exercise of such warrants or other
rights. The consideration for any Additional Shares of Stock issuable pursuant
to the terms of any Convertible Securities shall be the consideration received
by the Company for issuing warrants or other rights to subscribe for or purchase
such Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such Convertible
Securities, plus the additional consideration, if any, payable to the Company
12
<PAGE>
upon the exercise of the right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Stock or Convertible Securities in payment or satisfaction of any dividends upon
any class of stock other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
b. When Adjustments to be Made. The adjustments required by this
---------------------------
Section 9 shall be made whenever and as often as any event requiring an
adjustment shall occur, except that any adjustment of the Conversion Price that
would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for in
Section 9.3) up to, but not beyond the date of exercise if such adjustment
either by itself or with other adjustments not previously made amount to a
change in the Conversion Price of less than $.05. Any adjustment representing a
change of less than such minimum amount (except as aforesaid) which is postponed
shall be carried forward and made as soon as such adjustment, together with
other adjustments required by this Section 9 and not previously made, would
result in a minimum adjustment or on the date of conversion. For the purpose of
any adjustment, any event shall be deemed to have occurred at the close of
business on the date of its occurrence.
c. Fractional Interests. In computing adjustments under this Section
--------------------
9, fractional interests in the Common Stock shall be taken into account to the
nearest 1/10th of a share.
d. Challenge to Good Faith Determination. Whenever the Board of
-------------------------------------
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 9, such determination may be
challenged in good faith by a holder of Series AA Preferred Stock and any
dispute shall be resolved by an investment banking firm of recognized national
standing selected by the Company and acceptable to such holder. The fees of such
investment banker shall be borne by such holder if the Company's calculation is
determined to be correct and otherwise by the Company.
9.7.8 Exceptions to Adjustment of Conversion Price. Anything herein to
--------------------------------------------
the contrary notwithstanding, the Company shall not make any adjustment of the
Conversion Price in the case of (i) the issuance of the Warrants or the issuance
of shares of Class A Common Stock upon exercise of the Warrants, (ii) the
issuance of shares of Class A Common Stock to holders of the Series AA Preferred
Stock upon conversion of all or any portion of their shares of Series AA
Preferred Stock, (iii) the issuance of the Bank Warrants or the issuance of
shares of Class A Common Stock upon exercise of the Bank Warrants, (iv) the
issuance of the Series AA Preferred Stock, (v) the issuance of the option (the
"Option") to purchase Series B Convertible Preferred Stock, stated value $40.00
(the "Series B Preferred Stock"), contemplated by the Transaction Agreement
dated January 31, 1997 between the Company and HFMI Acquisition Corporation, a
Delaware corporation (the "Transaction Agreement"), (vi) the issuance of the
Series B Preferred Stock pursuant to the Option, (vii) the issuance of Class A
Common Stock upon conversion of the Series B Preferred Stock, (viii) the
issuance of the Warrants (as such term is defined in the Transaction Agreement)
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(the "New Warrants"), or (ix) the issuance of Class A Common Stock upon exercise
of the New Warrants.
9.7.9 Chief Financial Officer's Opinion. Upon each adjustment of the
---------------------------------
Conversion Price, and in the event of any change in the rights of a holder of
Series AA Preferred Stock by reason of other events herein set forth, then and
in each such case, the Company will promptly obtain an opinion of the chief
financial officer of the Company, stating the adjusted Conversion Price, or
specifying the other shares of the Common Stock, securities or assets and the
amount thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company will promptly mail a copy of such
opinion to the holders of Series AA Preferred Stock. If a holder disagrees with
such calculation, the Company agrees to obtain within thirty (30) business days
an opinion of a firm of independent certified public accountants selected by the
Company's Board of Directors and acceptable to such holder to review such
calculation and the opinion of such firm of independent certified public
accountants shall be final and binding on the parties and shall be conclusive
evidence of the correctness of the computation with respect to any such
adjustment of the Conversion Price. The fees of such accountants shall be borne
by such holder if the Company's calculation is determined by such accountants to
be correct and otherwise by the Company.
9.7.10 Company to Prevent Dilution. In case at any time or from time to
---------------------------
time conditions arise by reason of action taken by the Company, which in the
good faith opinion of its Board of Directors or a majority of the holders of the
Series AA Preferred Stock are not adequately covered by the provisions of this
Section 9, and which might materially and adversely affect the exercise rights
of the holders of the Series AA Preferred Stock, the Board of Directors of the
Company shall appoint such firm of independent certified public accountants
acceptable to a majority of the holders of the Series AA Preferred Stock, which
shall give their opinion upon the adjustment, if any, on a basis consistent with
the standards established in the other provisions of this Section 9, necessary
with respect to the Conversion Price, so as to preserve, without dilution (other
than as specifically contemplated by the Articles of Incorporation), the
exercise rights of the holders of the Series AA Preferred Stock. Upon receipt
of such opinion, the Board of Directors of the Company shall forthwith make the
adjustments described therein.
9.8 No Impairment. The Company will not, by amendment of its Articles of
-------------
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
Section 9 hereof and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series AA Preferred Stock against impairment.
9.9 No Fractional Shares Adjustments. No fractional shares shall be
--------------------------------
issued upon conversion of the Series AA Preferred Stock. If more than one share
of the Series AA Preferred Stock is to be converted at one time by the same
stockholder, the number of full shares issuable upon such conversion shall be
14
<PAGE>
computed on the basis of the aggregate amount of the shares to be converted.
Instead of any fractional shares of Class A Common Stock which would otherwise
be issuable upon conversion of any shares of Series AA Preferred Stock, the
Company will pay a cash adjustment in respect of such fractional interest in an
amount equal to the same fraction of the Market Price per share of Class A
Common Stock at the close of business on the day of conversion which such
fractional share of Series AA Preferred Stock would be convertible into on such
date.
9.10 Shares to be Reserved. The Company shall at all times reserve and
---------------------
keep available, out of its authorized and unissued stock, solely for the purpose
of effecting the conversion of the Series AA Preferred Stock, such number of
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series AA Preferred Stock from time to time
outstanding. The Company shall from time to time, in accordance with the laws
of the State of Georgia, increase the authorized number of shares of Class A
Common Stock if at any time the number of shares of authorized but unissued
Class A Common Stock shall be insufficient to permit the conversion in full of
the Series AA Preferred Stock.
9.11 Taxes and Charges. The Company will pay any and all issue or other
-----------------
taxes that may be payable in respect of any issuance or delivery of shares of
Class A Common Stock on conversion of the Series AA Preferred Stock. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance or delivery of Class A Common
Stock in a name other than that of the Series AA Preferred Stock, and no such
issuance or delivery shall be made unless and until the Person requesting such
issuance has paid to the Company the amount of such tax or has established, to
the satisfaction of the Company, that such tax has been paid.
9.12 Accrued Dividends. Upon conversion of any shares of Series AA
-----------------
Preferred Stock, the holder thereof shall be entitled to receive any accrued but
unpaid dividends in respect of the shares of Series AA Preferred Stock so
converted to the date of such conversion.
9.13 Closing of Books. The Company will at no time close its transfer
----------------
books against the transfer of any shares of Series AA Preferred Stock or of any
shares of Class A Common
Stock issued or issuable upon the conversion of any shares of Series AA
Preferred Stock in any manner which interferes with the timely conversion of
such shares of Series AA Preferred Stock.
10. CERTAIN DEFINITIONS.
-------------------
"Additional Shares of Stock" means all shares of Common Stock issued by the
Company after the Issue Date, other than (i) the Class A Common Stock to be
issued upon exercise of the Warrants, (ii) the Class A Common Stock to be issued
upon conversion of the Series A Preferred Stock Common Stock, (iii) the Class A
Common Stock to be issued upon exercise of the Bank Warrants, (iv) 125,000
shares of Class A Common Stock to be issued pursuant to the Company's Outside
Directors Incentive Plan or otherwise to directors, (v) 475,000 shares of Class
A Common Stock to be issued pursuant to the Company's Management Incentive Plan,
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<PAGE>
(vi) 300,000 shares of Class A Common Stock issued or to be issued pursuant to
the Company's Employee Stock Plan, (vii) the issuance of Class A Common Stock
upon conversion of the Series AA Preferred Stock, (viii) the issuance of the
Option, (ix) the issuance of the New Warrants, and (x) the issuance of Class A
Common Stock upon exercise of the New Warrants.
"Bank Warrants" means warrants exercisable for 360,000 shares of Class A
Common Stock issued to NationsBank, N.A. (South) and Creditanstalt-Bankverien or
their successors and assigns.
"Business Day" means a day other than a Saturday, Sunday, or other day on
which banks and trust companies in Atlanta are not required to be opened.
"Capital Stock" means any and all shares, interests, participations, or
other equivalents (however designated) of corporate stock or other equity
securities.
"Class A Common Stock" means the Class A Common Stock, no par value, of the
Company and any other stock into which such Class A Common Stock may hereafter
be changed, or for which such Class A Common Stock may be exchanged, after
giving effect to the terms of such change or exchange (by way of reorganization,
recapitalization, merger, consolidation, or otherwise).
"Class B Common Stock" means the Class B Common Stock, no par value, of the
Company and any other stock into which such Class B Common Stock may hereafter
by changed, or for which such Class B Common Stock may be exchanged, after
giving effect to the terms of such change or exchange (by way of reorganization,
recapitalization, merger, consolidation, or otherwise).
"Common Stock" means the Class A Common Stock, Class B Common Stock, and
any other class of common stock now or hereafter authorized by the Company from
time to time, and any capital stock of the Company hereafter authorized which is
not preferred as to dividends or distributions upon liquidation, dissolution, or
winding up of the Company over any other class of capital stock of the Company,
or, for purposes of Section 8, has ordinary voting power for the election of
directors of the Company.
"Company" means Harry's Farmers Market. Inc.
"Conversion Price" means the Conversion Price per share of Class A Common
Stock into which the Series AA Preferred Stock is convertible.
"Convertible Securities" means evidences of indebtedness, shares of
preferred stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Stock, either immediately or upon the occurrence of a
specified date or a specified event, other than the Series AA Preferred Stock or
the Series B Preferred.
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"Dividend Payment Date" means each of March 31, June 30, September 30 and
December 31 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter each
Quarterly Dividend Period.
"Dividend Record Date" means, with respect to the dividend payable on each
Dividend Payment Date of each year, the immediately preceding March 15, June 15,
September 15 and December 15, or such other record date as may be designated by
the Board of Directors with respect to the dividend payable on such Dividend
Payment Date; provided, however, that such record date may not be more than
sixty (60) days or less than ten (10) days prior to such Dividend Payment Date.
"Holder" means a registered holder of shares of Series AA Preferred Stock.
"Initial Dividend Period" means the dividend period commencing on the
Redemption Default Date and ending on the first Dividend Payment Date to occur
thereafter.
"Issue Date" means as to any share of Series AA Preferred Stock, the date
of the original issuance by the Company.
"Liquidation Preference" means the Original Liquidation Preference, plus an
amount in cash equal to all accrued and unpaid dividends (including an amount
equal to a prorated dividend from the last Dividend Payment Date to the date
such Liquidation Preference is being determined). The Liquidation Preference of
a share of Series AA Preferred Stock will increase on a daily basis as dividends
accrue on such share and will decrease only to the extent such dividends are
actually paid, all as provided in Section 4 hereof.
"Market Price" means, as to any security on the date of determination
thereof, the average of the closing prices of such security's sales on all
principal United States securities exchanges on which such security may at the
time be listed, or, if there shall have been no sale on any such exchange on any
day, the last trading price of such security on such day, or if such there is no
such price, the average of the bid and asked prices at the end of such day, on
the Nasdaq Stock Market, in each such case averaged for a period of twenty (20)
consecutive Business Days prior to the day as of which Market Price is being
determined; provided that if such security is listed on any United States
securities exchange the term "Business Days" as used in this sentence means
business days on which such exchange is open for trading. Notwithstanding the
foregoing, with respect to the issuance of any security by the Company in an
underwritten public offering, the Market Price shall be the per share purchase
price paid by the underwriters. If at any time such security is not listed on
any exchange or the Nasdaq Stock Market, the Market Price shall be deemed to be
the fair value thereof determined by an investment banking firm of nationally
recognized standing selected by the Board of Directors of the Company and
acceptable to holders of a majority of the Series A Preferred Stock, as of the
most recent practicable date as of which the determination is to be made, taking
17
<PAGE>
into account the value of the Company as a going concern, and without taking
into account any lack of liquidity of such security or any discount for a
minority interest.
"Original Liquidation Preference" means $9.00 per share of Series AA
Preferred Stock.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization or a government or agency or political subdivision
thereof.
"Public Market Event" shall mean any program of acquisition by the Company
of its own Class A Common Stock, initiation of a corporate reorganization,
recapitalization, or undertaking a consolidation or merger or authorizing,
consenting to, or taking any action which would have the effect of:
(i) removing the Company from registration with the Securities and
Exchange Commission under the Securities Exchange Act with respect to the
Company's Class A Common Stock,
(ii) requiring the Company to make a filing under Section 13(e) of
the Securities Exchange Act,
(iii) reducing substantially or eliminating the public market for
shares of Class A Common Stock of the Company,
(iv) causing a delisting of the Company's Class A Common Stock as a
National market Security on The NASDAQ Stock market (unless such stock is
delisted as a result of being listed on a national securities exchange), or
(v) if any shares of the Company's Class A Common Stock are at any
time listed on a national securities exchange, causing a delisting of such
stock from such exchange.
"Quarterly Dividend Period" means the quarterly period commencing on and
including the immediately preceding Dividend Payment Date and ending on but not
including the immediately subsequent Dividend Payment Date.
"Redemption Default" means if the Company shall fail to redeem any Series
AA Preferred Stock as and when required to be redeemed pursuant to Section 6
hereof.
"Redemption Default Date" means the date upon which a Redemption Default
occurs with respect to the Series AA Preferred Stock.
"Securities Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
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"Series AA Preferred Stock" means the Series AA Preferred Stock, stated
value $9.00 per share, of the Company authorized by these resolutions and the
Certificate of Designations filed pursuant hereto (as such Certificate of
Designations may be amended from time to time).
"Subsidiary" means with respect to any Person (the "parent"), any
corporation, association or other business entity of which securities or other
ownership interests representing more than fifty percent (50%) of the ordinary
voting power are, at the time as of which any determination is being made, owned
or controlled by the parent or one or more Subsidiaries of the parent or by the
parent and one or more Subsidiaries of the parent.
"Warrants" means the Company's warrants exercisable for 412,500 shares of
Class A Common Stock and its performance warrants exercisable for 61,111 shares
of Class A Common Stock originally issued on December 30, 1994, to the holders
of the Company's Series A Redeemable Convertible Preferred Stock, $9.00 stated
value.
Executed this 31st day of January 1997.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
------------------------------
Name: Harry A. Blazer
Title: President
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EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
HARRY'S FARMERS MARKET, INC.
============================
Series B Preferred Stock
1. The name of the corporation is Harry's Farmers Market, Inc.
2. Article II of the Articles of Incorporation authorizes the issuance of
up to 3,000,000 shares of Preferred Stock by the Company, with such preferences,
limitations, and relative rights as may be determined by the Board of Directors
in accordance with (S) 14-2-602 of the Georgia Business Corporation Code.
3. On January 30, 1997, the Board of Directors of the Company duly adopted
an amendment to the Company's Articles of Incorporation designating a series of
Preferred Stock as the Series B Preferred Stock, and determining the terms of
such series.
4. The text of the amendment so adopted, which amends Article II by adding
a new Section G, is as follows.
G. Series B Preferred Stock
1. GENERAL. There is designated herein a single series of preferred stock
having the preferences, limitations, and relative rights set forth below. The
Series B Preferred Stock shall be issuable upon the exercise of certain option
rights issued by the Company on January 31, 1997 (the "Option Issuance Date").
Capitalized terms not otherwise defined shall have the meanings assigned by
Section 10.
2. DESIGNATION.
The series of Preferred Stock shall be designated as the "Series B
Preferred Stock." The number of shares constituting such series shall be
500,000, having a stated value of $40.00 per share. All shares of Series B
Preferred Stock shall be identical with each other in all respects.
3. RANK.
The Series B Preferred Stock shall rank, with respect to dividend rights
and rights on liquidation, dissolution and winding-up of the affairs of the
Company:
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(i) senior to all classes or series of Common Stock of the Company and to
any other class or series of Capital Stock that does not expressly
provide that it ranks senior to or on a parity with the Series B
Preferred Stock as to dividends and upon liquidation, dissolution and
winding-up (collectively referred to as "Junior Securities");
(ii) on parity with the Series AA Preferred Stock, stated value $9.00 (the
"Series AA Preferred Stock"), of the Company, and with each other
class or series of Capital Stock that expressly provides that it
ranks on a parity with the Series B Preferred Stock as to dividends
and upon liquidation, dissolution and winding-up (collectively
referred to as "Parity Securities"); and
(iii) junior to each class or series of Capital Stock which expressly
provides that it ranks senior to the Series B Preferred Stock as to
dividends and upon liquidation, dissolution and winding-up
(collectively referred to as "Senior Securities").
The Company shall not create, authorize or issue any Senior Securities or
Parity Securities or reclassify any class or series of Capital Stock into Senior
Securities or Parity Securities, without the approvals required by Section 8
hereof.
4. DIVIDENDS.
4.1 Amount and Payment. If the Company shall at any time or from time to
time declare, order, pay, or make a dividend or other distribution (whether in
cash, securities, rights to purchase securities, or other property) with respect
to its Common Stock, the Holders of outstanding shares of Series B Preferred
Stock shall be entitled to receive, with respect to each share of Series B
Preferred Stock held, a dividend or distribution that is the same dividend or
distribution that would be received by a holder of the number of shares of Class
A Common Stock into which such share of Series B Preferred Stock is convertible
under Section 9 on the record date for such dividend or distribution. Any such
dividend or distribution shall be declared, ordered, paid, or made on the Series
B Preferred Stock at the same time such dividend or distribution is declared,
ordered, paid, or made on the Common Stock.
4.2 Cumulative Default Dividends. Beginning on the date of any Redemption
Default applicable to the Series AA Preferred Stock, and until such Redemption
Default has been cured in full by the Company and all dividends provided by this
Section 4.2 have been paid in full, the Holders of outstanding shares of Series
B Preferred Stock shall be entitled to receive, when, as, and if declared by the
Board of Directors, out of funds legally available for the payment of dividends,
cash dividends at the annual rate equal to fifteen percent of the Liquidation
Preference. All dividends shall be cumulative and shall be payable in equal
quarterly installments in arrears on each Dividend Payment Date commencing on
the first Dividend Payment Date for which the Dividend Record Date occurs after
the Redemption Default Date, in preference to and with priority over dividends
on Junior Securities. The dividend payable on any
2
<PAGE>
share of Series B Preferred Stock on any Dividend Payment Date in respect of the
Quarterly Dividend Period then ended shall be calculated by multiplying the
Liquidation Preference of such share on the immediately preceding Dividend
Payment Date (after giving effect to any dividend payment actually made on such
preceding Dividend Payment Date, if any) by 3.75 percent. Dividends per share of
Series B Preferred Stock payable in respect of the Initial Dividend Period shall
be equal to the product of the Liquidation Preference and 3.75 percent times a
fraction, the numerator of which is the number of days in the Initial Dividend
Period and denominator of which is 90. The amount of dividends accrued on the
Series B Preferred Stock for any period less than a full Quarterly Dividend
Period shall be equal to a pro rata portion of the total dividend payable for
the Quarterly Dividend Period during which such period occurs, based on the
actual number of days elapsed in such period for which payable and the total
number of days in the applicable Quarterly Dividend Period. Dividends shall
accrue on a daily basis during each Dividend Period as provided above, and the
Liquidation Preference of each outstanding share of Series B Preferred Stock
shall be correspondingly increased on a daily basis. Each such dividend shall be
payable to Holders of record as their names shall appear on the stock books of
the Company on the Dividend Record Date for such dividends, except that
dividends in arrears for any past Payment Date may be declared and paid at any
time without reference to such regular Dividend Payment Date to Holders of
record on such date not more than 60 days or less than 10 days prior to the date
of payment as shall be determined by the Board of Directors.
4.3 Limitation on Dividends, Repurchases and Redemptions. So long as any
shares of Series B Preferred Stock shall be outstanding, the Company shall not
declare or pay or set apart for payment any dividends or make any other
distributions on any Junior Securities, whether in cash, property or otherwise
(other than dividends or distributions payable in shares of the class or series
upon which such dividends or distributions are declared or paid), nor shall the
Company or any of its Subsidiaries purchase, redeem or otherwise acquire for any
consideration or make payment on account of the purchase, redemption, or other
retirement of any Parity Securities or Junior Securities, nor shall any monies
be paid or made available for a sinking fund for the purchase or redemption of
any Parity Securities or Junior Securities, unless with respect to all of the
foregoing all dividends or other distributions to which the holders of Series B
Preferred Stock shall have been entitled, pursuant to Section 4.1 or 4.2 hereof,
shall have been paid or declared and a sum of money has been set apart for the
full payment thereof.
4.4 Pro Rata Payments. All dividends paid with respect to shares of the
Series B Preferred Stock shall be paid pro rata to the Holders entitled thereto.
5. LIQUIDATION PREFERENCE.
5.1 Amount. Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Company, the Holders of Series B Preferred
Stock will be entitled to receive out of the assets of the Company available for
distribution to the holders of its Capital Stock, whether such assets are
capital or surplus, an amount in cash equal to the Liquidation Preference
determined as of the date of such voluntary or involuntary liquidation,
dissolution or
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winding-up, before any payment or other distribution is made on any Junior
Securities, including Common Stock of the Company. Holders of Series B Preferred
Stock shall not be entitled to any other distribution in the event of voluntary
or involuntary liquidation, dissolution or winding-up of the affairs of the
Company.
5.2 Proration. If upon any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Company, the assets of the
Company are not sufficient to pay in full the liquidation preference payable to
the holders of outstanding shares of the Series B Preferred Stock and all Parity
Securities, then the holders of all such shares shall share equally and ratably
in any distribution of assets in proportion to the full liquidation preference
determined as of the date of such voluntary or involuntary liquidation,
dissolution or winding-up, to which they are entitled.
5.3 Sale Not Liquidation. For the purposes of this Section 5 only,
neither the sale, lease, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with or into one or more corporations shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the Company.
6. [Reserved.]
7. CERTAIN REPURCHASES
7.1 Repurchase of Series B Preferred Stock by the Company. Neither the
Company nor any of its Subsidiaries shall repurchase any outstanding shares of
Series B Preferred Stock unless the Company on the same terms either (i) offers
to purchase all of the then outstanding shares of Series B Preferred Stock or
(ii) offers to purchase shares of Series B Preferred Stock from the holders in
proportion to the respective number of shares of Series B Preferred Stock held
by each holder. In any such repurchase by the Company, if all shares of Series B
Preferred Stock are not being repurchased, then the number of shares of Series B
Preferred Stock to be repurchased shall be allocated among all shares of Series
B Preferred Stock held by holders which accept the Company's repurchase offer so
that the shares of Series B Preferred stock are repurchased from such holders in
proportion to the respective number of shares of Series B Preferred held by each
such holder which accepts the Company's offer (or in such other proportion as
agreed by all such holders who accept the Company's offer). Nothing in this
Section 7 shall obligate a holder of shares of Series B Preferred Stock to
accept the Company's repurchase offer.
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8. VOTING RIGHTS
8.1 General.
8.1.1 Holders of Series B Preferred Stock shall be permitted to vote
with the holders of Common Stock and the holders of the Series AA Preferred
Stock, voting together as a single voting group, on any matter required or
permitted to be voted upon by the holders of Common Stock. Each share of Series
B Preferred Stock shall entitle the holder thereof to such number of votes per
share in each such matter as shall equal the number of shares of Class A Common
Stock (including fractions of a share) into which each share of Series B
Preferred Stock is convertible as of the record date for the determination of
holders entitled to vote on such matters.
8.1.2 Notwithstanding the foregoing, without the approval of Holders
of at least two-thirds of the shares of Series B Preferred Stock then
outstanding, voting or consenting, as the case may be, as a single voting group,
given in person or by proxy, either in writing or by resolution adopted at an
annual or special meeting called for the purpose, the Company will not, and will
not permit any of its Subsidiaries to:
a. issue any Senior Securities or Parity Securities;
b. reclassify any Junior Securities into any Senior Securities
or Parity Securities;
c. amend, modify or repeal the Articles of Incorporation, the
By-Laws of the Company, or these Articles of Amendment to
the Articles of Incorporation or any other specified
designations, rights, preferences or powers of the Series B
Preferred Stock in a manner adverse to Holders of Series B
Preferred Stock; or
d. increase the number of shares of Series B Preferred Stock
authorized for issuance.
8.2 Shares Deemed Outstanding. For the purpose of this Section 8 and for
purposes of exercising any vote, election or consent hereunder or under
applicable law, shares of Series B Preferred Stock held by the Company or any of
its Subsidiaries shall not be deemed to be outstanding and shall not be counted
in determining the outcome of any such vote, election or consent solicitation.
9. Conversion.
9.1 Conversion Ratio. The shares of Series B Preferred Stock shall be
convertible into the number of fully paid and nonassessable shares of Class A
Common Stock obtained by
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dividing (i) the aggregate Liquidation Preference of the shares to be converted,
by (ii) the Conversion Price, subject to adjustment of such number of shares as
provided herein. The initial Conversion Price shall be $4.00 per share, adjusted
as provided in this Section 9 for events occurring from and after the Option
Issuance Date.
9.2 Reserved Shares. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Class A Common Stock for
the purpose of issuance upon conversion of shares of Series B Preferred Stock, a
sufficient number of such shares and shall take all action necessary so that
shares of Class A Common Stock so issued will be validly issued, fully paid and
nonassessable.
9.3 Changes in Common Stock. Upon any change in the Class A Common Stock
after the Option Issuance Date by reason of stock dividends, split-ups, stock
splits, reverse stock splits, recapitalization, exchanges of shares or the like,
the number of shares of Class A Common Stock that a holder of Series B Preferred
Stock is entitled to receive upon conversion shall be adjusted proportionately.
9.4 Recapitalizations, Reorganizations, Etc. If the Company shall effect
any capital reorganization or reclassification of its Class A Common Stock
(other than changes in par value or as a result of a change described in Section
9.3 above) or shall consolidate or merge with or into any other corporation
(other than where the Company is the surviving corporation and each share of
Class A Common Stock outstanding immediately prior to such consolidation or
merger is to remain outstanding immediately after such consolidation or merger)
or shall sell or transfer all or substantially all its assets to any other
corporation for a consideration consisting in whole or in part of equity
securities of such other corporation, lawful provision shall be made as a part
of the terms of such transaction whereby the holders of shares of the Series B
Preferred Stock shall receive upon conversion thereof, in lieu of each share of
Class A Common Stock issuable upon conversion of such shares immediately prior
to such consummation, the same kind and amount of stock (or other securities,
cash or property, if any) as may be issuable or distributable in connection with
such transaction with respect to each outstanding share of Class A Common Stock
subject to adjustments for subsequent stock dividends and distributions,
subdivisions or combinations of shares, capital reorganizations,
reclassifications, consolidations or mergers as nearly equivalent as possible to
the adjustments provided for in this Section 9, as would have been distributed
to a holder of Series B Preferred Stock upon such reorganization,
reclassification, consolidation or merger had such holder converted such Series
B Preferred Stock immediately prior to such reorganization, reclassification,
consolidation or merger.
9.5 Mechanics of Conversion. Each holder of Series B Preferred Stock that
desires to convert the same into shares of Class A Common Stock shall surrender
the certificate or certificates therefor, duly endorsed, at the principal office
of the Company or of any transfer agent for the Series B Preferred Stock or
Class A Common Stock, accompanied by written notice to the Company that such
holder elects to convert the same and stating therein the number of shares of
Series B Preferred Stock being converted and setting forth the name or names in
which
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such holder wishes the certificate or certificates for shares of Class A Common
Stock to be issued if such name or names shall be different than that of such
holder. In case such notice shall specify a name or names other than that of
such holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance and delivery of shares of Class A Common Stock in such
name or names. Thereupon, the Company shall issue and deliver at such office on
the fifth (5th) succeeding Business Day (unless such conversion is in connection
with an underwritten public offering of Class A Common Stock, in which event
concurrently with such conversion) to such holder or on such holder's written
order, (i) a certificate or certificates for the number of validly issued, fully
paid and nonassessable full shares of Class A Common Stock to which such holder
is entitled and (ii) if less than the full number of shares of Series B
Preferred Stock evidenced by the surrendered certificate of certificates are
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates less
the number of shares converted.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date of such surrender of the shares to be
converted (except that if such conversion is in connection with an underwritten
public offering of Class A Common Stock, then such conversion shall be deemed to
have been effected upon such surrender) so that the rights of the holder thereof
as to the shares being converted shall cease at such time except for the right
to receive shares of Class A Common Stock and accrued but unpaid dividends in
accordance herewith, and the person entitled to receive the shares of Class A
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Class A Common Stock at such time.
9.6 Conditional Conversion. Notwithstanding any other provision hereof,
if conversion of any shares of Series B Preferred Stock is to be made in
connection with a public offering of Class A Common Stock or any transaction
described in Section 9.4 hereof, the conversion of any shares of Series B
Preferred Stock may, at the election of the holder thereof, be conditioned upon
the consummation of the public offering or such transaction, in which case such
conversion shall not be deemed to be effective until the consummation of such
public offering or transaction.
9.7 Adjustment of the Conversion Price. The Conversion Price shall be
adjusted from time to time as follows:
9.7.1 Pre-Issuance Adjustment. Adjustments to the Conversion Price
will be made for the events described in this Section 9.7 occurring after the
Option Issuance Date, even if such events occur prior to the issuance of any
Series B Preferred Stock pursuant to the Option (as defined in Section 9.7.8
herein).
9.7.2 Issuance of Additional Shares of Stock. If at any time the
Company shall (except as hereinafter provided) issue or sell any Additional
Shares of Stock either (A) in exchange for consideration in an amount per
Additional Share of Stock less than the Conversion
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Price in effect immediately prior to such issuance or sale of Additional Shares
of Stock or (B) in exchange for consideration in an amount per Additional Share
of Stock less than the Market Price in effect immediately prior to such issuance
or sale of Additional Shares of Stock, then the Conversion Price as to the Class
A Common Stock into which the Series B Preferred Stock is convertible
immediately prior to such adjustment shall be adjusted to equal the price
determined by multiplying the Conversion Price by a fraction, of which
(x) the numerator shall be (1) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale of
Additional Shares of Stock plus (2) the number of shares of Common
Stock which the aggregate amount of consideration, if any, received by
the Company for the total number of such Additional Shares of Stock so
issued or sold would purchase at the greater of (I) the Market Price
in effect immediately prior to such issuance or sale of Additional
Shares of Stock or (II) the Conversion Price in effect immediately
prior to such issuance or sale of Additional Shares of Stock, and
(y) the denominator shall be the number of shares of Common Stock
outstanding immediately after such issuance or sale of Additional
Shares of Stock;
provided, however, that such adjustment shall be made only if the Conversion
Price determined from such Adjustment shall be less than the Conversion Price in
effect immediately prior to the issuance of such Additional Shares of Stock. The
provisions of this Section 9.7.2 shall not apply to any issuance of Additional
Shares of Stock for which an adjustment is provided under Section 9.7.2 or which
are dividends or distributions received by the holders of the Series B Preferred
Stock pursuant to Section 4.1 hereof.
9.7.3 Issuance of Warrants or Other Rights. If at any time the Company
shall in any manner (whether directly or by assumption in a merger in which the
Company is the surviving corporation) issue or sell any warrants or other rights
to subscribe for or purchase any Additional Shares of Stock or any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the consideration received for such warrants or
other rights or such Convertible Securities shall be less than the Conversion
Price or the Market Price in effect immediately prior to the time of such issue
or sale, then the Conversion Price shall be adjusted as provided in Section
9.7.2. No further adjustments of the Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such Convertible Securities.
9.7.4 Issuance of Convertible Securities. If at any time the Company shall
in any manner (whether directly or by assumption in a merger in which the
Company is the surviving corporation) issue or sell any Convertible Securities,
whether or not the rights to convert thereunder are immediately exercisable, and
the consideration received for such stock shall be less than the Conversion
Price or the Market Price in effect immediately prior to the time
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of such issue or sale, then the Conversion Price shall be adjusted as provided
in Section 9.7.2. No adjustment of the Conversion Price shall be made under this
Section 9.7.4 upon the issuance of any Convertible Securities which are issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights pursuant to Section 9.7.3. No further
adjustments of the Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion of such Convertible Securities and, if any issue or
sale of such Convertible Securities is made upon exercise of any warrant or
other right to subscribe for or to purchase any such Convertible Securities for
which adjustments of the Conversion Price have been or are to be made pursuant
to other provisions of this Section 9, no further adjustments of the Conversion
Price shall be made by reason of such issue or sale.
9.7.5 Superseding Adjustments. If, at any time after any adjustment of the
Conversion Price which the Series B Preferred Stock is convertible shall have
been made pursuant to Section 9.7.3 or Section 9.7.4 as the result of any
issuance of warrants, rights or Convertible Securities,
(i) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all
or a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, or
(ii) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or rights, or the terms
of such other Convertible Securities, shall be increased solely by
virtue of provisions therein contained for an automatic increase in
such consideration per share upon the occurrence of a specified date
or event,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(iii) treating the number of Additional Shares of Stock or other
property, if any, theretofore actually issued or issuable pursuant to
the previous exercise of any such warrants or rights or any such right
of conversion or exchange, as having been issued on the date or dates
of any such exercise and for the consideration actually received and
receivable therefor, and
(iv) treating any such warrants or rights of any such other
Convertible Securities which then remain outstanding as having been
granted or issued
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immediately after the time of such increase of the consideration per
share for which shares of Common Stock or other property are issuable
under such warrants or rights or other Convertible Securities;
whereupon a new adjustment of the Conversion Price at which the Series B
Preferred Stock is convertible shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
9.7.6 Antidilution Adjustments Under Other Securities. Without
limiting any other rights available hereunder to the holders of the Series B
Preferred Stock, if there is an antidilution adjustment (i) under any
Convertible Securities, whether issued prior to or after the Issue Date or (ii)
under any rights, options or warrants to purchase Additional Shares of Stock,
whether issued prior to or after the Issue Date which, in either case, results
in a reduction in the exercise or purchase price with respect to such security
or rights or results in an increase in the number of Additional Shares of Stock
obtainable under such Convertible Security, right, option or warrant, then an
adjustment shall be made to the Conversion Price hereunder. Any such adjustment
pursuant to this Section 9.7.6 shall be whichever of the following results in a
lower Conversion Price: (A) a reduction in the Conversion Price equal to the
percentage reduction in such exercise or purchase price with respect to such
Convertible Security, right, option or warrant or (B) a reduction in the
Conversion Price which will result in the same percentage increase in the number
of shares of Class A Common Stock available hereunder as the percentage increase
in the number of Additional Shares of Stock available under such Convertible
Security, right, option or warrant. Any such adjustment under this Section 9.7.6
shall only be made if it would result in a lower Conversion Price than that
which would be determined pursuant to any other antidilution adjustment
otherwise required hereunder as a result of the event or circumstance which
triggered the adjustment to such Convertible Security, right, option or warrant,
and if an adjustment is made pursuant to this Section 9.7.6, such other
antidilution adjustment otherwise required hereunder shall not be made as a
result of such event or circumstance.
9.7.7 Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of the
shares of Class A Common Stock into which the Series B Preferred Stock is
convertible and the Conversion Price at which the Series B Preferred Stock is
convertible provided for in this Section 9:
a. Computation of Consideration. To the extent that any
Additional Shares of Stock or any Convertible Securities or any warrants or
other rights to subscribe for or purchase any Additional Shares of Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Corporation therefor shall be the amount of the cash received by
the Company therefor, or, if such Additional Shares of Stock or Convertible
Securities are offered by the Company for subscription, the subscription price,
or, if such Additional Shares of Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription offering, the
initial public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends and any
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compensation, discounts or expenses paid or incurred by the Company for and in
the underwriting of, or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration other than cash, then
except as herein otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair value of such consideration at the time of such
issuance as determined in good faith by the Board of Directors of the Company.
In case any Additional Shares of Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase such Additional Shares of
Stock or Convertible Securities shall be issued in connection with any merger in
which the Company issues any securities, the amount of consideration therefor
shall be deemed to be the fair value, as determined in good faith by the Board
of Directors of the Company, of such portion of the assets and business of the
nonsurviving Company as such Board in good faith shall determine to be
attributable to such Additional Shares of Stock, Convertible Securities,
warrants or other rights, as the case may be. The consideration for any
Additional Shares of Stock issuable pursuant to any warrants or other rights to
subscribe for or purchase the same shall be the consideration received by the
Company for issuing such warrants or other rights plus the additional
consideration payable to the Company upon exercise of such warrants or other
rights. The consideration for any Additional Shares of Stock issuable pursuant
to the terms of any Convertible Securities shall be the consideration received
by the Company for issuing warrants or other rights to subscribe for or purchase
such Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Stock or Convertible Securities in payment or satisfaction of any dividends upon
any class of stock other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
b. When Adjustments to be Made. The adjustments required by this
Section 9 shall be made whenever and as often as any event requiring an
adjustment shall occur, except that any adjustment of the Conversion Price that
would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for in
Section 9.3) up to, but not beyond the date of exercise if such adjustment
either by itself or with other adjustments not previously made amount to a
change in the Conversion Price of less than $.05. Any adjustment representing a
change of less than such minimum amount (except as aforesaid) which is postponed
shall be carried forward and made as soon as such adjustment, together with
other adjustments required by this Section 9 and not previously made, would
result in a minimum adjustment or on the date of conversion. For the purpose of
any adjustment, any event shall be deemed to have occurred at the close of
business on the date of its occurrence.
c. Fractional Interests. In computing adjustments under this
Section 9, fractional interests in the Common Stock shall be taken into account
to the nearest 1/10th of a share.
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d. Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 9, such determination may be
challenged in good faith by a holder of Series B Preferred Stock and any dispute
shall be resolved by an investment banking firm of recognized national standing
selected by the Company and acceptable to such holder. The fees of such
investment banker shall be borne by such holder if the Company's calculation is
determined to be correct and otherwise by the Company.
9.7.8 Exceptions to Adjustment of Conversion Price. Anything herein
to the contrary notwithstanding, the Company shall not make any adjustment of
the Conversion Price in the case of (i) the issuance of the Warrants or the
issuance of shares of Class A Common Stock upon exercise of the Warrants, (ii)
the issuance of shares of Class A Common Stock to holders of the Series B
Preferred Stock upon conversion of all or any portion of their shares of Series
B Preferred Stock, (iii) the issuance of the Bank Warrants or the issuance of
shares of Class A Common Stock upon exercise of the Bank Warrants, (iv) the
issuance of the Series AA Preferred Stock, (v) the issuance of Class A Common
Stock upon conversion of the Series AA Preferred Stock, (vi) the issuance of the
option (the "Option") to purchase Series B Preferred Stock, contemplated by the
Transaction Agreement dated January 31, 1997, between the Company and HFMI
Acquisition Corporation, a Delaware corporation (the "Transaction Agreement"),
(vii) the issuance of the Series B Preferred Stock pursuant to the Option,
(viii) the issuance of the Warrants (as such term is defined in the Transaction
Agreement) (the "New Warrants"), and (ix) the issuance of Class A Common Stock
upon exercise of the New Warrants.
9.7.9 Chief Financial Officer's Opinion. Upon each adjustment of
the Conversion Price, and in the event of any change in the rights of a holder
of Series B Preferred Stock by reason of other events herein set forth, then and
in each such case, the Company will promptly obtain an opinion of the chief
financial officer of the Company, stating the adjusted Conversion Price, or
specifying the other shares of the Common Stock, securities or assets and the
amount thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company will promptly mail a copy of such opinion
to the holders of Series B Preferred Stock. If a holder disagrees with such
calculation, the Company agrees to obtain within thirty (30) business days an
opinion of a firm of independent certified public accountants selected by the
Company's Board of Directors and acceptable to such holder to review such
calculation and the opinion of such firm of independent certified public
accountants shall be final and binding on the parties and shall be conclusive
evidence of the correctness of the computation with respect to any such
adjustment of the Conversion Price. The fees of such accountants shall be borne
by such holder if the Company's calculation is determined by such accountants to
be correct and otherwise by the Company.
9.7.10 Company to Prevent Dilution. In case at any time or from time
to time conditions arise by reason of action taken by the Company, which in the
good faith opinion of its Board of Directors or a majority of the holders of the
Series B Preferred Stock are not adequately
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covered by the provisions of this Section 9, and which might materially and
adversely affect the exercise rights of the holders of the Series B Preferred
Stock, the Board of Directors of the Company shall appoint such firm of
independent certified public accountants acceptable to a majority of the holders
of the Series B Preferred Stock, which shall give their opinion upon the
adjustment, if any, on a basis consistent with the standards established in the
other provisions of this Section 9, necessary with respect to the Conversion
Price, so as to preserve, without dilution (other than as specifically
contemplated by the Articles of Incorporation), the exercise rights of the
holders of the Series B Preferred Stock. Upon receipt of such opinion, the Board
of Directors of the Company shall forthwith make the adjustments described
therein.
9.8 No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
Section 9 hereof and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series B Preferred Stock against impairment.
9.9 No Fractional Shares Adjustments. No fractional shares shall be issued
upon conversion of the Series B Preferred Stock. If more than one share of the
Series B Preferred Stock is to be converted at one time by the same stockholder,
the number of full shares issuable upon such conversion shall be computed on the
basis of the aggregate amount of the shares to be converted. Instead of any
fractional shares of Class A Common Stock which would otherwise be issuable upon
conversion of any shares of Series B Preferred Stock, the Company will pay a
cash adjustment in respect of such fractional interest in an amount equal to the
same fraction of the Market Price per share of Class A Common Stock at the close
of business on the day of conversion which such fractional share of Series B
Preferred Stock would be convertible into on such date.
9.10 Shares to be Reserved. The Company shall at all times reserve and
keep available, out of its authorized and unissued stock, solely for the purpose
of effecting the conversion of the Series B Preferred Stock, such number of
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series B Preferred Stock from time to time
outstanding. The Company shall from time to time, in accordance with the laws
of the State of Georgia, increase the authorized number of shares of Class A
Common Stock if at any time the number of shares of authorized but unissued
Class A Common Stock shall be insufficient to permit the conversion in full of
the Series B Preferred Stock.
9.11 Taxes and Charges. The Company will pay any and all issue or other
taxes that may be payable in respect of any issuance or delivery of shares of
Class A Common Stock on conversion of the Series B Preferred Stock. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issuance or delivery of
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Class A Common Stock in a name other than that of the Series B Preferred Stock,
and no such issuance or delivery shall be made unless and until the Person
requesting such issuance has paid to the Company the amount of such tax or has
established, to the satisfaction of the Company, that such tax has been paid.
9.12 Accrued Dividends. Upon conversion of any shares of Series B
Preferred Stock, the holder thereof shall be entitled to receive any accrued but
unpaid dividends in respect of the shares of Series B Preferred Stock so
converted to the date of such conversion.
9.13 Closing of Books. The Company will at no time close its transfer
books against the transfer of any shares of Series B Preferred Stock or of any
shares of Class A Common Stock issued or issuable upon the conversion of any
shares of Series B Preferred Stock in any manner which interferes with the
timely conversion of such shares of Series B Preferred Stock.
10. CERTAIN DEFINITIONS.
"Additional Shares of Stock" means all shares of Common Stock issued by the
Company after the Option Issuance Date, other than (i) the Class A Common Stock
to be issued upon exercise of the Warrants, (ii) the Class A Common Stock to be
issued upon conversion of the Series AA Preferred Stock, (iii) the Class A
Common Stock to be issued upon exercise of the Bank Warrants, (iv) 125,000
shares of Class A Common Stock to be issued pursuant to the Company's Outside
Directors Incentive Plan or otherwise to directors, (v) 475,000 shares of Class
A Common Stock to be issued pursuant to the Company's Management Incentive Plan,
(vi) 300,000 shares of Class A Common Stock issued or to be issued pursuant to
the Company's Employee Stock Plan, (vii) the issuance of the Series AA Preferred
Stock, (ix) the issuance of Class A Common Stock upon conversion of the Series
AA Preferred Stock, (x) the issuance of the Series B Preferred Stock pursuant to
the Option, (xi) the issuance of Class A Common Stock upon conversion of the
Series B Preferred Stock, (xii) the issuance of the New Warrants, and (xiii) the
issuance of Class A Common Stock upon exercise of the New Warrants.
"Bank Warrants" mean the Company's warrants exercisable for 360,000 shares
of Common Stock issued to NationsBank, N.A. (South) and Creditanstalt
Bankverein.
"Business Day" means a day other than a Saturday, Sunday, or other day on
which banks and trust companies in Atlanta are not required to be opened.
"Capital Stock" means any and all shares, interests, participations, or
other equivalents (however designated) of corporate stock or other equity
securities.
"Class A Common Stock" means the Class A Common Stock, no par value, of the
Company, and any other stock into which such Class A Common Stock may hereafter
be changed, or for which such Class A Common Stock may be exchanged after giving
effect to the
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terms of such change or exchange (by way of reorganization, recapitalization,
merger, consolidation, or otherwise).
"Class B Common Stock" means the Class B Common Stock, no par value, of the
Company, and any other stock into which such Class B Common Stock may hereafter
be changed, or for which such Class B Common Stock may be exchanged, after
giving effect to the terms of such change or exchange (by way of reorganization,
recapitalization, merger, consolidation, or otherwise).
"Company" means Harry's Farmers Market, Inc.
"Common Stock" means the Class A Common Stock, Class B Common Stock, and
every other class of common stock now or hereafter authorized by the Company
from time to time, and any capital stock of the Company hereafter authorized
which is not preferred as to dividends or distributions upon liquidation,
dissolution or winding up of the Company over any other class of capital stock
of the Company or, for purposes of Section 8, has ordinary voting power for the
election of directors of the Company.
"Conversion Price" means the Conversion Price per share of Class A Common
Stock into which the Series B Preferred Stock is convertible, as such Conversion
Price may be adjusted pursuant to Section 5 hereof. The initial Conversion Price
will be $4.00.
"Convertible Securities" means evidences of indebtedness, shares of
preferred stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Stock, either immediately or upon the occurrence of a
specified date or a specified event, other than the Series B Preferred Stock or
the Series AA Preferred Stock.
"Dividend Payment Date" means each of March 31, June 30, September 30 and
December 31 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter each
Quarterly Dividend Period.
"Dividend Record Date" means, with respect to the dividend payable on each
Dividend Payment Date of each year, the immediately preceding March 15, June 15,
September 15 and December 15, or such other record date as may be designated by
the Board of Directors with respect to the dividend payable on such Dividend
Payment Date; provided, however, that such record date may not be more than
sixty (60) days or less than ten (10) days prior to such Dividend Payment Date.
"Holder" means a registered holder of shares of Series B Preferred Stock.
15
<PAGE>
"Initial Dividend Period" means the dividend period commencing on the
Redemption Default Date and ending on the first Dividend Payment Date to occur
thereafter.
"Issue Date" means as to any share of Series B Preferred Stock, the date of
the original issuance thereof by the Company.
"Liquidation Preference" means the Original Liquidation Preference, plus an
amount in cash equal to all accrued and unpaid dividends (including an amount
equal to a prorated dividend from the last Dividend Payment Date to the date
such Liquidation Preference is being determined). The Liquidation Preference of
a share of Series B Preferred Stock will increase on a daily basis as dividends
accrue on such share and will decrease only to the extent such dividends are
actually paid, all as provided in Section 4 hereof.
"Market Price" means, as to any security on the date of determination
thereof, the average of the closing prices of such security's sales on all
principal United States securities exchanges on which such security may at the
time be listed, or, if there shall have been no sale in any such exchange on any
day, the last trading price of such security on such day, or if such there is no
such price, the average of the bid and asked prices at the end of such day, on
the Nasdaq Stock Market, in each such case averaged for a period of twenty (20)
consecutive Business Days prior to the day as of which Market Price is being
determined; provided that if such security is listed on any United States
securities exchange the term "Business Days" as used in this sentence means
business days on which such exchange is open for trading. Notwithstanding the
foregoing, with respect to the issuance of any security by the Company in an
underwritten public offering, the Market Price shall be the per share purchase
price paid by the underwriters. If at any time such security is not listed on
any exchange or the Nasdaq Stock Market, the Market Price shall be deemed to be
the fair value thereof determined by an investment banking firm of nationally
recognized standing selected by the Board of Directors of the Company and
acceptable to holders of a majority of the Series A Preferred Stock, as of the
most recent practicable date as of which the determination is to be made, taking
into account the value of the Company as a going concern, and without taking
into account any lack of liquidity of such security or any discount for a
minority interest.
"Option Issuance Date" shall mean the date of the Option issued by the
Company and contemplated by the Transaction Agreement.
"Original Liquidation Preference" means $40.00 per share of Series B
Preferred Stock.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization or a government or agency or political subdivision
thereof.
"Quarterly Dividend Period" means the quarterly period commencing on and
including the immediately preceding Dividend Payment Date and ending on but not
including the immediately subsequent Dividend Payment Date.
16
<PAGE>
"Redemption Default Date" means the date upon which a Redemption Default
occurs with respect to the Series A Preferred Stock.
"Series B Preferred Stock" means the Series B Preferred Stock, stated value
$40.00 per share, of the Company authorized by these resolutions and the
Articles of Amendment to the Articles of Incorporation filed pursuant hereto (as
such Articles of Amendment to the Articles of Incorporation may be amended from
time to time).
"Subsidiary" means with respect to any Person (the "parent"), any
corporation, association or other business entity of which securities or other
ownership interests representing more than fifty percent (50%) of the ordinary
voting power are, at the time as of which any determination is being made, owned
or controlled by the parent or one or more Subsidiaries of the parent or by the
parent and one or more Subsidiaries of the parent.
"Warrants" mean the warrants exercisable for 412,500 shares of Class A
Common Stock and its performance warrants exercisable for 61,111 shares of Class
A Common Stock issued December 30, 1994 to the holders of the Company's Series A
Redeemable Convertible Preferred Stock, $9.00 stated value.
Executed this 31st day of January 1997.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
----------------------------------
Name: Harry A. Blazer
-----------------------------
Title: President
----------------------------
17
<PAGE>
EXHIBIT 4.1
================================================================================
PREFERRED STOCK EXCHANGE AGREEMENT
among
HARRY'S FARMERS MARKET, INC.
and
ROBERT FLEMING NOMINEES LTD.,
AXA EQUITY & LAW LIFE ASSURANCE SOCIETY,
ORBIS PENSION TRUSTEES LTD.,
ASHFORD CAPITAL PARTNERS, L.P., and
THEODORE H. ASHFORD
-------------------------
JANUARY 31, 1997
-------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1
EXCHANGE OF PREFERRED STOCK AND AMENDMENT OF WARRANT........................... 3
SECTION 1.1 Exchange of Preferred Shares...................................... 3
----------------------------
SECTION 1.2 Amendment of Warrant Price........................................ 3
--------------------------
SECTION 1.3 Registration Rights Agreements.................................... 3
------------------------------
SECTION 1.4 Closing........................................................... 4
-------
SECTION 1.5 Closing Deliveries................................................ 4
------------------
ARTICLE 2
REPRESENTATIONS AND WARRANTIES................................................. 4
SECTION 2.1 Representations and Warranties of the Preferred Stockholders...... 4
------------------------------------------------------------
(a) Authority to Execute and Perform Agreement........................ 5
------------------------------------------
(b) Title to the Preferred Shares..................................... 6
-----------------------------
(c) Investment Representation......................................... 6
-------------------------
SECTION 2.2 Representations and Warranties of the Company..................... 7
(a) Due Incorporation and Authority................................... 7
-------------------------------
(b) Authority and Validity of Agreement............................... 7
-----------------------------------
(c) Capitalization of the Company..................................... 9
-----------------------------
(d) Exchange Preferred Validly Issued................................ 11
---------------------------------
(e) Articles of Amendment............................................ 11
---------------------
(f) Closing of Transaction Agreement................................. 11
--------------------------------
ARTICLE 3
COVENANTS AND AGREEMENTS...................................................... 12
SECTION 3.1 Incorporation of Covenants by Reference.......................... 12
---------------------------------------
SECTION 3.2 Termination of Purchase Agreements............................... 12
----------------------------------
SECTION 3.3 Transactions with Affiliates..................................... 13
----------------------------
SECTION 3.4 Publicity........................................................ 17
---------
SECTION 3.5 Expenses......................................................... 17
--------
ARTICLE 4
CONDITIONS TO CLOSING......................................................... 17
SECTION 4.1 Conditions to the Obligation of Parties to Close................. 17
------------------------------------------------
SECTION 4.2 Conditions to the Obligation of the Preferred Stockholders to
-------------------------------------------------------------
Close..................................................................... 18
-----
SECTION 4.3 Conditions Precedent to the Obligation of the Company to Close... 19
--------------------------------------------------------------
SECTION 4.4 Survival of Representations and Warranties After Closing......... 19
--------------------------------------------------------
i
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 5
MISCELLANEOUS................................................................. 20
SECTION 5.1 Further Assurances............................................... 20
------------------
SECTION 5.2 Termination of Agreement......................................... 20
------------------------
SECTION 5.3 Notices.......................................................... 21
-------
SECTION 5.4 Entire Agreement................................................. 22
----------------
SECTION 5.5 Waivers and Amendments; Non-Contractual Remedies;
------------------------------------------------
Preservation of Remedies................................................ 22
------------------------
SECTION 5.6 Governing Law.................................................... 23
-------------
SECTION 5.7 Binding Effect; Assignment....................................... 23
--------------------------
SECTION 5.8 Usage............................................................ 23
-----
SECTION 5.9 Counterparts..................................................... 23
------------
SECTION 5.10 Headings........................................................ 24
--------
SECTION 5.11 Severability of Provisions...................................... 24
--------------------------
</TABLE>
ii
<PAGE>
PREFERRED STOCK EXCHANGE AGREEMENT
THIS PREFERRED STOCK EXCHANGE AGREEMENT (this "AGREEMENT"), dated as
---------
of January 31, 1997, is between and among Harry's Farmers Market, Inc., a
Georgia corporation (the "COMPANY"), Robert Fleming Nominees Ltd. ("FLEMING"),
------- -------
AXA Equity & Law Life Assurance Society ("AXA"), Orbis Pension Trustees Ltd.
---
("ORBIS"), Ashford Capital Partners, L.P. ("ACP"), and Theodore H. Ashford
- ------- ---
("ASHFORD" and, together with Fleming, AXA, Orbis, and ACP, the "PREFERRED
- --------- ---------
STOCKHOLDERS" and each individually, a "PREFERRED STOCKHOLDER").
- ------------ ---------------------
R E C I T A L S
(a) Each of the Preferred Stockholders owns that number of shares of
Series A Redeemable Convertible Preferred Stock, stated value $9.00 per share,
of the Company (the "SERIES A PREFERRED STOCK"), set forth opposite such
------------------------
Preferred Stockholder's name on Schedule 1 hereto (each individually, a
"PREFERRED SHARE" and collectively, the "PREFERRED SHARES"), issued to such
- ---------------- ----------------
Preferred Stockholder pursuant to separate Share and Warrant Purchase Agreements
dated as of December 30, 1994, between the Company and each of the Preferred
Stockholders (individually the "PURCHASE AGREEMENT" and collectively the
------------------
"PURCHASE AGREEMENTS");
- --------------------
(b) Each Preferred Stockholder also owns a warrant which, upon due
exercise, entitles such Preferred Stockholder to acquire that number of shares
of Class A Common Stock, without par value, of the Company (the "CLASS A COMMON
--------------
STOCK") set forth opposite such Preferred Stockholder's name on Schedule 1
- -----
hereto, at $10.00 per share (collectively, the "WARRANTS"), containing rights
--------
<PAGE>
2
and privileges as more fully set forth in those Warrant Certificates each dated
December 30, 1994 (collectively, the "WARRANT CERTIFICATES" and, each
--------------------
individually, a "WARRANT CERTIFICATE").
-------------------
(c) Pursuant to a resolution of the Board of Directors of the Company
and the Articles of Incorporation of the Company (the "ARTICLES OF
-----------
INCORPORATION"), 1,222,221 shares of the Company's blank cheque preferred stock,
- -------------
previously undesignated, shall be designated shares of Series AA Preferred Stock
of the Company, stated value $9.00 per share, of the Company ("SERIES AA
----------
PREFERRED STOCK").
- ---------------
(d) Pursuant to a Transaction Agreement (the "TRANSACTION AGREEMENT")
---------------------
to be entered into on the date hereof between the Company and HFMI Acquisition
Corporation, a Delaware corporation ("Newco"), among other things, Newco will
enter into certain transactions with the Company.
(e) At the Closing (as defined below), each Preferred Stockholder
shall exchange such Preferred Stockholder's Preferred Shares with the Company
for an equal number of shares of Series AA Preferred Stock ("EXCHANGE PREFERRED
------------------
STOCK").
- -----
(f) Capitalized terms used herein without definition shall have the
respective meanings assigned to them in the Transaction Agreement.
NOW, THEREFORE, in consideration of the premises and representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the parties agree as follows:
<PAGE>
3
ARTICLE 1
EXCHANGE OF PREFERRED STOCK AND
AMENDMENT OF WARRANTS
Section 1.1 Exchange of Preferred Shares. Subject to the satisfaction
----------------------------
or waiver by the relevant party of the conditions contained in the Transaction
Agreement and this Agreement, at the Closing, (i) each Preferred Stockholder
shall transfer to the Company, and the Company shall accept and redeem, such
Preferred Stockholder's Preferred Shares, and (ii) the Company shall issue and
transfer to such Preferred Stockholder a like number of shares of Exchange
Preferred Stock (the "EXCHANGE").
--------
Section 1.2 Amendment of Warrant Price. Simultaneously with the
--------------------------
Exchange, the terms and conditions of the Warrant Certificate shall be amended
pursuant to the terms of an Amendment to Warrant Certificate (individually a
"WARRANT AMENDMENT" and together, the "WARRANT AMENDMENTS") so that the price
----------------- ------------------
per share of Class A Common Stock at which each Preferred Stockholder may
purchase such shares of Class A Common Stock upon exercise of the Warrant and
the Warrant Certificate shall be $4.00 per share.
SECTION 1.3 Registration Rights Agreements. Also simultaneously with
------------------------------
the Exchange, (a) each of the Registration Rights Agreements dated December 30,
1994, between the Company and each of the Preferred Stockholders, shall be
amended, and (b) the Company and each Preferred Stockholder shall enter into an
amendment to the respective Registration Rights Agreements (the "REGISTRATION
------------
RIGHTS AMENDMENTS"), in the forms of Exhibit A-1 and A-2 attached hereto.
- -----------------
<PAGE>
4
SECTION 1.4 Closing. The closing for the Exchange (the "CLOSING")
------- -------
shall take place concurrently with the closing of the transactions contemplated
by the Transaction Agreement on the closing date (the "CLOSING DATE").
------------
SECTION 1.5 Closing Deliveries.
------------------
At the Closing:
(a) each Preferred Stockholder shall deliver to the Company a
duly executed stock certificate or certificates representing such Preferred
Stockholder's Preferred Shares, duly endorsed in blank or accompanied by an
appropriate stock power duly executed in blank, in proper form for transfer, and
with all appropriate stock transfer tax stamps affixed; and
(b) the Company shall deliver to each Preferred Stockholder duly
executed stock certificates or certificates representing the EXCHANGE PREFERRED
STOCK to be exchanged for that Preferred Stockholder's Preferred Shares, in
proper form.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Preferred
-----------------------------------------------
Stockholders. Each Preferred Stockholder represents and warrants to the Company
- ------------
as follows:
<PAGE>
5
(a) Authority to Execute and Perform Agreement. Such Preferred
------------------------------------------
Stockholder has full legal right and power and all authority and approvals
required to enter into, execute and deliver this Agreement and each and every
agreement and instrument contemplated hereby to which it is or will be a party
and to perform fully its obligations hereunder and thereunder. This Agreement
has been duly executed and delivered by such Preferred Stockholder, and on the
Closing Date, each and every agreement and instrument contemplated hereby to
which such Preferred Stockholder is a party will be duly executed and delivered
by it and (assuming due execution and delivery hereof and thereof by the other
parties hereto and thereto) this Agreement and each such other agreement and
instrument will be valid and binding obligations of such Preferred Stockholder
enforceable against it in accordance with their respective terms. The execu tion
and delivery by such Preferred Stockholder of this Agreement and each and every
agreement and instrument contemplated hereby to which it is a party, the
consummation of the transactions contemplated hereby and thereby and the
performance by such Preferred Stockholder of this Agreement and each such other
agreement and instrument in accordance with their respective terms and
conditions will not (a) require such Preferred Stockholder to obtain any
consent, approval, authorization or action of, or make any filing with or give
any notice to, any Governmental Entity or any other person; (b) violate or
conflict with the articles of incorporation or bylaws or other organization
documents of such Preferred Stockholder, as applicable; (c) violate, conflict
with or result in the breach of any of the terms and conditions of, result in a
material modification of the effect of, otherwise cause the termination of or
<PAGE>
6
give any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default under, any contract or
agreement to which such Preferred Stockholder is a party or by or to which such
Preferred Stockholder is or any Preferred Shares are or may be bound or subject;
or (d) result in the creation of any Lien (as defined below) on any Preferred
Shares.
(b) Title to the Preferred Shares. As of the Closing Date, each
-----------------------------
Preferred Stockholder shall own beneficially and of record, free and clear of
any Lien, and shall have full power and authority to convey free and clear of
any Lien, its Preferred Shares, and, upon delivery of such Preferred Shares at
the Closing as herein provided, such Preferred Stockholder will convey to the
Company good and valid title thereto, free and clear of any lien, pledge,
mortgage, deed of trust, security interest, claim, lease, license, charge,
option, right of joint refusal, easement, servitude, transfer restriction,
encumbrance or any other restriction or limitation whatsoever (each a "LIEN").
----
(c) Investment Representation.
-------------------------
(i) Each Preferred Stockholder is an "accredited investor,"
as defined in Regulation D under the Securities Act.
(ii) Each Preferred Stockholder understands that the
Exchange Preferred Stock has not been registered under the Securities Act or
under the securities laws of any state or other jurisdiction in reliance upon
exemptions for private offerings, and that except as set forth in the
Registration Rights Agreements, as amended by the Registration Rights
<PAGE>
7
Amendments, it is under no obligation to do so. Each Preferred Stockholder
acknowledges and is aware that the shares of Exchange Preferred Stock cannot be
resold unless they are registered under the Securities Act and any applicable
state securities law, or an exemption from registration is available.
(iii) Each Preferred Shareholder represents that the
Exchange Preferred Stock is being acquired solely for its own account, for
investment and not with a view to or for the resale, distribution, subdivision,
or fractionalization thereof.
Section 2.2 Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants to each Preferred Stockholder as follows:
(a) Due Incorporation and Authority. The Company is a corporation
-------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Georgia and has all requisite corporate power and lawful authority to
own, lease and operate its properties and to carry on its business as now being
and heretofore conducted.
(b) Authority and Validity of Agreement. The Company has the requisite
-----------------------------------
power and authority to enter into this Agreement, the Registration Rights
Amendments, the Warrant Amendments, the Amended and Restated Stockholders'
Agreement, to be entered into on the date hereof by and among the Company, Harry
A. Blazer and Fleming, (the "Stockholders' Agreement"), and the Amended and
-----------------------
Restated Investors' Agreement, to be entered into on the date herein, by and
among the Company, Harry A. Blazer and the Preferred Stockholders, other than
Fleming (the "Investors' Agreement"), and consummate the transactions
--------------------
<PAGE>
8
contemplated thereby. The execution, delivery and performance of this Agreement,
the Registration Rights Amendments, the Warrant Amendments, the Stockholders'
Agreement and the Investors' Agreement by the Company and the consummation by
the Company of the transactions contemplated thereby have been duly authorized.
This Agreement, the Registration Rights Amendments, the Warrant Amendments, the
Stockholders' Agreement and the Investors' Agreement have been duly authorized,
executed and delivered by the Company and constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms. The execution and delivery by the Company of this Agreement, the
Registration Rights Amendments, the Warrant Amendments, the Stockholders'
Agreement and the Investors' Agreement and each and every other agreement and
instrument contemplated thereby, the consummation of the transactions
contemplated thereby and the performance by the Company of this Agreement, the
Registration Rights Amendment, the Warrant Amendments, the Stockholders'
Agreement and the Investors' Agreement and each such other agreement and
instrument, in accordance with their respective terms and conditions, will not
(a) violate any provision of the Articles of Incorporation, as amended, or By-
laws (or comparable instruments) of the Company; (b) require the Company to
obtain any consent, approval, authorization or action of, or make any filing
with or give any notice to, any Governmental Entity or any other person; or (c)
violate, conflict with or result in the breach of any of the terms and
conditions of, result in a material modification of the effect of, otherwise
cause the termination of or give any other contracting party the right to
<PAGE>
9
terminate, or constitute (or with notice or lapse of time or both constitute) a
default under, any contract or agreement to which the Company is a party or by
or to which the Company is or may be bound or subject.
(c) Capitalization of the Company.
-----------------------------
(i) Immediately prior to the transactions contemplated
hereby, the authorized capital stock of the Company consists of: 22,000,000
shares of Class A Common Stock, of which as of the date hereof, 4,159,253 shares
are issued and outstanding; 3,000,000 shares of Class B Common Stock, no par
value ("CLASS B COMMON STOCK"), of which as of the date hereof, 2,050,701 shares
--------------------
are issued and outstanding; and 3,000,000 shares of Preferred Stock, of which as
of the date hereof, 1,222,221 shares have been issued in series designated as
the Series A Redeemable Convertible Preferred Stock, and are issued and
outstanding. (The Class A Common Stock and the Class B Common Stock are herein
sometimes collectively referred to as the "COMPANY COMMON STOCK" and the
--------------------
Preferred Stock is sometimes referred to as the "COMPANY PREFERRED STOCK".) All
-----------------------
of the issued and outstanding shares of Company Common Stock and Company
Preferred Stock have been duly authorized, validly issued and are fully paid,
nonassessable and free of preemptive rights, except as set forth in the Company
Disclosure Schedule. As the date hereof, approximately 434,200 shares of Class A
Common Stock are reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding options to purchase
Class A Common Stock ("COMPANY OPTIONS") issued pursuant to the Company Plans
---------------
and 833,611 shares of Class A Common Stock are reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
<PAGE>
10
outstanding warrants to purchase Class A Common Stock ("COMPANY WARRANTS").
----------------
Except as described in the Company Filed SEC Reports and as disclosed in Section
3.2(a) of the Company Disclosure Schedule, as of the date hereof, since January
31, 1996 no shares of the Company's capital stock have been issued other than
pursuant to the exercise of Company Options already in existence on such date,
and, except as set forth in the Company Disclosure Schedule, since January 31,
1996, no stock options have been granted by the Company. Except as set forth
above or in Section 3.2(a) of the Company Disclosure Schedule, as of the date
hereof, there are outstanding no shares of capital stock or other voting
securities of the Company, no securities of the Company or any Company
Subsidiary convertible into or exchangeable for shares of capital stock or
voting securities of the Company, no options, warrants or other rights to
acquire from the Company or any Company Subsidiary, and no obligations of the
Company or any Company Subsidiary to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of the Company, no equity equivalents, interests in the ownership or
earnings of the Company or any Company Subsidiary or other similar rights
(including stock appreciation rights) (the items listed in subclauses (i), (ii),
(iii) and (iv) being referred to, collectively, as "COMPANY SECURITIES") and (v)
------------------
no obligations of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any Company Securities. Except as set forth in Section 3.2(a)
of the Company Disclosure Schedule, there are no shareholder agreements, voting
trusts or other agreements or understandings to which the Company is a party or
<PAGE>
11
to which it is bound relating to the voting or registration of any shares of
capital stock of the Company. The Company has not taken any action that would
result in any Company Stock Options that are unvested becoming vested in
connection with or as a result of the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
(ii) The Class A Common Stock constitutes the only
class of securities of the Company or any Company Subsidiary registered or
required to be registered under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT").
------------
(d) Exchange Preferred Validly Issued. The Exchange Preferred Stock to
---------------------------------
be issued by the Company to the Preferred Stockholders pursuant to this
Agreement upon the Exchange will be duly and validly issued, fully paid and non-
accessible.
(e) Articles of Amendment. The Articles of Amendment have been
---------------------
approved by the Board of Directors and have been or will be filed with the
Secretary of State of the State of Georgia.
(f) Closing of Transaction Agreement. The transactions described in
--------------------------------
the Transaction Agreement have been consummated.
<PAGE>
12
ARTICLE 3
COVENANTS AND AGREEMENTS
Section 3.1 Incorporation of Covenants by Reference. The following
---------------------------------------
provisions from the Purchase Agreements shall be incorporated herein by
reference, along with any relevant definitions set forth in Section 3 of the
Purchase Agreements, and shall apply, mutatis mutandis, to the Company, the
Preferred Stockholders, and the Exchange Preferred Stock (as the case may be):
(a) Section 6;
(b) Section 7.2;
(c) Section 7.3;
(d) Section 7.4;
(e) Section 7.5;
(f) Section 7.6;
(g) Section 7.7;
(h) Section 7.10;
(i) Section 7.13;
(j) Section 7.14; and
(k) Section 7.15.
Section 3.2 Termination of Purchase Agreements. Upon and following the
----------------------------------
Closing, each of the Purchase Agreements and the terms and provisions therein,
other than Sections 10 and 12 of each Purchase Agreement, shall be terminated
and thereafter cease to have any force or effect.
<PAGE>
13
Section 3.3 Transactions with Affiliates. From the date hereof until
----------------------------
the later of the time that (x) no Exchange Preferred Stock or Warrants are
outstanding and (y) the Fleming Holders and their Affiliates cease to hold,
directly or indirectly, Exchange Preferred Stock, Warrants and Conversion Shares
representing at least fifty percent (50%) of the number of Conversion Shares
represented by the Exchange Preferred Stock and the Warrants held by Fleming on
the date hereof (after giving effect to the Exchange), except with the prior
written consent of Fleming, the Company will not, and will not permit any
Subsidiary to, directly or indirectly, enter into any material transaction or
agreement (including, without limitation, the purchase, sale, distribution,
lease or exchange of any property or the rendering of any service) with or for
the benefit of any Affiliate of the Company or of any Subsidiary, unless such
transaction or agreement is approved by the Outside Directors, believing in good
faith that the approval is in the best interest of the Company taking into
account all facts and circumstances; provided, however, that this Section 3.3
-------- -------
shall not limit, or be applicable to, (i) the payment of salaries, bonuses or
other employee compensation to employees of the Company or any Subsidiary at a
rate and in a manner consistent with the Company's past practices, (ii) the
payment of reasonable and customary regular fees to directors who are not
employees of the Company consistent with the Company's past practices and (iii)
transactions contemplated by this Agreement, by the Transaction Agreement, and
by the other agreements described in the Transaction Agreement. For purposes of
determining the percentage of Conversion Shares held by Fleming and their
Affiliates pursuant to this Section 3.3, the Warrants shall be deemed to include
<PAGE>
14
the Performance Warrants (as originally defined in the Share and Warrant
Purchase Agreement between Fleming and the Company) if the Performance Warrants
are exercisable at the time such determination is made.
For purposes of this Section 3.3 the following terms shall have the
following meanings:
"Affiliate", when used with respect to any person, means (i) if such Person
----------
is a corporation, any officer or director thereof (other than a director elected
pursuant to Section 4(c) of the Articles of Amendment) and any Person which is,
directly or indirectly, the beneficial owner (by itself or as part of any group)
of more than five percent (5%) of any class of any equity security (within the
meaning of the Securities Exchange Act) thereof, and, if such beneficial owner
is a partnership, any general partner thereof, or if such beneficial owner is a
corporation, any Person controlling, controlled by or under common control with
such beneficial owner, or any officer or director of such beneficial owner or of
any corporation occupying any such control relationship, (ii) if such Person is
a partnership, any general or limited partner thereof, and (iii) any other
Person which, directly or indirectly, controls or is controlled by or is under
common control with such Person. For purposes of this definition, "control"
(including the correlative terms "controlling", "controlled by" and "under
common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise. The holding of Preferred Shares,
<PAGE>
15
Warrants or Performance Warrants (or of Conversion Shares obtained upon
conversion of Preferred Shares or exercise of Warrants or Performance Warrants),
and the rights under the Exchange Agreement or under the Articles of
Incorporation, the Warrant Certificates, the Performance Warrant Certificates,
or the Stockholders' Agreements (or the exercise of any such rights, including,
without limitation, sending an observer to Board or committee meetings of the
Company), shall not cause any Person to be deemed to be an "Affiliate" of the
Company or of any Subsidiary.
"Conversion Shares" means those shares of Class A Common Stock obtainable
-----------------
upon conversion of Exchange Preferred Stock or exercise of Warrants and shall
also include any capital stock or other securities into which Conversion Shares
are changed and any capital stock or other securities resulting from or
comprising a reclassification, combination or subdivision of, or a stock
dividend on, any Conversion Shares. In the event that any Conversion Shares are
sold either in a public offering pursuant to a registration statement under the
Securities Act or pursuant to a Rule 144 Transaction, then the transferees of
such Conversion Shares shall not be entitled to any benefits under this
Agreement with respect to such Conversion Shares.
"Outside Directors" means those directors on the Company's Board of
-----------------
Directors at any time who are not otherwise Affiliates of or employed by the
Company, and who do not have a financial interest (or serve as directors,
officers, employees, or agents of an entity that has a financial interest)
adverse to the Company in the transaction or matter under consideration;
provided, however, that any director who is an Affiliate solely because such
<PAGE>
16
person is a director and who is not otherwise employed by the Company shall be
considered to be an Outside Director.
"Person" or "person" means an individual, corporation, partnership, firm,
------ ------
association, joint venture, trust, unincorporated organization, government,
governmental body, agency, political subdivision or other entity.
"Rule 144" means (i) Rule 144 under the Securities Act as such Rule is in
--------
effect from time to time and (ii) any successor rule, regulation or law, as in
effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares (A) complying
--------------------
with Rule 144 as such Rule is in effect on the date of such transfer (but not
including a sale other than pursuant to "brokers' transactions" as defined in
clauses (1) and (2) of paragraph (g) of such Rule as in effect on the date
hereof) and (B) occurring at a time when Conversion Shares are registered
pursuant to Section 12 of the Securities Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules, regulations and interpretations thereunder.
"Subsidiary", with respect to any Person, means any corporation,
----------
association or other entity of which more than 50% of the total voting power of
shares of stock or other equity interests (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is, at the time as of which any determination is being made, owned or
controlled, directly or indirectly, by such Person or one or more of its
Subsidiaries, or both. The term "Subsidiary" or "Subsidiaries" when
<PAGE>
17
used herein without reference to any particular Person, means a Subsidiary or
Subsidiaries of the Company.
Section 3.4 Publicity. The parties agree that no publicity release or
---------
announcement concerning this Agreement shall be made without advance approval
thereof by Newco; provided, however, nothing in this Section 3.4 shall prohibit
any party from making a disclosure which its counsel deems necessary or
advisable in order to satisfy such party's disclosure obligation imposed by law
or rules of the principal trading market in which such party's securities may be
traded.
Section 3.5 Expenses. Except as otherwise provided herein, the Company
--------
shall bear all reasonable expenses incurred in connection with the preparation,
execution and performance of this Agreement, including all transfer taxes and
all reasonable fees and expenses of agents, representatives, counsel and
accountants.
ARTICLE 4
CONDITIONS TO CLOSING
Section 4.1 Conditions to the Obligation of Parties to Close. The
------------------------------------------------
obligations of the Company and each Preferred Stockholder to consummate the
Closing is subject to the satisfaction or waiver by the relevant party of the
conditions contained in the Transaction Agreement (and the consummation of the
transactions therein) and this Agreement.
<PAGE>
18
Section 4.2 Conditions to the Obligation of the Preferred Stockholders
----------------------------------------------------------
to Close. The obligations of each Preferred Stockholder to consummate the
- --------
Closing is subject to the following conditions, which may be waived by each
Preferred Stockholder:
(i) that the representations and warranties of the Company
contained in this Agreement shall be true on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date;
(ii) the Company shall have performed and complied with all
covenants and agreements required by this Agreement to be performed or complied
with by it on or prior to the Closing Date;
(iii) the Company shall have delivered to such Preferred
Stockholder a certificate, dated the date of the Closing and signed by the
Company, to the foregoing effect;
(iv) the Company shall have entered into Registration
Rights Amendments with each of the Preferred Stockholders;
(v) the Company shall have entered into the Amended and
Restated Stockholders' Agreement;
(vi) the Company shall have entered into the Amended and
Restated Investors' Agreement;
(vii) the Company shall have executed a Warrant Amendment
between it and each of the Preferred Stockholders;
<PAGE>
19
(viii) the Articles of Amendment shall have been filed with
Secretary of State of the State of Georgia; and
(ix) the opinion of Alston & Bird, counsel to the Company, in
a form acceptable to the Preferred Stockholders, shall have been delivered to
the Preferred Stockholders.
Section 4.3 Conditions Precedent to the Obligation of the Company to
--------------------------------------------------------
Close. The obligation of the Company to consummate the Closing is subject to the
- -----
fulfillment of the following conditions, which may be waived by the Company, (i)
that the representations and warranties of each Preferred Stockholder contained
in this Agreement shall be true on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date; and (ii) each
Preferred Stockholder shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the Closing Date.
Section 4.4 Survival of Representations and Warranties After Closing.
--------------------------------------------------------
Each party has the right to rely fully upon the representations, warranties,
covenants and agreements of any other party contained in this Agreement or in
any instrument or agreement delivered pursuant to this Agreement. All such
representations, warranties, covenants and agreements shall survive the
execution and delivery of this Agreement and the Closing hereunder.
<PAGE>
20
ARTICLE 5
MISCELLANEOUS
Section 5.1 Further Assurances. Each of the parties agree, at any time
------------------
and from time to time after the Closing to execute such further agreements or
instruments and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof.
Section 5.2 Termination of Agreement. This Agreement may be terminated
------------------------
prior to the Closing as follows:
(a) by any party, if any one or more of the conditions to the
Transaction Agreement or this Agreement, that is not within the control of that
party, has not been fulfilled as of the scheduled Closing Date;
(b) at the election of any Preferred Stockholder, if the
Company has breached any material representation, warranty, covenant or
agreement contained in this Agreement, which breach cannot be or is not cured by
the Closing Date;
(c) at the election of the Company, if any Preferred
Stockholder has breached any material representation, warranty, covenant or
agreement contained in this Agreement, which breach cannot be or is not cured by
the Closing Date; or
(d) at any time on or prior to the Closing Date, by mutual
written consent of the Preferred Stockholders and the Company.
<PAGE>
21
If this Agreement so terminates, it shall become null and void and
have no further force or effect.
Section 5.3 Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally, or sent by facsimile transmission or, if mailed, five days after the
date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Harry's Farmers Market, Inc.
1180 Upper Hembree Road
Roswell, GA 30076
Attention: Harry A. Blazer
Telephone:(770) 751-3357
Facsimile: (770) 664-4920
with a copy to:
Alston & Bird
One Atlantic Center
1201 W. Peachtree Road, N.W.
Atlanta, GA 30309-3424
Attention: John L. Latham
Telephone: (404) 881-7915
Facsimile: (404) 881-7913
(ii) if to the Preferred Stockholders, to the
address set forth in Schedule I hereto.
Any party may by notice given in accordance with this section to the other
parties designate another address or person for receipt of notices hereunder.
<PAGE>
22
Section 5.4 Entire Agreement. This Agreement other agreements entered
----------------
into between or among any or all of the Preferred Stockholders and the Company,
and the Articles of Incorporation contain the entire agreement among the parties
with respect to the subject matter herein and supersede all prior agreements,
written or oral, with respect thereto.
Section 5.5 Waivers and Amendments; Non-Contractual Remedies;
------------------------------------------------
Preservation of Remedies. This Agreement may be amended, superseded, canceled,
- ------------------------
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the Company and the Preferred Stockholders or relevant
Preferred Stockholder or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
The rights and remedies of any party based upon, arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty, covenant
or agreement contained in this Agreement or any agreement or instrument pursuant
to this Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
<PAGE>
23
warranty, covenant or agreement contained in this Agreement or any agreement or
instrument delivered pursuant to this Agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or breach.
Section 5.6 Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
Section 5.7 Binding Effect; Assignment. This Agreement shall be
--------------------------
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable except by
operation of law, except that the Company may assign its rights hereunder to any
successor to all or substantially all of its business or assets.
Section 5.8 Usage. All pronouns and any variations thereof refer to
-----
the masculine, feminine or neuter, singular or plural, as the context may
require. All terms defined in this Agreement in their singular or plural forms
have correlative meanings when used herein in their plural or singular forms,
respectively. Unless otherwise expressly provided, the words "include,"
"includes" and "including" do not limit the preceding words or terms and shall
be deemed to be followed by the words "without limitation."
Section 5.9 Counterparts. This Agreement may be executed by the
------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
<PAGE>
24
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
Section 5.10 Headings. The headings in this Agreement are for
--------
reference only, and shall not affect the interpretation of this Agreement.
Section 5.11 Severability of Provisions.
--------------------------
(a) If any provision or any portion of any provision of this
Agreement shall be held invalid or unenforceable, the remaining portion of such
provision and the remaining provisions of this Agreement shall not be affected
thereby.
(b) If the application of any provision or any portion of any
provision of this Agreement to any person or circumstance shall be held invalid
or unenforceable, the application of such provision or portion of such provision
to persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
HARRY'S FARMERS MARKET, INC.
By /s/ Harry A. Blazer
---------------------------------
Name: Harry A. Blazer
Title: President
ROBERT FLEMING NOMINEES LTD.
By /s/ Jonathan Simon
---------------------------------
Name: Jonathan Simon
Title: Authorized Signatory
AXA EQUITY AND LAW LIFE
ASSURANCE SOCIETY
By /s/ A. Arnold
---------------------------------
Name: A. Arnold
Title: Associate Director
ORBIS PENSION TRUSTEES LTD.
By /s/ David J. Lewis
---------------------------------
Name: David J. Lewis
Title: Investing Manager
ASHFORD CAPITAL PARTNERS, L.P.
By: Ashcap Corp., General Partner
By /s/ Theodore H. Ashford
---------------------------------
Name: Theodore H. Ashford
Title: President, Ashcap Corp.
/s/ Theodore H. Ashford
---------------------------------
Theodore H. Ashford
<PAGE>
PREFERRED STOCK EXCHANGE AGREEMENT
----------------------------------
SCHEDULE 1
----------
<TABLE>
<CAPTION>
Class A Class A Common
Common Shares Shares Subject to
Number of Subject to Performance
Preferred Shares Warrants Warrants
---------------- ------------- ------------------
<S> <C> <C> <C>
Robert Fleming Nominees Ltd. 888,888 30,000 44,444
c/o Fleming Capital Management
1245 Avenue of the Americas
16th Floor
New York, New York 10019
Fax: (212) 713-8596
Attn: Eytan Shapiro
Christopher Jones
AXA Equity & Law Life 166,667 56,250 8,333
Assurance Society
20 Lincoln's Inn Fields
London WC2A 3ES
England
Fax: 011-44-71-242-5030
Attn: Tony Arnold
Orbis Pension Trustees Ltd. 111,111 37,500 5,556
c/o Chatsworth Management
Services, Ltd.
One Connaught Place
London W2 2DY
England
Fax: 011-44-71-298-0002
Attn: David Lewis
Ashford Capital Partners, L.P. 44,444 15,000 2,222
3801 Kennett Pike
Suite B-107
Wilmington, Delaware 19807
Fax: (302) 655-8690
Attn: Theodore Ashford
Theodore M. Ashford 11,111 3,750 556
c/o Ashford Capital Partners, L.P.
3801 Kennett Pike
Suite B-107
Wilmington, Delaware 19807
Fax: (302) 655-8690
</TABLE>
<PAGE>
PREFERRED STOCK EXCHANGE AGREEMENT
----------------------------------
EXHIBIT A
---------
[Form of Registration Rights Amendment]
<PAGE>
EXHIBIT A-1
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
WITH ROBERT FLEMING NOMINEES, LTD.
<PAGE>
AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") is
dated as of January , 1997, by and among Harry's Farmers Market, Inc., a
---
Georgia Corporation (the "Company"), and Robert Fleming Ltd., an English company
-------
(the "Fleming Investors").
W I T N E S S E T H:
-------------------
WHEREAS, the Company and the Fleming Investors entered into that
Registration Rights Agreement dated December 30, 1994 (the "Registration Rights
-------------------
Agreement"); and
- ---------
WHEREAS, pursuant to the terms of that Preferred Stock Exchange
Agreement of even date herewith between, among others, the Company and the
Fleming Investors (the "Exchange Amendment"), the Fleming Investors have agreed
------------------
that upon the consummation of the transactions set forth in that Transaction
Agreement of even date herewith between the Company and HFMI Acquisition
Corporation, a Delaware corporation ("Newco"), to exchange each share of Series
A Preferred Stock held by the Fleming Investors for one share of Series AA
Preferred Stock, stated value $9 per share, of the Company (the "AA Preferred
------------
Stock"), and to amend the terms of the Registration Rights Agreement as provided
- -----
herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Capitalized terms used herein and not otherwise defined
shall have the meaning given such terms in the Registration Rights Agreement;
provided, however, the definitions of "Preferred Stock" and "Purchase Agreement"
shall be deleted in their entirety and replaced with the following:
"'Preferred Stock' means the Company's Series AA Preferred
---------------
Stock, stated value $9 per share, which Preferred Stock is convertible into
Shares of Class A Common Stock.
"Purchase Agreement" means, as applicable, for purposes of
------------------
Preferred Stock, the Preferred Stock Exchange Agreement dated January 31, 1997
between the Company and each of the persons listed on Schedule 1 hereto (the
"Investors") and for purpose of the Warrants, collectively the separate Share
---------
and Warrant Purchase Agreements, dated as of December 30, 1994 between the
Company and each of the Investors."
2. The reference to "sixty (60)" in the first sentence of
Section 1.2(b) of the Registration Rights Agreement is hereby deleted and
replaced with "ninety (90)".
1
<PAGE>
3. The Fleming Investors agree that for purposes of Article I
only, as to any particular Registrable Securities, such securities shall cease
to be Registrable Securities when such securities are permitted to be sold
pursuant to Rule 144(k) (or any successor provision to such Rule) under the
Securities Act.
4. The definition of Registrable Securities shall be deemed to
include any shares of Class A Common Stock issued to the Fleming Investors
pursuant to that put right set forth in Section 3 of that Amended and Restated
Stockholders' Agreement of even date herewith.
5. Except as set forth herein, the terms of the Registration
Rights Agreement shall remain in full force and effect.
* * * *
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
HARRY'S FARMERS MARKET, INC.
By:
-----------------------------
Name:
Title:
ROBERT FLEMING NOMINEES LTD.
By:
-----------------------------
Name:
Title:
3
<PAGE>
EXHIBIT A-2
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
WITH THE INVESTORS PARTY THERETO
<PAGE>
AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") is
dated as of January , 1997, by and among Harry's Farmers Market, Inc., a
---
Georgia corporation (the "Company"), and each owner of securities of the Company
-------
listed on the signature page hereto (the "Investors").
W I T N E S S E T H:
WHEREAS, the Company and each of the Investors entered into that
Registration Rights Agreement dated December 30, 1994 (the "Registration Rights
--------------------
Agreement"); and
- ---------
WHEREAS, pursuant to the terms of that Preferred Stock Exchange
Agreement of even date herewith between the Company, the Investors and Robert
Fleming Nominees Ltd. (the "Exchange Amendment"), the Investors have agreed that
-------- ---------
upon the consummation of the transactions set forth in that Transaction
Agreement of even date herewith between the Company and HFMI Acquisition
Corporation, a Delaware corporation ("Newco"), to exchange each share of Series
A Preferred Stock held by each Investor for one share of Series AA Preferred
Stock, stated value $9 per share, of the Company (the "AA Preferred Stock"), and
------------------
to amend the terms of the Registration Rights Agreement as provided herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Capitalized terms used herein and not otherwise defined
shall have the meaning given such terms in the Registration Rights Agreement;
provided, however, the definitions of "Preferred Stock" and "Purchase Agreement"
shall be deleted in their entirety and replaced with the following:
"'Preferred Stock' means the Company's Series AA Preferred
---------------
Stock, stated value $9 per share, which Preferred Stock is convertible into
Shares of Class A Common Stock.
"Purchase Agreement" means, as applicable, for purposes of the
------------------
Preferred Stock, the Preferred Stock Exchange Agreement dated January 31, 1997
between the Company and each of the persons listed on Schedule 1 thereto (the
"Investors") and for purpose of the Warrants, collectively the separate Share
---------
and Warrant Purchase Agreements, dated as of December 30, 1994 between the
Company and each of the Investors."
2. Except as set forth herein, the terms of the Registration
Rights Agreement shall remain in full force and effect.
* * * *
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
HARRY'S FARMERS MARKET, INC.
By:
----------------------------------
Name:
Title:
AXA EQUITY & LAW LIFE ASSURANCE
SOCIETY
By:
----------------------------------
Anthony R. Arnold
Associate Director
AXA Equity & Law Investment
Managers, Ltd.
ORBIS PENSION TRUSTEES LTD.
By:
----------------------------------
David J. Lewis
Investment Manager
ASHFORD CAPITAL PARTNERS, L.P.
By: Ashcap Corp., General Partner
By:
-----------------------------
Theodore H. Ashford
President
-------------------------------------
Theodore H.Ashford
2
<PAGE>
PREFERRED STOCK EXCHANGE AGREEMENT
----------------------------------
SCHEDULE 3.1(i)
---------------
Since January 31, 1996, the Company has granted options to acquire an aggregate
of 501,900 shares of Class A Common Stock.
<PAGE>
COMPANY DISCLOSURE SCHEDULE
---------------------------
SECTION 3.1(a)
--------------
Company Subsidiary Ownership by the Company
- ------------------ ------------------------
Marthasville Trading Company, Inc. 100%
Karalea, Inc. 100%
Roman Properties, Inc. 100%
SECTION 3.2(a)
--------------
The Company has granted preemptive rights of first refusal pursuant to the
Stockholders' Agreement with Harry A. Blazer and Robert Fleming Nominees Ltd.,
dated as of December 30, 1994, and the Investors' Agreement with Harry A.
Blazer, AXA Equity & Law Life Assurance Society, Orbis Pension Trustees Ltd.,
Ashford Capital Partners, L.P., and Theodore H. Ashford, dated as of
December 30, 1994.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Person Common Exercis- Common A Exercise
A shares able shares price in $
subject to subject to per share
Options Warrants
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Fleming Nominees Ltd. -- -- 30,000 10.00
44,444 0.01
- -------------------------------------------------------------------------------------------------
AXA Equity & Law Life Assurance -- -- 56,350 10.00
Society 8,333 0.01
- -------------------------------------------------------------------------------------------------
Orbis Pension Trustees Ltd. -- -- 37,500 10.00
5,556 0.01
- -------------------------------------------------------------------------------------------------
Ashford Capital Partners, L.P. -- -- 15,000 10.00
2,222 0.01
- -------------------------------------------------------------------------------------------------
NationsBank, N.A. (South) -- -- 144,000 3.00
72,000 6.00
- -------------------------------------------------------------------------------------------------
CreditAnstalt-Bankverein -- -- 96,000 3.00
48,000 6.00
- -------------------------------------------------------------------------------------------------
Theodore M. Ashford 3,750 10.00
556 0.01
- -------------------------------------------------------------------------------------------------
All employees as a group 294,200 89,312 -- 6.00
- -------------------------------------------------------------------------------------------------
Terry L. Ransom 30,000 20,000 -- 3.00
- -------------------------------------------------------------------------------------------------
Robert C. Glustrom 80,000 70,000 -- 3.00
- -------------------------------------------------------------------------------------------------
John D. Branch 30,000 20,000 -- 3.00
- -------------------------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE>
Since January 31, 1996, the Company has adopted the 1996 Director Stock Option
Plan and the 1996 Employee Stock Purchase Plan and has reserved an aggregate of
500,000 shares of Class A Common Stock for issuance under such Plans.
Since January 31, 1996, the Company has granted options to acquire 501,900
shares of Class A Common Stock.
On January 30, 1997, the Company issued to Mr. William J. Horvath 41,380 shares
of Class A Common Stock in payment for services rendered to the Company pursuant
to a consulting agreement of January 7, 1997.
On January 31, 1997, the Company granted to Robert C. Glustrom an option to
acquire 50,000 shares of Class A Common Stock at $3.00 per share.
Under certain conditions, the Class B Common Stock of the Company is convertible
into Class A Common Stock.
The Series A Preferred Stock of the Company is convertible into Class A Common
Stock.
The Company (i) may incur obligations to issue, sell, repurchase, redeem,
acquire or otherwise cash-out Company Securities, and (ii) is a party to
agreements with respect to voting or registration of its capital stock, pursuant
to the following agreements and instruments:
. The Company is a party to a Share and Warrant Purchase Agreement with each of
Robert Fleming Nominees Ltd., AXA Equity & Law Life Assurance Society, Orbis
Pension Trustees Ltd., Ashford Capital Partners, L.P., and Theodore H.
Ashford, each dated as of December 30, 1994.
. Warrant Certificate delivered by the Company to each of Robert Fleming
Nominees Ltd., AXA Equity & Law Life Assurance Society, Orbis Pension
Trustees Ltd., Ashford Capital Partners, L.P., and Theodore H. Ashford, each
dated as of December 30, 1994.
. Performance Warrant Certificate delivered by the Company to each of Robert
Fleming Nominees Ltd., AXA Equity & Law Life Assurance Society, Orbis Pension
Trustees Ltd., Ashford Capital Partners, L.P., and Theodore H. Ashford, each
dated as of December 30, 1994.
. The Company is a party to a Stockholders' Agreement with Harry A. Blazer and
Robert Fleming Nominees Ltd., dated as of December 30, 1994.
. The Company is party to a Investors' Agreement with Harry A. Blazer, AXA
Equity & Law Life Assurance Society, Orbis Pension Trustees Ltd., Ashford
Capital Partners, L.P., and Theodore H. Ashford, dated as of December 30,
1994.
-2-
<PAGE>
. The Company is a party to a Registration Rights Agreement with Robert Fleming
Nominees Ltd., dated as of December 30, 1994.
. The Company is a party to a Registration Rights Agreement with AXA Equity &
Law Life Assurance Society, Orbis Pension Trustees Ltd., Ashford Capital
Partners, L.P., and Theodore H. Ashford, dated as of December 30, 1994.
. The Company is a party to an Amended and Restated Warrant Agreement with
Nationsbank, N.A. (South) and CreditAnstalt-Bankverein, dated as of May 8,
1996.
. Amended and Restated Warrant Certificate delivered by the Company to each of
Nationsbank N.A. (South) and CreditAnstalt-Bankverein, dated as of December
30, 1994.
. Warrant Certificate delivered by the Company to each of Nationsbank N.A.
(South) and CreditAnstalt-Bankverein, dated as of May 8, 1996.
. The Company's 1996 Employee Stock Purchase Plan and the enrollment/
participation agreements entered into in connection therewith prior to and
subsequent to January 31, 1996.
. The Company's Management Incentive Plan and the options agreements entered
into in connection therewith prior to and subsequent to January 31, 1996.
. The Company's Outside Directors Incentive Plan and the option agreements
entered into in connection therewith.
SECTION 3.2(b)
--------------
All of the outstanding capital stock of Roman Properties, Inc. has been pledged
to Nationsbank N.A. (South) and CreditAnstalt-Bankverein.
SECTION 3.6
-----------
The execution, delivery and performance of the Agreement and the consummation of
the transactions contemplated by the Company will constitute a breach of the
Amended and Restated Credit Agreement among the Company, Nationsbank N.A.
(South) and CreditAnstalt-Bankverein and the agreements entered into in
connection therewith.
-3-
<PAGE>
SECTION 3.8
-----------
In October 1996, the Company entered into an Exclusive Rental Listing Agreement
with Lincoln Property Company to lease or sell a portion of the Northfield Way
bakery facility.
In December 1996, the Company entered into a Business License with D&B No. 3 for
rental of the Southlake Warehouse facility.
On December 19, 1996, the Company entered into a Lease Agreement and Option to
Purchase with Colonial Pacific Leasing for the lease of pasta machines.
In December, 1996, the Company entered into an oral agreement with Pattillo
Construction Corporation for renovation of the restroom facilities at the
Alpharetta location. Construction cost is estimated at $46,117.
On January 7, 1997, the Company entered into an agreement with William J.
Horvath to provide consulting services to the Company in exchange for
compensation equal to $150,000 payable in shares of the Company's Class A Common
Stock.
Since January 31, 1996, the Company has agreed to grant Mr. Gulstrom an option
to purchase 50,000 shares of the Company's Class A Common Stock at an exercise
price of $3.00 per share.
Since January 31, 1996, the Company has adopted a short term disability plan,
the 1996 Employee Stock Purchase Plan, the 1996 Outside Director Incentive Plan
and a plan to subsidize employee health club membership with Sportslife.
Since January 31, 1996, the annual base salary of Mr. Blazer has been increased
to $200,000.
On March 13, 1996, the Company sold a portion of its property owned in Gwinnett
County, Georgia to Hi Fi Buys, Inc. at a purchase price of $660,000.00.
On June 17, 1996, the Company sold its Brentwood, Tennessee property to
Springvest Associates, Limited Partnership at a purchase price of $4,600,000.00.
On December 31, 1996, the Company sold to its wholly-owned subsidiary, Roman
Properties, Inc. ("RPI"), a 19.44 acre plot of land and the 151,255 square feet
warehouse situated thereon at a nominal purchase price. Roman Properties, Inc.
refinanced the property through a mortgage from Nationwide Life Insurance
Company and West Coast Life Insurance Company (collectively "Nationwide") for
$2,700,000.00 and leases it back to the Company under a lease agreement dated
December 27, 1996. In connection with this transaction, among other things, the
Company has delivered an indemnity and guaranty agreement to and for the benefit
of Nationwide. In addition, RPI has delivered various indemnity agreements to
and for the benefit of Nationwide, has assigned all leases
-4-
<PAGE>
and rents to Nationwide, and has delivered a real estate note to Nationwide in
the principal amount of $2,700,000.
SECTION 3.9
-----------
Harry's Farmers Market, Inc., a Georgia corporation v. Dieter Esch and
- ----------------------------------------------------------------------
Hans-Peter Wodarz, d/b/a Pomp Duck & Circumstance; Civil Action File No.
- -------------------------------------------------
E-49925; Superior Court of Fulton County, State of Georgia
Danny Adcock Insurance Agency, Inc. v. Harry's Farmers Market, Inc.; Civil
- -------------------------------------------------------------------
Action File No. 96-VS-0120867A; State Court of Fulton County, State of Georgia
Naomi Nicks: Ms. Nicks has alleged that she was injured when she allegedly
- -----------
slipped and fell on June 15, 1996, at the store located in Cobb County, Georgia.
The Company believes liability is questionable in this matter. This matter has
been turned over to the Company's insurer for appropriate handling. No lawsuit
has been filed to date.
SECTION 3.11(b)
---------------
The Company has not yet offered eligible employees an opportunity to enroll in
the Company's 401(k) Plan. Enrollment has been delayed until approximately
February 1, 1997.
The Company has granted preemptive rights of first refusal to the Stockholders'
Agreement with Harry A. Blazer and Robert Fleming Nominees Ltd., dated as of
December 30, 1994, and the Investors' Agreement with Harry A. Blazer, AXA Equity
& Law Life Assurance Society, Orbis Pension Trustees Ltd., Ashford Capital
Partners, L.P., and Theodore H. Ashford, dated as of December 30, 1994.
Participants in the Company's 401(k) Plan may invest their accounts in shares
of the Company's Class A Common Stock. The Company believes that a prospectus
for the Company's shares of Class A Common Stock may not have been provided to
plan participants as they became eligible to participate in the plan or to
invest their accounts in the Company's stock.
SECTION 3.11(d)
---------------
Each of the Company's 1996 Employee Stock Purchase Plans, 1993 Management
Incentive Plan and Outside Directors Incentive Plan contain change of control
provisions.
-5-
<PAGE>
SECTION 3.12(A)
---------------
The following environmental reports identify matters some of which may amount to
a violation or infraction of the Environmental Laws:
. Phase I Environmental Site Assessment, Satellite Boulevard and Liddel Road,
Gwinnett County, Georgia, by Dunn Geoscience Corporation, dated April 4, 1991
. Phase I Environmental Assessment for Cobb Crossing Shopping Center, 2315
Wylie Drive, by Urban Testing & Environmental Services, Inc., dated April 15,
1993.
. Phase I Environmental Assessment Update for Northfield Business Center
Building 1075, by Urban Testing and Environmental Services, Inc., dated
December 9, 1996.
Also, in the ordinary course of business minimal quantities of cleaning
solvents, fluids and other cleaning chemicals and materials are stored on the
Company's premises. The Company also stores small quantities of diesel fuel to
power emergency generators. All such fuel is stored in above ground tanks. The
Company believes that all of these substances are used in material compliance
with all rules and regulations applicable to such substances.
SECTION 3.16(A)
---------------
The Company has granted a security interest in the following marks to
Nationsbank, N.A. (South), as agent, pursuant to a TradeMark Collateral
Assignment and Security Agreement, dated as of December 30, 1996:
REGISTRATION/
APPLICATION NUMBER
------------------
Harry's in a Hurry 1,850,126
Harry's Farmers Market (stylized) 1,854,765
Grainger County Home Grown Tomatoes (stylized) 74/444,331
Harry's in a Hurry 1,850,126
Harry's 74/444,333
Marthasville Creamery (and design) 74/476,219 and 1,871,456
Bear Dance (and design) 74/476,219
Harry's Old Fashioned Layer Cakes (and design) 74/501,924
The following Liens affect the real property owned by the Company and the
Company Subsidiaries:
-6-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Location Business(es) Status Mortgagee Legal
- -------- ------------ ------ --------- Description
-----------
- ------------------------------------------------------------------------------------------------------------------
1180 Upper Hembree Alpharetta Owned Nationsbank, Appendix A
Road Headquarters N.A. (South), as
Roswell, Georgia 30076 agent
Fulton County Alpharetta Megastore
Alpharetta Prepared
Foods
Facility
- ------------------------------------------------------------------------------------------------------------------
1075 Northfield Way Roswell Bakery Owned Nationwide Life Appendix B
Roswell, Georgia 30076 Facility Insurance
Fulton County Company
Roswell Distribution
Center
Roswell Design
Office
- ------------------------------------------------------------------------------------------------------------------
2025 Satellite Pointe Duluth Megastore Owned Nationsbank, Appendix C
Duluth, Georgia 30136 N.A. (South), as
Gwinnett County agent
- ------------------------------------------------------------------------------------------------------------------
1875 Peachtree Street Harry's In A Hurry I Leased N/A N/A
Atlanta, Georgia 30309
Fulton County
- ------------------------------------------------------------------------------------------------------------------
3804 Roswell Road, Harry's In A Hurry II Leased N/A N/A
N.E.
Atlanta, Georgia 30348
Fulton County
- ------------------------------------------------------------------------------------------------------------------
70 Powers Ferry Road Marietta Megastore Owned Nationsbank, Appendix D
Marietta, Georgia 30067 N.A. (South), as
Cobb County agent
- ------------------------------------------------------------------------------------------------------------------
325 Farm Path Residential Owned First Union Appendix E
Roswell, Georgia 30076 Mortgage Corp
Fulton County
- ------------------------------------------------------------------------------------------------------------------
1780 Nolan Court Southlake Warehouse Leased N/A N/A
Morrow, Georgia 30287
Clayton County
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
On March 13, 1996, the Company sold a portion of its property owned in Gwinnett
County, Georgia to Hi Fi Buys, Inc. at a purchase price of $660,000.00.
-7-
<PAGE>
On June 17, 1996, the Company sold its Brentwood, Tennessee property to
Springvest Associates, Limited Partnership at a purchase price of $4,600,000.00.
On December 31, 1996, the Company sold to its wholly-owned subsidiary, Roman
Properties, Inc. ("RPI"), a 19.44 acre plot of land and the 151,255 square feet
warehouse situated thereon at a nominal purchase price. Roman Properties, Inc.
refinanced the property through a mortgage from Nationwide Life Insurance
Company and West Coast Life Insurance Company (collectively "Nationwide") for
$2,700,000.00 and leases it back to the Company under a lease agreement dated
December 27, 1996. In connection with this transaction, among other things, the
Company has delivered an indemnity and guaranty agreement to and for the benefit
of Nationwide. In addition, RPI has assigned all leases and rents to
Nationwide, and has delivered a real estate note to Nationwide in the principal
amount of $2,700,000.
Subject to matters of record which would be revealed by a current title search,
matters which would be revealed by a current survey of the properties and zoning
laws and ordinances affecting the real property, title exceptions, easements,
liens and other imperfections and matters relating to real property owned by the
Company or a Company Subsidiary are identified in the following title insurance
policies, a copy of each of which policies has been delivered to Newco:
. With respect to the property located in Cobb County, Georgia, Chicago Title
Insurance Company Policy No. 11-0673-61-198, as endorsed from time to time.
. With respect to the property located in Fulton County, Georgia (other than
the property located at 1075 Northfield Way in Roswell and the property
located at 325 Farm Path in Roswell), and Gwinnett County, Georgia, Ticor
Title Insurance Company Policy No. 11-4178-92-000032, as endorsed from time
to time.
. With respect to the property located at 1075 Northfield Way in Roswell,
Fulton County, Georgia, First American Title Insurance Company Policy No.
01191/9010, as amended by endorsements issued from time to time.
-8-
<PAGE>
The following Liens affect the personal property or fixtures owned or used by
the Company and the Company Subsidiaries:
Debtor: THE COMPANY
Jurisdiction: FULTON COUNTY
<TABLE>
<CAPTION>
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
<S> <C> <C> <C>
89-13610 NCC Leasing Incorporated 6/22/89 Original
91-06454 NCR Corporation Credit Service PCD4 3/25/91 Original
91-18845 SouthTrust Bank of Alabama 9/10/91 Original
91-15659 NationsBank (C&S) 8/01/91 Original
93-20698 SouthTrust Bank of Alabama 10/29/93 Partial Release
93-22616 NationsBank of Georgia 11/23/93 Original
94-11366 Sun Financial Group, Inc. 6/06/94 Original
93-06861 SouthTrust Bank of Alabama 4/12/93 Original
93-07949 SouthTrust Bank of Alabama 4/23/93 Amendment
93-09186 NationsBank of Georgia 5/10/93 Amendment
93-08809 NationsBank of Georgia 5/12/93 Original
93-16423 SouthTrust Bank of Alabama 8/13/93 Original
93-16422 SouthTrust Bank of Alabama 8/13/93 Original
93-20090 Sun Financial Group, Inc. 10/18/93 Original
93-20104 CIT Group Equipment Finance, Inc. 10/18/93 Assignment
93-22890 NationsBank of Georgia 11/23/93 Assignment
93-22894 NationsBank of Georgia 11/23/93 Amendment
93-22894 NationsBank of Georgia 11/23/93 Amendment
93-22887 NationsBank of Georgia 11/23/93 Amendment
93-22889 NationsBank of Georgia 11/23/93 Amendment
93-23799 Sun Financial Group, Inc. 12/06/93 Original
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
94-04338 General Electric Capital Corp. 3/07/94 Assignment
94-04446 Sun Financial Group, Inc. 3/09/94 Original
94-04913 Toyota Motor Credit Corp. 3/15/94 Amendment
94-07898 General Electric Capital Corp. 4/11/94 Assignment
94-07866 Sun Financial Group, Inc. 4/20/94 Original
94-07867 General Electric Capital Corp. 4/29/94 Assignment
94-14350 Sun Financial Group, Inc. 7/13/94 Original
94-15328 Sun Financial Group, Inc. 7/25/94 Original
94-15195 MetLife Capital Corp. 7/26/94 Original
94-23742 Sun Financial Group, Inc. 11/14/94 Original
94-26555 Sun Financial Group, Inc. 12/19/94 Original
94-27609 NationsBank of Georgia 12/28/94 Original
90-24623 SunTrust Bank 10/03/90 LD
90-24741 SunTrust Bank 10/23/90 Original
91-15524 NationsBank (C&S) 8/01/91 LD
91-22301 Toyota Motor Credit Corp. 10/24/91 Assignment
91-22188 Atlanta Fork Lifts, Inc. 10/24/91 Original
91-24498 NationsBank (C&S) 11/22/91 Partial Release
91-24300 CIT Group Equipment Finance, Inc. 11/22/91 Assignment
91-24118 Sun Financial Group, Inc. 11/22/91 Original
91-24435 SouthTrust Bank of Alabama 11/27/91 Original
93-01665 Jackson Electric Membership Corp. 1/25/93 Original
93-06774 NationsBank of Georgia 4/09/93 Original
93-06775 NationsBank of Georgia 4/09/93 Original
93-08809 NationsBank of Georgia 5/12/93 Original
93-16771 SouthTrust Bank of Alabama 8/17/93 Amendment
93-22889 NationsBank of Georgia 11/23/93 Amendment
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
93-22887 NationsBank of Georgia 11/23/93 Amendment
93-22890 NationsBank of Georgia 11/23/93 Assignment
93-09187 NationsBank of Georgia 5/10/93 Amendment
93-20699 SouthTrust Bank of Alabama 10/29/93 Partial Release
95-6654 Tetra Laval Credit, Inc. 4/19/95 Original
95-9530 Sun Financial Group, Inc. 5/26/95 Original
95-9778 Copelco Capital, Inc. 5/30/95 Original
95-14334 SouthTrust Bank of Alabama 7/28/95 Continuation
95-24062 Zeno 12/18/95 Original
96-7526 NationsBank of Georgia 4/19/96 Continuation
96-15128 Tetra Laval Credit, Inc. 8/5/96 Original
96-22381 Sun Microsystems Finance 11/13/96 Original
</TABLE>
-11-
<PAGE>
Debtor: THE COMPANY
Jurisdiction: CLAYTON COUNTY
<TABLE>
<CAPTION>
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
<S> <C> <C> <C>
95-2436 Sun Financial Group, Inc. 5/25/95 Original
95-2859 NationsBank of Georgia 6/15/95 Release of
93-4112
95-2860 NationsBank of Georgia 6/15/95 Release of
94-4695
95-2861 NationsBank of Georgia 6/15/95 Release of
93-4340
95-3088 Capital Associates Intl. 6/27/95 Assignment
95-3089 Capital Associates Intl. 6/27/95 Assignment
95-4206 NationsBank of Georgia 8/21/95 Release of
93-4340
95-4207 NationsBank of Georgia 8/21/95 Release of
94-4695
95-4208 NationsBank of Georgia 8/21/95 Release of
93-4112
96-520 NationsBank of Georgia 1/31/96 Termination of
93-4340
96-665 NationsBank of Georgia 2/6/96 Termination of
93-4112
96-666 NationsBank of Georgia 2/6/96 Termination of
94-4695
94-4695 NationsBank of Georgia 12/29/94
94-2695 MetLife Capital Corporation 5/1/94
94-2623 Sun Financial Group, Inc. 7/25/94
94-2614 MetLife Capital Corporation 7/25/94
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
94-1270 General Electric Capital Corporation 4/20/94
94-2295 MetLife Capital Corporation 6/30/94
94-0722 General Electric Capital Corporation 4/11/94 Assignment
94-0722 Sun Financial Group, Inc. 3/9/94
94-1091 Hussman Corporation 4/5/94
93-4340 NationsBank of Georgia 11/22/93
93-4112 NationsBank of Georgia 11/23/93
Debtor: THE COMPANY
Jurisdiction: BARROW COUNTY
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
95-380 AT&T Capital Leasing 2/10/95 Original
Debtor: THE COMPANY
Jurisdiction: DEKALB COUNTY
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
95-4444 Wrenn Handling, Inc. 5/22/95 Assignment
95-6512 Wrenn Handling, Inc. 7/13/95 Assignment
Debtor: THE COMPANY
Jurisdiction: GWINNETT COUNTY
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
66-2095 NationsBank (C&S) 8/7/91 Construction
91-5625 NationsBank (C&S) 8/7/91 Original
91-6393 SouthTrust Bank of Alabama 9/10/91 Original
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
91-6507 Sun Financial Group, Inc. 9/16/91 Original
91-6933 Atlanta Fork Lifts, Inc. 10/2/91 Original
91-7211 Paper Recycling, Inc. 10/14/91 Original
91-6507 CIT Group Equipment 11/25/91 Assignment
91-8485 SouthTrust Bank of Alabama 12/9/91 Original
91-5625 NationsBank (C&S) 2/7/92 Release
93-0577 Jackson Electric Membership Corp. 1/26/93 Original
91-7211 Paper Recycling, Inc. 2/3/93 Termination
93-2448 SouthTrust Bank of Alabama 4/12/93 Original
91-8485 SouthTrust Bank of Alabama 4/23/93 Amendment
91-5625 NationsBank 5/11/93 Amendment
93-4267 NationsBank 6/18/93 Original
93-6000 SouthTrust Bank of Alabama 8/13/93 Original
93-6001 SouthTrust Bank of Alabama 8/13/93 Original
91-6393 SouthTrust Bank of Alabama 8/17/93 Amendment
91-6393 SouthTrust Bank of Alabama 10/29/93 Partial Release
93-2448 SouthTrust Bank of Alabama 10/29/93 Partial Release
91-5625 NationsBank 11/24/93 Assignment
91-5625 NationsBank (C&S) 11/24/93 Amendment
93-4627 NationsBank 11/24/93 Assignment
93-4627 NationsBank 11/24/93 Amendment
93-8680 NationsBank 11/24/93 Original
93-9181 Hussman Corp. 12/13/93 Original
94-0212 Sun Financial Group, Inc. 1/13/94 Original
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
94-1750 Sun Financial Group, Inc. 3/10/94 Original
91-6933 Toyota Motor Credit Corp. 3/15/94 Amendment
94-2578 Hussman Corp. 4/5/94 Original
93-9181 Hussman Corp. 4/19/94 Termination
94-3024 Sun Financial Group, Inc. 4/20/94 Original
94-1750 General Electric Capital Corp. 5/4/94 Assignment
94-5054 MetLife Capital Corp. 6/30/94 Original
94-5428 Sun Financial Group, Inc. 7/13/94 Original
94-5666 MetLife Capital Corp. 7/20/94 Original
94-5781 Sun Financial Group, Inc. 7/25/94 Original
94-2578 Hussman Corp. 10/12/94 Termination
94-8714 Sun Financial Group, Inc. 11/15/94 Original
94-9698 Sun Financial Group, Inc. 12/21/94 Original
94-9909 NationsBank 12/28/94 Original
96-4351 NationsBank of Georgia 4/19/96 Continuation
of 91-5625
96-5870 NationsBank of Georgia 5/24/96 Continuation
of 91-5625
Debtor: THE COMPANY
Jurisdiction: COBB COUNTY
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
94-11908 NationsBank 12/28/94
94-11016 AT&T Capital Leasing, Inc. 12/5/94
94-10497 Sun Financial Group, Inc. 11/15/94
94-6785 MetLife Capital Corporation 7/28/94
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
94-5012 Sun Financial Group, Inc. 6/7/94
94-3442 Sun Financial Group, Inc. 4/20/94
94-2060 Sun Financial Group, Inc. 3/10/94
93-11685 Sun Financial Group, Inc. 12/7/93
93-1642 NationsBank of Georgia 11/23/93
93-8906 Sun Financial Group, Inc. 9/30/93
93-9010 Hussman Corporation 10/4/93
93-8954 Hussman Corporation 10/1/93
93-8140 Hussman Corporation 9/8/93
93-8139 Hussman Corporation 9/8/93
93-6998 Hussman Corporation 8/10/93
Debtor: ROMAN PROPERTIES, INC.
Jurisdiction: FULTON COUNTY
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
96-25936 Nationwide Life Ins. 12/31/96 Original
Debtor: MARTHASVILLE TRADING CO.
Jurisdiction: FULTON COUNTY
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
91-15660 NationsBank (C&S) 8/01/91 Original
93-22614 NationsBank of Georgia 11/23/93 Original
93-22892 NationsBank of Georgia 11/23/93 Amendment
93-22888 NationsBank of Georgia 11/23/93 Assignment
94-27610 NationsBank of Georgia 12/28/94 Original
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
96-7527 NationsBank of Georgia 4/19/96 Continuation
of 91-762024
Debtor: MARTHASVILLE TRADING CO.
Jurisdiction: GWINNETT COUNTY
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
96-4350 NationsBank 4/19/96 Continuation
of 91-5626
96-5869 NationsBank 5/24/96 Continuation
of 91-5626
Debtor: KARALEA, INC.
Jurisdiction: FULTON COUNTY
UCC Secured Party Date Type
- --- ------------- ---- ----
File No.
- -------
91-5626 NationsBank (C&S) 8/7/91 Original
91-5626 NationsBank (C&S) 11/24/93 Amendment
91-5626 NationsBank 11/24/93 Assignment
93-8679 NationsBank 6/17/94 Original
94-9908 NationsBank 12/28/94 Original
93-22615 NationsBank of Georgia 11/23/93 Original
94-27608 NationsBank of Georgia 12/28/94 Original
</TABLE>
-17-
<PAGE>
EXHIBIT 4.2
AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") is dated
as of January 31, 1997, by and among Harry's Farmers Market, Inc., a Georgia
corporation (the "Company"), and Robert Fleming Nominees Ltd., an English
-------
company (the "Fleming Investors").
W I T N E S S E T H:
-------------------
WHEREAS, the Company and the Fleming Investors entered into that
Registration Rights Agreement dated December 30, 1994 (the "Registration Rights
-------------------
Agreement"); and
- ---------
WHEREAS, pursuant to the terms of that Preferred Stock Exchange Agreement
of even date herewith between, among others, the Company and the Fleming
Investors (the "Exchange Amendment"), the Fleming Investors have agreed that
------------------
upon the consummation of the transactions set forth in that Transaction
Agreement of even date herewith between the Company and HFMI Acquisition
Corporation, a Delaware corporation ("Newco"), to exchange each share of Series
A Preferred Stock held by the Fleming Investors for one share of Series AA
Preferred Stock, stated value $9 per share, of the Company (the "AA Preferred
------------
Stock"), and to amend the terms of the Registration Rights Agreement as provided
- -----
herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have
the meaning given such terms in the Registration Rights Agreement; provided,
however, the definitions of "Preferred Stock" and "Purchase Agreement" shall be
deleted in their entirety and replaced with the following:
"Preferred Stock" means the Company's Series AA Preferred Stock,
---------------
stated value $9 per share, which Preferred Stock is convertible into Shares of
Class A Common Stock.
"Purchase Agreement" means, as applicable, for purposes of the
------------------
Preferred Stock, the Preferred Stock Exchange Agreement dated January 31, 1997
between the Company and each of the persons listed on Schedule 1 hereto (the
"Investors") and for purpose of the Warrants, collectively the separate Share
---------
and Warrant Purchase Agreements, dated as of December 30, 1994 between the
Company and each of the Investors."
2. The reference to "sixty (60)" in the first sentence of Section
1.2(b) of the Registration Rights Agreement is hereby deleted and replaced with
"ninety (90)".
3. The Fleming Investors agree that for purposes of Article I only, as
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when such securities are permitted to be sold pursuant to
Rule 144(k) (or any successor provision to such Rule) under the Securities Act.
1
<PAGE>
4. The definition of Registrable Securities shall be deemed to include
any shares of Class A Common Stock issued to the Fleming Investors pursuant to
that put right set forth in Section 3 of that Amended and Restated Stockholders'
Agreement of even date herewith.
5. Except as set forth herein, the terms of the Registration Rights
Agreement shall remain in full force and effect.
* * * *
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
---------------------------------
Name: Harry A. Blazer
Title: President
ROBERT FLEMING NOMINEES LTD.
By: /s/ Jonathan Simon
----------------------------------
Name: Jonathan Simon
Title: Authorized Signatory
3
<PAGE>
EXHIBIT 4.3
AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") is dated
as of January 31, 1997, by and among Harry's Farmers Market, Inc., a Georgia
corporation (the "Company"), and each owner of securities of the Company listed
-------
on the signature page hereto (the "Investors").
W I T N E S S E T H:
-------------------
WHEREAS, the Company and each of the Investors entered into that
Registration Rights Agreement dated December 30, 1994 (the "Registration Rights
-------------------
Agreement"); and
- ---------
WHEREAS, pursuant to the terms of that Preferred Stock Exchange Agreement
of even date herewith between the Company, the Investors and Robert Fleming
Nominees Ltd. (the "Exchange Amendment"), the Investors have agreed that upon
------------------
the consummation of the transactions set forth in that Transaction Agreement of
even date herewith between the Company and HFMI Acquisition Corporation, a
Delaware corporation ("Newco"), to exchange each share of Series A Preferred
Stock held by each Investor for one share of Series AA Preferred Stock, stated
value $9 per share, of the Company (the "AA Preferred Stock"), and to amend the
------------------
terms of the Registration Rights Agreement as provided herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have
the meaning given such terms in the Registration Rights Agreement; provided,
however, the definitions of "Preferred Stock" and "Purchase Agreement" shall be
deleted in their entirety and replaced with the following:
"'Preferred Stock' means the Company's Series AA Preferred Stock,
---------------
stated value $9 per share, which Preferred Stock is convertible into Shares of
Class A Common Stock.
"Purchase Agreement" means, as applicable, for purposes of the
------------------
Preferred Stock, the Preferred Stock Exchange Agreement dated January 31, 1997
between the Company and each of the persons listed on Schedule 1 thereto (the
"Investors") and for purpose of the Warrants, collectively the separate Share
- ----------
and Warrant Purchase Agreements, dated as of December 30, 1994 between the
Company and each of the Investors."
2. Except as set forth herein, the terms of the Registration Rights
Agreement shall remain in full for and effect.
* * * *
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
----------------------------------
Name: Harry A. Blazer
Title: President
AXA EQUITY & LAW LIFE ASSURANCE
SOCIETY
By: /s/ Anthony R. Arnold
----------------------------------
Anthony R. Arnold
Associate Director
AXA Equity & Law Investment
Managers, Ltd.
ORBIS PENSION TRUSTEES LTD.
By: /s/ David J. Lewis
----------------------------------
David J. Lewis
Investment Manager
ASHFORD CAPITAL PARTNERS, L.P.
By: Ashcap Corp., General Partner
By: /s/ Theodore H. Ashford
----------------------------------
Theodore H. Ashford
President
/s/ Theodore H. Ashford
----------------------------------
Theodore H. Ashford
2
<PAGE>
EXHIBIT 4.4
AMENDMENT TO WARRANT CERTIFICATE
This AMENDMENT TO WARRANT CERTIFICATE, dated January 31, 1997, between
Harry's Farmers Market, Inc., a Georgia Corporation (the "Corporation") and
Robert Fleming Nominees Ltd., a U.K. corporation (the "Holder").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Holder owns a Warrant to Purchase Class A Common Stock of the
Company, dated December 30, 1994 (the "Warrant"); and
WHEREAS, the Holder and the Company desire to amend the Warrant as set
forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have the
meaning given such terms in the Warrant.
2. The Exercise Price, effective the date hereof, shall be $4.00 per share
(as such number may be adjusted hereafter in accordance with Section 5 of the
Warrant, as amended hereby).
3. Notwithstanding anything to the contrary in the Warrant, there shall be
no adjustment to the number of Warrant Shares for which the Warrant is
exercisable or to the Exercise Price by reason of the following: (i) the
issuance of the Series AA Preferred Stock, stated value $9.00 per share, (the
"Series AA Preferred Stock") issued by the Company pursuant to the Preferred
Stock Exchange Agreement dated the date hereof between the Holder and the
Company, (ii) the issuance of Stock upon conversion of the Series AA Preferred
Stock, (iii) the issuance of the option (the "Option") to purchase Series B
Convertible Preferred Stock, stated value $40.00 (the "Series B Preferred
Stock"), contemplated by the Transaction Agreement dated the date hereof between
the Company and HFMI Acquisition Corporation, a Delaware corporation (the
"Transaction Agreement"), (iv) the issuance of the Series B Preferred Stock
pursuant to the Option, (v) the issuance of Stock upon conversion of the Series
B Preferred Stock, (vi) the issuance of the Warrants (as such term is defined in
the Transaction Agreement) (the "New Warrants"), and (vii) the issuance of Stock
upon exercise of the New Warrants.
4. Except as set forth herein, the terms of the Warrants shall remain in
full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
--------------------------------
Name: Harry A. Blazer
Title: President
ROBERT FLEMING NOMINEES LTD.
By: /s/ Jonathan Simon
--------------------------------
Name: Jonathan Simon
Title: Authorized Signatory
2
<PAGE>
EXHIBIT 4.5
AMENDMENT TO WARRANT CERTIFICATE
This AMENDMENT TO WARRANT CERTIFICATE, dated January 31, 1997, between
Harry's Farmers Market, Inc., a Georgia Corporation (the "Company") and AXA
Equity & Law Life Assurance Society (the "Holder").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Holder owns a Warrant to Purchase Class A Common Stock of the
Company, dated December 30, 1994 (the "Warrant"); and
WHEREAS, the Holder and the Company desire to amend the Warrant as set
forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have the
meaning given such terms in the Warrant.
2. The Exercise Price, effective the date hereof, shall be $4.00 per share
(as such number may be adjusted hereafter in accordance with Section 5 of the
Warrant, as amended hereby).
3. Notwithstanding anything to the contrary in the Warrant, there shall be
no adjustment to the number of Warrant Shares for which the Warrant is
exercisable or to the Exercise Price by reason of the following: (i) the
issuance of the Series AA Preferred Stock, stated value $9.00 per share, (the
"Series AA Preferred Stock") issued by the Company pursuant to the Preferred
Stock Exchange Agreement dated the date hereof between the Holder and the
Company, (ii) the issuance of Stock upon conversion of the Series AA Preferred
Stock, (iii) the issuance of the option (the "Option") to purchase Series B
Convertible Preferred Stock, stated value $40.00 (the "Series B Preferred
Stock"), contemplated by the Transaction Agreement dated the date hereof between
the Company and HFMI Acquisition Corporation, a Delaware corporation (the
"Transaction Agreement"), (iv) the issuance of the Series B Preferred Stock
pursuant to the Option, (v) the issuance of Stock upon conversion of the Series
B Preferred Stock, (vi) the issuance of the Warrants (as such term is defined in
the Transaction Agreement) (the "New Warrants"), and (vii) the issuance of Stock
upon exercise of the New Warrants.
4. Except as set forth herein, the terms of the Warrants shall remain in
full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
------------------------------------
Name: Harry A. Blazer
Title: President
AXA EQUITY & LAW LIFE ASSURANCE SOCIETY
By: /s/ Anthony R. Arnold
------------------------------------
Name: Anthony R. Arnold
Title: Associate Director
2
<PAGE>
EXHIBIT 4.6
AMENDMENT TO WARRANT CERTIFICATE
This AMENDMENT TO WARRANT CERTIFICATE, dated January 31, 1997, between
Harry's Farmers Market, Inc., a Georgia Corporation (the "Company") and Orbis
Pension Trustess Ltd. (the "Holder").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Holder owns a Warrant to Purchase Class A Common Stock of the
Company, dated December 30, 1994 (the "Warrant"); and
WHEREAS, the Holder and the Company desire to amend the Warrant as set
forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have the
meaning given such terms in the Warrant.
2. The Exercise Price, effective the date hereof, shall be $4.00 per share
(as such number may be adjusted hereafter in accordance with Section 5 of the
Warrant, as amended hereby).
3. Notwithstanding anything to the contrary in the Warrant, there shall be
no adjustment to the number of Warrant Shares for which the Warrant is
exercisable or to the Exercise Price by reason of the following: (i) the
issuance of the Series AA Preferred Stock, stated value $9.00 per share, (the
"Series AA Preferred Stock") issued by the Company pursuant to the Preferred
Stock Exchange Agreement dated the date hereof between the Holder and the
Company, (ii) the issuance of Stock upon conversion of the Series AA Preferred
Stock, (iii) the issuance of the option (the "Option") to purchase Series B
Convertible Preferred Stock, stated value $40.00 (the "Series B Preferred
Stock"), contemplated by the Transaction Agreement dated the date hereof between
the Company and HFMI Acquisition Corporation, a Delaware corporation (the
"Transaction Agreement"), (iv) the issuance of the Series B Preferred Stock
pursuant to the Option, (v) the issuance of Stock upon conversion of the Series
B Preferred Stock, (vi) the issuance of the Warrants (as such term is defined in
the Transaction Agreement) (the "New Warrants"), and (vii) the issuance of Stock
upon exercise of the New Warrants.
4. Except as set forth herein, the terms of the Warrants shall remain in
full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
-----------------------------
Name: Harry A. Blazer
Title: President
ORBIS PENSION TRUSTEES LTD.
By: /s/ David J. Lewis
------------------------------
Name: David J. Lewis
Title: Investment Manager
2
<PAGE>
EXHIBIT 4.7
AMENDMENT TO WARRANT CERTIFICATE
This AMENDMENT TO WARRANT CERTIFICATE, dated January 31, 1997, between
Harry's Farmers Market, Inc., a Georgia Corporation (the "Company") and Ashford
Capital Partners, L.P., (the "Holder").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Holder owns a Warrant to Purchase Class A Common Stock of the
Company, dated December 30, 1994 (the "Warrant"); and
WHEREAS, the Holder and the Company desire to amend the Warrant as set
forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have the
meaning given such terms in the Warrant.
2. The Exercise Price, effective the date hereof, shall be $4.00 per share
(as such number may be adjusted hereafter in accordance with Section 5 of the
Warrant, as amended hereby).
3. Notwithstanding anything to the contrary in the Warrant, there shall be
no adjustment to the number of Warrant Shares for which the Warrant is
exercisable or to the Exercise Price by reason of the following: (i) the
issuance of the Series AA Preferred Stock, stated value $9.00 per share, (the
"Series AA Preferred Stock") issued by the Company pursuant to the Preferred
Stock Exchange Agreement dated the date hereof between the Holder and the
Company, (ii) the issuance of Stock upon conversion of the Series AA Preferred
Stock, (iii) the issuance of the option (the "Option") to purchase Series B
Convertible Preferred Stock, stated value $40.00 (the "Series B Preferred
Stock"), contemplated by the Transaction Agreement dated the date hereof between
the Company and HFMI Acquisition Corporation, a Delaware corporation (the
"Transaction Agreement"), (iv) the issuance of the Series B Preferred Stock
pursuant to the Option, (v) the issuance of Stock upon conversion of the Series
B Preferred Stock, (vi) the issuance of the Warrants (as such term is defined in
the Transaction Agreement) (the "New Warrants"), and (vii) the issuance of Stock
upon exercise of the New Warrants.
4. Except as set forth herein, the terms of the Warrants shall remain in
full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
HARRY'S FARMERS MARKET, INC..
By: /s/ Harry A. Blazer
--------------------------------
Name: Harry A. Blazer
Title: President
ASHFORD CAPITAL PARTNERS, L.P.
By: Ashcap Corp., General Partner
By: /s/ Theodore H. Ashford
--------------------------------
Name: Theodore H. Ashford
Title: President, Ashcap Corp.
2
<PAGE>
EXHIBIT 4.8
AMENDMENT TO WARRANT CERTIFICATE
This AMENDMENT TO WARRANT CERTIFICATE, dated January , 1997, between
---
Harry's Farmers Market, Inc., a Georgia Corporation (the "Company") and Theodore
H. Ashford (the "Holder").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Holder owns a Warrant to Purchase Class A Common Stock of the
Company, dated December 30, 1994 (the "Warrant"); and
WHEREAS, the Holder and the Company desire to amend the Warrant as set
forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have the
meaning given such terms in the Warrant.
2. The Exercise Price, effective the date hereof, shall be $4.00 per share
(as such number may be adjusted hereafter in accordance with Section 5 of the
Warrant, as amended hereby).
3. Notwithstanding anything to the contrary in the Warrant, there shall be
no adjustment to the number of Warrant Shares for which the Warrant is
exercisable or to the Exercise Price by reason of the following: (i) the
issuance of the Series AA Preferred Stock, stated value $9.00 per share, (the
"Series AA Preferred Stock") issued by the Company pursuant to the Preferred
Stock Exchange Agreement dated the date hereof between the Holder and the
Company, (ii) the issuance of Stock upon conversion of the Series AA Preferred
Stock, (iii) the issuance of the option (the "Option") to purchase Series B
Convertible Preferred Stock, stated value $40.00 (the "Series B Preferred
Stock"), contemplated by the Transaction Agreement dated the date hereof between
the Company and HFMI Acquisition Corporation, a Delaware corporation (the
"Transaction Agreement"), (iv) the issuance of the Series B Preferred Stock
pursuant to the Option, (v) the issuance of Stock upon conversion of the Series
B Preferred Stock, (vi) the issuance of the Warrants (as such term is defined in
the Transaction Agreement) (the "New Warrants"), and (vii) the issuance of Stock
upon exercise of the New Warrants.
4. Except as set forth herein, the terms of the Warrants shall remain in
full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
----------------------------------
Name: Harry A. Blazer
Title: President
/s/ Theodore H. Ashford
-------------------------------------
Theodore H. Ashford
2
<PAGE>
EXHIBIT 4.9
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
This AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT is dated as of
January 31, 1997, by and among Harry's Farmers Market, Inc., a Georgia
corporation (the "Company"), Harry A. Blazer ("HB") and Robert Fleming Nominees
------- --
Ltd., an English company.
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the terms of the Share and Warrant Purchase
Agreement, dated as of December 30, 1994 (the "Share and Warrant Purchase
--------------------------
Agreement"), between the Company and Fleming (as such term and other capitalized
- ---------
terms used herein are defined in Section 4 hereof), Fleming purchased 888,888
shares of the Company's Series A Redeemable Convertible Preferred Stock, stated
value $9.00 per share (the "Series A Preferred Stock"), warrants (the
------------------------
"Warrants") exercisable for 300,000 shares of the Company's Class A Common
--------
Stock, no par value per share (the "Class A Common Stock"), and performance
--------------------
warrants (the "Performance Warrants") exercisable for 44,444 shares of Class A
--------------------
Common Stock;
WHEREAS, the Company, HB, and Fleming entered into that Stockholders'
Agreement dated December 30, 1994 (the "Original Agreement") to regulate certain
aspects of their relationship; and
WHEREAS, HB owns 2,050,701 shares of the Company's Class B Common
Stock, no par value per share (the "Class B Common Stock" and together with the
--------------------
Class A Common Stock, the "Common Stock"), and no shares of Class A Common Stock
------------
(such shares, along with any shares of Common Stock or other equity securities
of the Company that HB may subsequently acquire, the "HB Shares"); and
---------
WHEREAS, pursuant to the terms of that Preferred Stock Exchange
Agreement of even date herewith between the Company and Fleming (the "Exchange
Amendment") Fleming has agreed that upon the consummation of the transactions
set forth in that Transaction Agreement of even date herewith between the
Company and HFMI Acquisition Corporation, a Delaware corporation ("Newco"), to
exchange each share of Series A Preferred Stock held by Fleming for one share of
Series AA Preferred Stock, stated value $9 per share, of the Company (the "AA
Preferred Stock").
WHEREAS, each of Fleming, HB, and the Company desires to amend and
restate the terms of the Original Agreement as set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1
<PAGE>
1. Rights of Inclusion.
-------------------
(a) In the event HB proposes to Transfer any HB Shares (the
"Transferor Shares") to any Person (the "Buyer"), as a condition to such
- ------------------ -----
Transfer, HB shall cause the Buyer to offer (the "Inclusion Offer") to purchase
---------------
from Fleming, at Fleming's option, up to that number of Fleming Shares
determined in accordance with Section 1(b) on the same terms and conditions as
are applicable to the Transferor Shares (including any consideration to be
received by HB in the form of bonuses, consulting fees, noncompetition payments,
pursuant to employment arrangements or similar arrangements), provided, that
Fleming shall not be required to provide any representation, warranty or other
undertaking other than with respect to its ownership of, and authority to
Transfer, such Fleming Shares free of any liens or encumbrances. HB shall
provide prompt written notice to Fleming (the "Inclusion Notice") setting forth
----------------
all the terms and conditions of the Inclusion Offer, and Fleming may accept the
Inclusion Offer in whole or in part by providing a written notice of acceptance
to HB within twenty (20) days of delivery of the Inclusion Notice to Fleming.
(b) Fleming shall have the right to sell, pursuant to the Inclusion
Offer, Fleming Shares representing the same percentage of all Fleming Shares as
the Transferor Shares are of all HB Shares; provided, however, that if Fleming
elects not to exercise such right, HB shall nonetheless be entitled to Transfer
all of the Transferor Shares described in the Inclusion Notice. In the event
the number of Fleming Shares for which Fleming elects to exercise such right,
along with the Transferor Shares and any other shares of the Company to be sold
by other shareholders pursuant to any similar rights granted to such other
shareholders, exceed the number of shares which the Buyer is willing to
purchase, the number of shares to be Transferred to the Buyer by each transferor
shall be reduced so that each transferor is entitled to Transfer the same
percentage of its shares as each other transferor. If Fleming elects to
exercise such right, Fleming may, in its sole discretion, determine the
composition of the Fleming Shares (i.e., the number of the shares of AA
Preferred Stock, Warrants, Performance Warrants and Class A Common Stock to be
included in the Fleming Shares) to be Transferred to the Buyer pursuant to the
Inclusion Offer. In the event Fleming chooses to include any AA Preferred Stock
or any Warrants or Performance Warrants in the Fleming Shares to be Transferred
to the Buyer pursuant to the Inclusion Offer, Fleming shall, prior to or
simultaneously with such Transfer, convert such AA Preferred Stock into shares
of Class A Common Stock and exercise such Warrants or Performance Warrants into
shares of Class A Common Stock so that Fleming Transfers only Class A Common
Stock to the Buyer.
(c) HB shall have ninety (90) days, commencing on the date of the
Inclusion Notice, in which to Transfer, on behalf of himself and Fleming, up to
the number of shares covered by the Inclusion Offer (including the Transferor
Shares) to the Buyer. The terms of such Transfer, including, without
limitation, price and form of consideration, shall be as set forth in the
Inclusion Notice. If at the end of such ninety (90) day period HB has not
completed the Transfer of the Transferor Shares and the Fleming Shares (if any)
proposed to be Transferred, HB may not proceed with such Transfer or any other
Transfer without first giving a new Inclusion Notice pursuant to the provisions
of this Section 1.
(d) If HB is able to complete the Transfer of the Transferor Shares
and the Fleming Shares (if any) proposed to be Transferred within such ninety
(90) day period, at the closing thereof, Fleming shall deliver to the Buyer a
certificate or certificates representing the Fleming Shares to be Transferred
pursuant to the Inclusion Offer, free and clear of all liens and
2
<PAGE>
encumbrances, and the Buyer shall pay to Fleming the purchase price for the
Fleming Shares so Transferred pursuant to this Section 1 and shall furnish such
other evidence of the completion of such Transfer and the terms thereof as may
be reasonably requested by Fleming.
(e) The provisions of this Section 1 shall not apply to any Transfer
or proposed Transfer by HB of HB Shares which, together with all other Transfers
by HB of HB Shares on or prior to the date of such Transfer represent ten
percent (10%) or less of the HB Shares held by HB on the date hereof,
appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar event. If any Transfer of the HB Shares, either
alone or together with all previous Transfers, exceeds such ten percent (10%)
threshold, the exclusion provided by this Section 1(e) shall apply to the
Transfer of that number of HB Shares needed to reach the ten percent (10%)
threshold and the other provisions of this Section 1 shall apply to the Transfer
of all HB Shares in excess of such ten percent (10%) threshold. In the event
that Fleming and its Affiliates cease to hold, directly or indirectly, AA
Preferred Stock, Warrants and Class A Common Stock representing at least fifteen
percent (15%) of the number of shares of Class A Common Stock into which the AA
Preferred Stock acquired by Fleming pursuant to the Exchange Agreement and
Warrants acquired by Fleming pursuant to the Share and Warrant Purchase
Agreement, as applicable, may be converted or exercised, then the provisions of
this Section 1 shall terminate and be of no further force or effect.
2. Board Observer Rights.
---------------------
(a) Fleming shall have the right to have one (1) representative (the
"Fleming Observer") attend meetings of the Company's Board of Directors, or any
- -----------------
committee thereof, and the Company shall permit the Fleming Observer to attend
all such meetings as an observer. The Fleming Observer shall not have the right
to vote on any matter presented to the Board or any committee thereof. The
Company shall give the Fleming Observer written notice of each meeting of the
Board of Directors or any committee thereof and all written materials and other
information given to the Company's directors and committee members in the same
manner and at the same time such notices, materials and other information are
given to the directors and committee members. The Company shall reimburse the
Fleming Observer for travel and other expenses in connection with such meetings
to the same extent that the Company reimburses its directors and committee
members. If the Board of Directors or any committee thereof proposes to take
any action by written consent in lieu of a meeting, the Company shall give
written notice thereof to the Fleming Observer prior to the effective date of
such consent describing the nature and substance of such action.
(b) Fleming shall cause the Fleming Observer to keep confidential all
confidential information provided to it in its capacity as an observer pursuant
to this Section 2; provided, however, that the Fleming Observer may disclose
such confidential information to Fleming. Fleming shall also be bound by this
Section 2(b) confidentiality obligation, except that Fleming may disclose such
confidential information to its directors, officers, employees, consultants,
advisors and professional representatives who need to know such information so
long as prior to disclosing such confidential information to any such person,
Fleming shall inform such person of the confidential nature of such information
and of Fleming's obligations under this Section 2(b) and direct such person to
treat such information confidentially. The confidentiality obligations
contained in this Section 2(b) shall not apply to any information which (i) is
3
<PAGE>
or becomes generally available to and known by the public (other than as a
result of a disclosure by Fleming or the Fleming Observer) or (ii) is or becomes
available to Fleming or the Fleming Observer on a non-confidential basis from a
source other than the Company.
(c) In the event that Fleming and its affiliates cease to hold,
directly or indirectly, AA Preferred Stock, Warrants and Class A Common Stock
representing at least fifteen percent (15%) of the number of shares of Class A
Common Stock into which the AA Preferred Stock acquired by Fleming pursuant to
the Exchange Agreement and the Warrants acquired by Fleming pursuant to the
Share and Warrant Purchase Agreement, as applicable, may be converted or
exercised, then the provisions of this Section 2 shall terminate and be of no
further force or effect.
3. Warrant Put Option.
------------------
(a) If a Fundamental Change occurs, Fleming shall have the right, at
its option, to require the Company to repurchase all, or any portion, of
Fleming's Warrants and Class A Common Stock received upon the exercise of its
Warrants (the "Warrant Shares") on the date (the "Repurchase Date") selected by
-------------- ---------------
the Company that is not less than ten (10) nor more than twenty (20) days after
the Warrant Surrender Date at the respective purchase prices specified in
Section 3(b). The Company agrees that it will not complete any Fundamental
Change unless proper provision has been made to satisfy its obligations under
this Section 3.
(b) The purchase price for the Warrants repurchased by the Company
pursuant to this Section 3 shall be the amount equal to (x) (i) the greater of
(A) the Market Price of the Class A Common Stock on the last trading day prior
to the occurrence of the Fundamental Change and (B) the consideration, if any,
to be paid with respect to each share of Class A Common Stock upon the
occurrence of the Fundamental Change, minus (ii) the Exercise Price, multiplied
by (y) the number of shares of Class A Common Stock for which the then
outstanding Warrants are exercisable (the "Warrant Put Purchase Price"). The
--------------------------
purchase price for the Warrant Shares repurchased by the Company pursuant to
this Section 3 shall be an amount equal to (x) the greater of (i) the Market
Price of the Class A Common Stock on the last trading day prior to the
occurrence of the Fundamental Change and (ii) the consideration, if any, to be
paid with respect to each share of Class A Common Stock upon the occurrence of
the Fundamental Change, multiplied by (y) the number of Warrant Shares (the
"Class A Put Purchase Price").
- ---------------------------
(c) Within thirty (30) days after the occurrence of a Fundamental
Change, the Company shall send Fleming a notice describing the Fundamental
Change and the repurchase right arising as a result thereof (including a
calculation in reasonable detail of the Warrant Put Purchase Price and Class A
Common Put Price, as applicable, therefor). Such notice shall also describe the
amount and kind of consideration, if any, payable to the holders of the
Company's Warrants and Class A Common Stock as a result of such Fundamental
Change.
(d) To exercise the repurchase right, Fleming must provide not less
than thirty (30) days notice to the agent for the lender(s) (the "Senior
Lender(s)"), under the Amended and Restated Credit Agreement, dated as of
December 30, 1994, among the Company, NationsBank, N.A. (South), and
Creditanstalt-Bankverein and any amendments, renewals, extensions or
refinancings thereof so long as NationsBank, N.A. (South) and
4
<PAGE>
Creditanstalt-Bankverein continue to extend at least forty percent (40%) of the
principal amount of the credit to be provided thereunder (the "Credit
Agreement"), of its intention to exercise the repurchase right. The Senior
Lender(s) or their Agent (under the Credit Agreement) shall, within such thirty
(30) day period, either (A) consent in writing to such exercise or (B) object in
writing to such exercise, such objection to be accompanied by a certification by
the Senior Lender(s) that an Event of Default or Default (as defined in the
Credit Agreement) currently exists under the Credit Agreement or will result
from the Fundamental Change or from the exercise of such repurchase right. In
the event that the Senior Lender(s) have objected to such exercise within such
thirty (30) day period, then Fleming shall not be entitled to exercise such
repurchase right, and the Company shall have no obligation to repurchase
Fleming's Warrants and Warrant Shares. In the event that the Senior Lender(s)
have consented to such exercise, or have not responded in writing within such
thirty (30) day period, then Fleming may exercise such repurchase right free and
clear of any further claim of the Senior Lender(s), and Fleming shall surrender,
on or before the date which is, subject to any contrary requirements of
applicable law, seventy-five (75) days after the date of the Section 3(c) notice
from the Company (the "Warrant Surrender Date"), the certificates representing
----------------------
the Warrant Shares and the Warrants with respect to which the right is being
exercised, duly endorsed for transfer to the Company, together with a written
notice of election. If the Events of Default or Defaults disclosed by the Senior
Lender(s) in the certificate provided pursuant to clause (b) above have been
cured or waived and no other Event of Default or Default exists or would occur
as a result thereof, Fleming may exercise the repurchase right by providing not
less than fifteen (15) days notice to the Senior Lender(s) of its intention to
exercise the repurchase right. If the Senior Lender(s) or their Agent do not
object in writing to such exercise within such fifteen (15) day period, such
objection to be accompanied by a certification by the Senior Lender(s) that an
Event of Default or Default exists or will result from the exercise of such
repurchase right, then Fleming may exercise such repurchase right free and clear
of any further claim of the Senior Lender(s).
(e) The Company shall use its reasonable efforts (including, if
necessary, refinancing, recapitalization or similar arrangements) to make
available the funds necessary to pay the purchase price upon Fleming's exercise
of its rights pursuant to this Section 3. Nonetheless, if the Company is unable
to satisfy its repurchase obligations under this Section 3, the purchase price
payable pursuant to this Section 3 shall accrue interest at an annual rate of
15% from the Repurchase Date until the purchase price and accrued interest are
paid in full. In addition, the Company may elect, in its sole and absolute
discretion, to pay the Warrant Put Purchase Price and the Class A Put Purchase
Price, as applicable, upon Fleming's exercise of its rights pursuant to this
Section 3 by delivering shares of Class A Common Stock equal to that number of
shares of Class A Common Stock, rounded to the nearest whole share, determined
by dividing the Warrant Put Purchase Price or the Class A Put Purchase Price, as
applicable, by the Market Price of the Class A Common Stock determined on the
last trading day prior to the Repurchase Date.
(f) In the event that Fleming, in lieu of, or in addition to,
exercising its repurchase rights under this Section 3 enters into an agreement
with the Company providing for the sale or transfer of all or part of the AA
Preferred Stock, Warrants or Class A Common Stock owned by it, then it shall
provide not less than thirty (30) days notice to the Senior Lender(s) of its
intention to consummate such transaction. The Senior Lender(s) or their Agent
(under the Credit Agreement) shall, within such thirty (30) day period, either
(A) consent in writing to such transaction or (B) object in writing to such
transaction, such objection to be accompanied by a certification by the Senior
Lender(s) that an Event of Default or Default (as defined in the Credit
5
<PAGE>
Agreement) currently exists under the Credit Agreement or will result from such
transaction. In the event that the Senior Lender(s) have objected to such
transaction within such thirty (30) day period, then Fleming shall not be
entitled to consummate such transaction, and the Company shall have no
obligation to consummate such transaction. In the event that the Senior
Lender(s) have consented to such transaction, or have not responded in writing
within such thirty (30) day period, then Fleming may consummate such transaction
free and clear of any further claim of the Senior Lender(s). If the Events of
Default or Defaults disclosed by the Senior Lender(s) in the certificate
provided pursuant to clause (B) above have been cured or waived and no other
Event of Default or Default exists or would occur as a result thereof, Fleming
may consummate such transaction by providing not less than fifteen (15) days
notice to the Senior Lender(s) of its intention to consummate such transaction.
If the Senior Lender(s) or their Agent do not object in writing to such
transaction within such fifteen (15) day period, such obligation to be
accompanied by a certification by the Senior Lender(s) that an Event of Default
or Default exists or will result from such transaction, then Fleming may
consummate such transaction free and clear of any further claim of the Senior
Lender(s).
4. Definitions.
-----------
As used herein, the following terms shall have the respective meanings
set forth below:
"AA Preferred Stock" shall have the meaning set forth in the fourth
------------------
WHEREAS clause hereof.
"Affiliate", when used with respect to any Person, means (i) if such
---------
Person is a corporation, any officer or director thereof and any Person which
is, directly or indirectly, the beneficial owner (by itself or as part of any
group) of more than five percent (5%) of any class of any equity security
(within the meaning of the Securities Exchange Act) thereof, and, if such
beneficial owner is a partnership, any general partner thereof, or if such
beneficial owner is a corporation, any Person controlling, controlled by or
under common control with such beneficial owner, or any officer or director of
such beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general or limited
partner thereof, and (iii) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person. For
purposes of this definition, "control" (including the correlative terms
"controlling", "controlled by" and "under common control with"), with respect to
any Person, shall mean possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of voting securities or by contract or otherwise.
The holding of AA Preferred Stock, Warrants or Performance Warrants (or of Class
A Common Stock obtained upon conversion of AA Preferred Stock or exercise of
Warrants or Performance Warrants), and the rights under the Share and Warrant
Purchase Agreement or under the Articles of Incorporation, the Warrant
Certificates, this Agreement or the Registration Rights Agreement (as such
certificates and agreements are defined in the Exchange Agreement) (or the
exercise of any such rights, including, without limitation, or sending an
observer to Board or committee meetings of the Company), shall not cause Fleming
to be deemed to be an "Affiliate" of the Company.
"Buyer" shall have the meaning set forth in Section 1(a) hereof.
-----
6
<PAGE>
"Class A Common Stock" shall have the meaning set forth in the first
--------------------
WHEREAS clause hereof.
"Class B Common Stock" shall have the meaning set forth in the third
--------------------
WHEREAS clause hereof.
"Common Stock" shall have the meaning set forth in the third WHEREAS
------------
clause hereof.
"Company" shall have the meaning set forth in the first paragraph hereof.
-------
"Credit Agreement" shall have the meaning set forth in Section 3(d)
----------------
hereof.
"Exercise Price" means the exercise price of the Warrants as set forth
--------------
in the Warrant Certificate, as the same may be amended from time to time, issued
pursuant to the terms of the Share and Warrant Agreement.
"Fleming" means Robert Fleming Nominees Ltd., an English company, and
-------
shall also include any Affiliate, officer or employee of an Affiliate or
investment fund managed by an Affiliate of Fleming to which Fleming may transfer
record or beneficial ownership of the AA Preferred Stock, the Warrants, the
Performance Warrants or the Class A Common Stock.
"Fleming Observer" shall have the meaning set forth in Section 2 hereof.
----------------
"Fleming Shares" means all AA Preferred Stock, Warrants, Performance
--------------
Warrants and Class A Common Stock owned by Fleming.
"Fundamental Change" means any of the following events:
------------------
(i) any event that causes HB to cease to be able to vote shares of
stock of the Company that possess more than fifty percent (50%) of the
total voting power of all classes of stock of the Company entitled to vote
generally in the election of directors;
(ii) the sale (or functional equivalent of a sale) of all or
substantially all of the assets of the Company;
(iii) any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company or
any other business combination involving the Company's stock immediately
prior to giving effect to such transaction owning shares of capital stock
of the surviving Person in such transaction representing (x) fifty percent
(50%) or less of the total voting power of all shares of capital stock of
such surviving Person entitled to vote generally in the election of
directors or (y) fifty percent (50%) or less of the total value of all
capital stock of such surviving Person; or
(iv) the commencement by the Company of a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or state
7
<PAGE>
bankruptcy, insolvency or similar law; the consent by the Company to the
entry of an order for relief in an involuntary case under such law or to
the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequester (or other similar official) of the Company or of any substantial
part of its property; any assignment by the Company for the benefit of its
creditors; any admission by the Company in writing of its inability to pay
its debts generally as they become due; the entry of a decree or order for
relief in respect of the Company by a court having jurisdiction in the
premises in an involuntary case under Federal bankruptcy laws or any other
applicable Federal or state bankruptcy, insolvency or similar law
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Company or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and on account of any such event the Company
shall liquidate, dissolve or wind up; or the liquidation, dissolution or
winding up of the Company under any other circumstances.
"HB" shall have the meaning set forth in the first paragraph hereof.
--
"HB Shares" shall have the meaning set forth in the third WHEREAS clause
---------
hereof.
"Inclusion Notice" shall have the meaning set forth in Section 1(a)
----------------
hereof.
"Inclusion Offer" shall have the meaning set forth in Section 1(a) hereof.
---------------
"Market Price" means, as to any security on the date of determination
------------
thereof, the average of the closing prices of such security's sales on all
principal United States securities exchanges on which such security may at the
time be listed, or, if there shall have been no sales on any such exchange on
any day, the last trading price of such security on such day, or if there is no
such price, the average of the bid and asked prices at the end of such day, on
the Nasdaq Stock Market, in each such case averaged for a period of twenty (20)
consecutive Business Days prior to the day as of which Market Price is being
determined; provided that if such security is listed on any United States
securities exchange the terms "Business Days" as used in this sentence means
business days on which such exchange is open for trading. If at any time such
security is not listed on any exchange or the Nasdaq Stock Market, the Market
Price shall be deemed to be the fair value thereof determined by an investment
banking firm of nationally recognized standing selected by the Board of
Directors of the Company and acceptable to Fleming, as of the most recent
practicable date as of which the determination is to be made, taking into
account the value of the Company as a going concern, and without taking into
account any lack of liquidity of such security or any discount for a minority
interest.
"Performance Warrants" shall have the meaning set forth in the first
--------------------
WHEREAS clause hereof.
"Person" means an individual corporation, partnership, limited
------
liability company, firm, association, joint venture, trust, unincorporated
organization, governmental body, agency, political subdivision or other entity.
8
<PAGE>
"Repurchase Date" shall have the meaning set forth in Section 3(a) hereof.
---------------
"Securities Exchange Act" means the Securities and Exchange Act of 1934,
-----------------------
as amended.
"Senior Lender(s)" shall have the meaning set forth in Section 3(d)
----------------
hereof.
"Share and Warrant Purchase Agreement" shall have the meaning set forth in
------------------------------------
the first WHEREAS clause hereof.
"Transfer" means, with respect to any security, any direct or indirect
--------
sale, transfer, assignment, hypothecation, pledge or any other disposition of
such security or any interest therein.
"Transferor Shares" shall have the meaning set forth in Section 1(a)
-----------------
hereof.
"Warrants" shall have the meaning set forth in the first WHEREAS clause
--------
hereof.
"Warrant Shares" shall have the meaning set forth in Section 3(a) hereof.
--------------
"Warrant Surrender Date" shall have the meaning set forth in Section 3(d)
----------------------
hereof.
5. Miscellaneous.
-------------
(a) In the event of a breach by any party to this Agreement of its
obligations under this Agreement, any party injured by such breach, in addition
to being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense in any action for specific
performance that a remedy at law would be adequate is waived.
(b) Except as otherwise provided herein, no modification, amendment or
waiver of any provision of this Agreement will be effective against any
provision of this Agreement will be effective against any party hereto unless
such modification, amendment or waiver is approved in writing by all parties
hereto; provided, that no amendment of Section 3(d) or 3(f) will be effective
--------
unless the Senior Lender(s) have also consented thereto in writing. The failure
of any party to enforce any of the provisions of this Agreement will in no way
be construed as a waiver of such provisions and will not affect the right of
such party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
(c) All covenants and agreements in this Agreement by or on behalf of
any of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
(d) All notices, requests and other communications hereunder must be
in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or sent by nationally recognized
overnight courier service to the parties at the following addresses or
9
<PAGE>
facsimile numbers:
(i) If to Fleming to:
Robert Fleming Nominees Ltd.
c/o Fleming Capital Management
1285 Avenue of the Americas
16th Floor
New York, NY 10019
Facsimile No.: (212) 713-8596
Attention: Eytan Shapiro
Christopher Jones
with a copy to:
Morgan, Lewis & Bockius, L.L.P.
101 Park Avenue
New York, New York 10178-0060
Facsimile: 212-309-6273
Attention: David W. Pollak
(ii) If to the Company, to:
Harry's Farmers Market, Inc.
1180 Upper Hembree Road
Roswell, GA 30076
Facsimile: (770) 664-4920
Attention: Harry A. Blazer
with a copy to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street, N.W.
Atlanta, Georgia 30309-3424
Facsimile No: 404-881-7777
Attn: John Latham
(iii) If to HB, to:
Harry A. Blazer
c/o Harry's Farmers Market, Inc.
1180 Upper Hembree Road
Roswell, GA 30076
with a copy to:
10
<PAGE>
Alston & Bird
One Atlantic Center
1201 West Peachtree Street, N.W.
Atlanta, Georgia 30309-3424
Facsimile No: 404-881-7777
Attn: John Latham
(iv) If to the Senior Lender(s), to:
Creditanstalt-Bankverein
Greenwich, CT 06830
Facsimile: 202-851-1234
Attention: Lisa Bruno
with a copy to:
Troutman Sanders L.L.P.
600 Peachtree Street, N.E.
Suite 5200
Atlanta, GA 30308-2216
Facsimile: 404-885-3900
Attention: Hazen H. Dempster
All such notices, requests and other communications will (x) if delivered
personally to the address as provided in this Section 5(d), be deemed given upon
delivery, (y) if delivered by facsimile transmission to the facsimile number as
provided in this Section 5(d), be deemed given upon receipt and (z) if delivered
by nationally recognized overnight courier service in the manner described above
to the address as provided in this Section 5(d), be deemed given on the business
day following the day it was sent (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section 5(d)). Any
party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other parties hereto.
(e) The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
(f) If any provision of this Agreement is held to be illegal, invalid
or unenforceable, and if the rights or obligations of any party hereto under
this Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as part of this Agreement a legal, valid and enforceable provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible.
11
<PAGE>
(g) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and
performed in such State without giving effect to the conflicts of laws
principles thereof.
(h) This Agreement may be executed in any number of counterparts, each
of which will be deemed an original, but all of which together will constitute
one and the same instrument.
(i) This Agreement hereby amends and restates the terms of the
Original Agreement in their entirety and shall only become effective upon the
consummation of the transactions set forth in the Transaction Agreement, at
which time the Original Agreement will be of no further force and effect from
the date thereof. In the event that the transactions set forth in the
Transaction Agreement are not consummated, this Agreement shall terminate and
the Original Agreement shall continue in effect.
* * * * *
12
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Amended and
Restated Stockholders' Agreement as of the date first written above.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
-------------------------------
Name: Harry A. Blazer
Title: President
ROBERT FLEMING NOMINEES LTD.
By: /s/ Jonathan Simon
-------------------------------
Name: Jonathan Simon
Title: Authorized Signatory
/s/ Harry A. Blazer
------------------------------------
Harry A. Blazer
13
<PAGE>
EXHIBIT 4.10
AMENDED AND RESTATED
INVESTORS' AGREEMENT
This AMENDED AND RESTATED INVESTORS' AGREEMENT is dated as of January 31,
1997, by and among Harry's Farmers Market, Inc., a Georgia corporation (the
"Company"), Harry A. Blazer ("HB") and the parties listed on Schedule I attached
- -------- --
hereto (the "Investors").
---------
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the terms of the Share and Warrant Purchase
Agreements, dated as of December 30, 1994 (the "Share and Warrant Purchase
--------------------------
Agreements"), between the Company and each of the Investors each Investor
- ----------
purchased the number of shares of the Company's Series A Redeemable Convertible
Preferred Stock, stated value $9.00 per share (the "Series A Preferred
------------------
Stock"),and warrants and performance warrants (together, the "Warrants")
--------
exercisable for shares of the Company's Class A Common Stock, no par value per
share (the "Class A Common Stock") set forth opposite such Investor's name on
--------------------
Schedule I;
WHEREAS, the Company, HB and each of the Investors entered into that
Investors' Agreement dated December 30, 1994 (the "Original Agreement") to
regulate certain aspects of their relationship; and
WHEREAS, HB owns 2,050,701 shares of the Company's Class B Common Stock, no
par value per share (the "Class B Common Stock" and together with the Class A
--------------------
Common Stock, the "Common Stock"), and no shares of Class A Common Stock (such
------------
shares, along with any shares of Common Stock or other equity securities of the
Company that HB may subsequently acquire, the "HB Shares"); and
---------
WHEREAS, pursuant to the terms of that Preferred Stock Exchange Agreement
of even date herewith between the Company, Robert Fleming Nominees Ltd. and each
of the Investors (the "Exchange Amendment") each of the Investors has agreed
that upon the consummation of the transactions set forth in that Transaction
Agreement of even date herewith between the Company and HFMI Acquisition
Corporation, a Delaware corporation ("Newco"), intends to exchange each share of
Series A Preferred Stock held by each Investor for one share of Series AA
Preferred Stock, stated value $9 per share, of the Company (the "AA Preferred
Stock").
WHEREAS, each of the Investors, HB, and the Company desires to amend and
restate the terms of the Original Agreement as set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Rights of Inclusion.
-------------------
(a) In the event HB proposes to Transfer (as such term and other
capitalized terms used herein are defined in Section 2 hereof), any HB Shares
(the "Transferor Shares") to any Person (the "Buyer"), as a condition to such
----------------- -----
Transfer, HB shall cause the Buyer to offer (the "Inclusion Offer") to purchase
---------------
<PAGE>
from each Investor, at the option of each Investor, up to that number of
Investor Shares determined in accordance with Section 1(b) on the same terms and
conditions as are applicable to the Transferor Shares (including any
consideration to be received by HB in the form of bonuses, consulting fees,
noncompetition payments, pursuant to employment arrangements or similar
arrangements), provided, that the Investors shall not be required to provide any
representation, warranty or other undertaking other than with respect to its
ownership of, and authority to Transfer, such Investor Shares free of any liens
or encumbrances. HB shall provide prompt written notice to each Investor (the
"Inclusion Notice") setting forth all the terms and conditions of the Inclusion
----------------
Offer, and each Investor may accept the Inclusion Offer in whole or in part by
providing a written notice of acceptance to HB within twenty (20) days of
delivery of the Inclusion Notice to such Investor.
(b) Each Investor shall have the right to sell, pursuant to the
Inclusion Offer, Investor Shares representing the same percentage of all
Investor Shares as the Transferor Shares are of all HB Shares; provided,
however, that if such Investors elect not to exercise such right, HB shall
nonetheless be entitled to Transfer all of the Transferor Shares described in
the Inclusion Notice. In the event the number of Investor Shares for which
Investors elect to exercise such right, along with the Transferor Shares and any
other shares of the Company to be sold by other shareholders pursuant to any
similar rights granted to such other shareholders, exceed the number of shares
which the Buyer is willing to purchase, the number of shares to be Transferred
to the Buyer by such transferor shall be reduced so that each transferor is
entitled to Transfer the same percentage of its shares as each other transferor.
If an Investor elects to exercise such right, such Investor may, in its sole
discretion, determine the composition of the Investor Shares (i.e., the number
of the AA Preferred Stock, Warrants, and Class A Common Stock to be included in
the Investor Shares) to be Transferred to the Buyer pursuant to the Inclusion
Offer. In the event an Investor chooses to include any AA Preferred Stock or
any Warrants in the Investor Shares to be Transferred to the Buyer pursuant to
the Inclusion Offer, such Investor shall, prior to or simultaneously with such
Transfer, convert such AA Preferred Stock into shares of Class A Common Stock
and exercise such Warrants into shares of Class A Common Stock so that such
Investor Transfers only Class A Common Stock to the Buyer.
(c) HB shall have ninety (90) days, commencing on the date of the
Inclusion Notice, in which to Transfer, on behalf of himself and the Investors,
up to the number of shares covered by the Inclusion Offer (including the
Transferor Shares) to the Buyer. The terms of such Transfer, including, without
limitation, price and form of consideration, shall be as set forth in the
Inclusion Notice. If at the end of such ninety (90) day period HB has not
completed the Transfer of the Transferor Shares and the Investor Shares (if any)
proposed to be Transferred, HB may not proceed with such Transfer or any other
Transfer without first giving a new Inclusion Notice pursuant to the provisions
of this Section 1.
(d) If HB is able to complete the Transfer of the Transferor Shares
and the Investor Shares (if any) proposed to be Transferred within such ninety
(90) day period, at the closing thereof, such Investors Transferring Investor
Shares shall deliver to the Buyer a certificate of certificates representing the
Investor Shares to be Transferred pursuant to the Inclusion Offer, free and
clear of all liens and encumbrances, and the Buyer shall pay to such Investor
the purchase price for the Investor Shares so Transferred pursuant to this
Section 1 and shall furnish such other evidence of the completion of such
2
<PAGE>
Transfer and the terms thereof as may be reasonably requested by such Investor.
(e) The provisions of this Section 1 shall not apply to any Transfer
or proposed Transfer by HB of HB Shares which, together with all other Transfers
by HB of HB Shares on or prior to the date of such Transfer represent ten
percent (10%) or less of the HB Shares held by HB on the date hereof,
appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar event. If any Transfer of the HB Shares, either
alone or together with all previous Transfers, exceeds such ten percent (10%)
threshold, the exclusion provided by this Section 1(e) shall apply to the
Transfer of that number of HB Shares needed to reach the ten percent (10%)
threshold and the other provisions of this Section 1 shall apply to the Transfer
of all HB Shares in excess of such ten percent (10%) threshold. In the event
that any Investor ceases to hold, directly or indirectly, AA Preferred Stock,
Warrants and Class A Common Stock representing at least fifteen percent (15%) of
the number of shares of Class A Common Stock into which the AA Preferred Stock
acquired by Investors pursuant to the Exchange Agreement and the Warrants
acquired by the Investors pursuant to the Share and Warrant Purchase Agreement,
as applicable, may be converted or exercised, then the provisions of this
Section 1 shall terminate and be of no further force or effect with respect to
such Investor.
2. Definitions.
-----------
As used herein, the following terms shall have the respective meanings
set forth below:
"AA Preferred Stock" shall have the meaning set forth in the fourth WHEREAS
------------------
clause hereof.
"Buyer" shall have the meaning set forth in Section 1(a) hereof.
-----
"Class A Common Stock" shall have the meaning set forth in the first
--------------------
WHEREAS clause hereof.
"Class B Common Stock" shall have the meaning set forth in the third
--------------------
WHEREAS clause hereof.
"Common Stock" shall have the meaning set forth in the third WHEREAS clause
------------
hereof.
"Company" shall have the meaning set forth in the first paragraph hereof.
-------
"HB" shall have the meaning set forth in the first paragraph hereof.
--
"HB Shares" shall have the meaning set forth in the third WHEREAS clause
---------
hereof.
"Investors" shall have the meaning set forth in the first paragraph hereof.
---------
"Investor Shares" means, with respect to each Investor all AA Preferred
---------------
Stock, Warrants and Class A Common Stock owned by such Investor.
3
<PAGE>
"Inclusion Notice" shall have the meaning set forth in Section 1(a) hereof.
----------------
"Inclusion Offer" shall have the meaning set forth in Section 1(a) hereof.
---------------
"Investors" shall have the meaning set forth in the first paragraph hereof.
---------
"Investor Shares" means, with respect to each Investor all AA Preferred
---------------
Stock, Warrants and Class A Common Stock owned by such Investor.
"Performance Warrants" shall have the meaning set forth in the first
--------------------
WHEREAS clause hereof.
"Person" means an individual corporation, partnership, limited liability
------
company, firm, association, joint venture, trust, unincorporated organization,
governmental body, agency, political subdivision or other entity.
"Share and Warrant Purchase Agreements" shall have the meaning set forth in
-------------------------------------
the first WHEREAS clause hereof.
"Transfer" means, with respect to any security, any direct or indirect
--------
sale, transfer, assignment, hypothecation, pledge or any other disposition of
such security or any interest therein.
"Transferor Shares" shall have the meaning set forth in Section 1(a)
-----------------
hereof.
"Warrants" shall have the meaning set forth in the first WHEREAS clause
--------
hereof.
3. Miscellaneous.
-------------
(a) In the event of a breach by any party to this Agreement of its
obligations under this Agreement, any party injured by such breach, in addition
to being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense in any action for specific
performance that a remedy at law would be adequate is waived.
(b) Except as otherwise provided herein, no modification, amendment or
waiver of any provision of this Agreement will be effective against any
provision of this Agreement will be effective against any party hereto unless
such modification, amendment or waiver is approved in writing by all parties
hereto. The failure of any party to enforce any of the provisions of this
Agreement will in no way be construed as a waiver of such provisions and will
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
(c) All covenants and agreements in this Agreement by or on behalf of any
4
<PAGE>
of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
(d) All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
or by facsimile transmission or sent by nationally recognized overnight courier
service to the parties at the following addresses or facsimile numbers:
(i) If to Investors, to the addresses
indicated on Schedule I hereto:
(ii) If to the Company, to:
Harry's Farmers Market, Inc.
1180 Upper Hembree Road
Roswell, GA 30076
Facsimile: (404) 772-9062
Attn: Harry A. Blazer
with a copy to:
Alston & Bird
One Atlantic Center
1201 W. Peachtree Road, N.W.
Atlanta, GA 30309-3424
Facsimile: (404) 881-7777
Attn: John Latham
(iii) If to HB, to:
Harry A. Blazer
c/o Harry's Farmers Market
1180 Upper Hembree Road
Roswell, GA 30076
with a copy to:
Alston & Bird
One Atlantic Center
1201 W. Peachtree Road, N.W.
Atlanta, GA 30309-3424
Facsimile: (404) 881-7777
Attn: John Latham
All such notices, requests and other communications will (x) if delivered
personally to the address as provided in this Section 3(d), be deemed given upon
delivery, (y) if delivered by facsimile transmission to the facsimile number as
provided in this Section 3(d), be deemed given upon receipt and (z) if delivered
by nationally recognized overnight courier service in the manner described above
to the address as provided in this Section 3(d), be deemed given on the business
day following the day it was sent (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section 3(d)). Any
5
<PAGE>
party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other parties hereto.
(e) The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof.
(f) If any provision of this Agreement is held to be illegal, invalid or
unenforceable, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as part of this Agreement a legal, valid and enforceable provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible.
(g) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to a contract executed and
performed in such State without giving effect to the conflicts of laws
principles thereof.
(h) This Agreement may be executed in any number of counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
(i) This Agreement hereby amends and restates the terms of the Original
Agreement in their entirety and shall only become effective upon the
consummation of the transactions set forth in the Transaction Agreement, at
which time the Original Agreement will be of no further force and effect from
the date thereof. In the event that the transactions set forth in the
Transaction Agreement are not consummated, this Agreement shall terminate and
the Original Agreement shall continue in effect.
* * * * *
6
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Amended and
Restated Investors' Agreement as of the date first written above.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
------------------------------
Name: Harry A. Blazer
Title: President
AXA EQUITY & LAW LIFE ASSURANCE
SOCIETY
By: /s/ Anthony R. Arnold
------------------------------
Anthony R. Arnold
Associate Director
AXA Equity & Law Investment
Managers, Ltd.
ORBIS PENSION TRUSTEES LTD.
By: /s/ David J. Lewis
------------------------------
David J. Lewis
Investment Manager
ASHFORD CAPITAL PARTNERS, L.P.
By: Ashcap Corp., General Partner
By: /s/ Theodore H. Ashford
------------------------------
Theodore H. Ashford
President
/s/ Theodore H. Ashford
-------------------------------------
Theodore H. Ashford
/s/ Harry A. Blazer
-------------------------------------
Harry A. Blazer
7
<PAGE>
SCHEDULE I
INVESTORS
<TABLE>
<CAPTION>
Number of Shares of:
Class A
Common
Stock for
Class A which the
Common Stock for Performance
AA Preferred which the Warrants Warrants are
Name and Address Stock are Exercisable Exercisable
- ---------------- ------------ ------------------ ------------
<S> <C> <C> <C>
AXA Equity & Law Life 166,667 56,250 8,333
Assurance Society
20 Lincoln's Inn Fields
London WC2A 3ES
England
Facsimile No.:
011-44-71-242-5030
Attn: Mr. Tony Arnold
Associate Director
Orbis Pension Trustees Ltd. 111,111 37,500 5,556
c/o Chatsworth Management Services,
Ltd.
One Connaught Place
London W2 2DY
England
Facsimile No.:
011-44-71-298-0002
Attn: Mr. David Lewis
Investment Manager
Ashford Capital Partners, L.P. 44,444 15,000 2,222
3801 Kennett Pike
Suite B-107
Wilmington, DE 19807
Facsimile No.:
(302) 655-8690
Attn: Mr. Theodore H. Ashford,
President
Theodore H. Ashford 11,111 3,750 556
c/o Ashford Capital Partners, L.P.
3801 Kennett Pike
Suite b-107
Wilmington, DE 19807
Facsimile No.:
(302) 655-8690
</TABLE>
8
<PAGE>
EXHIBIT 4.11
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made as of the 31st day
of January, 1997, by and between Harry's Farmers Market, Inc., a Georgia
corporation (the "Company"), and HFMI Acquisition Corporation, a Delaware
corporation (the "Purchaser").
WITNESSETH:
WHEREAS, the Company has agreed to provide the Purchaser with certain
registration rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to and on the terms
and conditions herein set forth, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 "Business Day" means any day on which the principal trading market for
the Common Stock is open for trading.
1.2 "Closing Date" means January 31, 1997.
1.3 "Common Stock" means the Class A Common Stock, no par value, of the
Company.
1.4 "Eligible Piggyback Registration" means any occasion occurring after
the Closing Date that the Company proposes to register any shares of Common
Stock in any manner which would permit registration of Eligible Securities for
public sale under the Securities Act, other than any offering described in
Sections 2.1(a) through (e).
1.5. "Eligible Securities" means all or any portion of the shares of
Common Stock now owned or hereafter acquired by a Stockholder or which are
issuable upon the conversion, exercise or exchange of any security of the
Company now owned or hereafter acquired by a Stockholder or which a Stockholder
has a right to acquire, including preferred stock, notes or other evidences of
indebtedness convertible into, exercisable or exchangeable for Common Stock, and
Common Stock issuable upon exercise of any warrant, and all other securities
issued with respect thereto by reason of dividends, stock splits, combinations
or similar transactions. Securities shall cease to be Eligible Securities for
all purposes of this Agreement when (i) a registration statement with respect to
the sale of such securities shall have become effective
<PAGE>
under the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (ii) such securities are permitted
to be sold pursuant to Rule 144(k) (or any successor provision to such Rule)
under the Securities Act, (iii) such securities shall have been otherwise
transferred pursuant to an applicable exemption under the Securities Act, new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company and such securities shall be
freely transferable to the public without registration under the Securities Act,
or (iv) a written opinion of counsel of the Company addressed to the Stockholder
owning such securities to the effect that such securities may be sold without
registration under the Securities Act has been delivered to such Stockholder.
1.6 "Person" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
1.7 The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing with the SEC a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement.
1.8 "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (i) the fees,
disbursements and expenses of the Company's counsel(s), accountants and experts
in connection with the registration of Eligible Securities to be disposed of
under the Securities Act; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering document and amendments and supplements
thereto and the mailing and delivering of copies thereof to the underwriters and
dealers; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of Eligible Securities to be disposed of; (iv) SEC or
blue sky registration fees attributable to Eligible Securities; (v) all expenses
in connection with the qualification of Eligible Securities to be disposed of
for offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(vi) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Eligible
Securities to be disposed of; and (vii) fees and expenses incurred in connection
with the listing of Eligible Securities on each securities exchange on which
securities of the same class are then listed; provided, however, that
Registration Expenses with respect to any Eligible Registration pursuant to this
Agreement shall not include underwriting discounts or commissions attributable
to Eligible Securities, transfer
2
<PAGE>
taxes applicable to Eligible Securities, or any fees and disbursements of any
legal counsel, accountant or other expert or professional advisor retained by a
Stockholder.
1.9 "Resale Registration" shall have the meaning set forth in Article 3
hereof.
1.10 "SEC" means the Securities and Exchange Commission.
1.11 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as the same shall be in effect
at the relevant time.
1.12 "Selling Stockholder" means any Stockholder requesting the
registration of Eligible Securities registered pursuant to Article 2 or Article
3 hereof.
1.13 "Stockholder" means the Purchaser and any person holding Eligible
Securities to whom the rights under this Agreement have been transferred in
accordance with Section 7.9 hereof.
ARTICLE 2
PIGGYBACK REGISTRATIONS
2.1 Notice and Registration. If the Company proposes to register any shares
of Common Stock for public sale under the Securities Act in an Eligible
Piggyback Registration, it will give prompt written notice to the Stockholders
of its intention to do so, and upon the written request of a Stockholder
delivered to the Company within ten (10) Business Days after the giving of any
such notice by the Company (which request shall specify the number of Eligible
Securities intended to be disposed of by the Selling Stockholder and the
intended method of disposition thereof) the Company will use all reasonable
efforts to effect, in connection with the registration of its Common Stock in
such Eligible Piggyback Registration, the registration under the Securities Act
of all Eligible Securities in which the Company has been so requested to
register by the Selling Stockholders, to the extent required to permit the
public sale (in accordance with the intended method or methods thereof as
aforesaid) of Eligible Securities so to be registered, provided that:
(a) if, at any time after giving such written notice of its intention
to register any Common Stock, the Company shall determine for any reason not to
register the Common Stock or to terminate or withdraw such registration, the
Company may, at its election, give written notice of such determination to the
Selling Stockholders and thereupon the Company shall be relieved of its
obligation to register (or continue the registration of) such Eligible
Securities in connection with the registration of such Common Stock (but not
from its obligation to pay Registration Expenses to the extent incurred in
connection therewith as provided in Section 2.3);
3
<PAGE>
(b) the Company will not be required to effect any registration
pursuant to this Article 2 if the Company shall have been advised in writing by
a nationally recognized independent investment banking firm selected by the
Company to act as lead underwriter in connection with the public offering of the
Common Stock by the Company that, in such firm's opinion, a registration of
shares of Common Stock of the Stockholders pursuant to this Article 2 at that
time may materially and adversely affect the Company's own scheduled offering;
(c) the Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the registration of any
of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock options or other
employee benefit plans;
(d) the Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the filing of a
registration statement for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act or any similar rule that may
be adopted by the SEC; and
(e) in no event shall the Company be required to register Eligible
Securities if, in the reasonable judgment of the Company, the amount of Eligible
Securities for which registration has been requested does not justify the effort
and/or expense to the Company of effecting such registration.
2.2 Reduction of Offering. If the offering is an underwritten offering, the
right of holders of Eligible Securities to registration pursuant to this Article
2 shall be conditioned on such holders' participation in such underwritten
offering and the inclusion of such holders' Eligible Securities in such
underwritten offering to the extent provided below. In the case of any offering
made pursuant to an Eligible Piggyback Registration, if the Board of Directors
of the Company (if the offering is not underwritten) or the managing underwriter
(if the offering is underwritten) determines in good faith that inclusion of all
of the Eligible Securities requested to be registered in such offering would
jeopardize the success of such offering, the Board of Directors or the managing
underwriter, as the case may be, may limit the Eligible Securities to be
included in such registration. The Company shall so advise all Selling
Stockholders and the number of Eligible Securities that may be included in the
offering will be allocated among the Selling Stockholders and other stockholders
of the Company to whom the Company has heretofore granted piggy-back
registration rights, pro rata, and among the Selling Stockholders as
contemplated by Section 6.1 hereof or, absent such agreement, among all such
Selling Stockholders in proportion, as nearly as practicable, to the number of
Eligible Securities held by such Selling Stockholders. Any Eligible Securities
excluded or withdrawn from such offering shall be withdrawn from such
registration.
2.3 Registration Expenses. The Company (as between the Company and the
Selling Stockholders) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 2.
4
<PAGE>
ARTICLE 3
RESALE REGISTRATION
3.1 Notice and Registration. The Company hereby agrees to file under the
Securities Act, within the 18-month period immediately following the Closing
Date (such period, subject to extension as provided below, the "Resale
Registration Period"), a registration statement on Form S-1 or any similar long-
form registration statement or Form S-3 or any similar short-form registration
statement, at its election, to register, in a non-underwritten offering, all
Eligible Securities for which the Company has received notice of intent to
register by Selling Stockholders pursuant to this Article 3, whether in
connection with a primary registration of its Common Stock or otherwise ("Resale
Registration"). The Company shall have the right to select the timing of the
Resale Registration within the Resale Registration Period. The Resale
Registration Period shall be extended for a period of 12 additional months if
the Company shall have been advised in writing by a nationally recognized
independent investment banking firm that, in such firm's opinion, the filing of
a registration statement for the Resale Registration immediately prior to the
end of the original Resale Registration Period might materially and adversely
affect the Company (including the price of the Company's Common Stock). When the
Company proposes to file a registration statement for the Resale Registration,
it will give written notice to the Stockholders of its intention to do so. Each
Stockholder shall have ten (10) Business Days from the giving of such notice to
notify the Company in writing of such Stockholder's intention to have the
Company include in the Resale Registration such Stockholder's Eligible
Securities (which notice shall specify the number of Eligible Securities
(including shares of Common Stock issuable in the future upon the conversion,
exercise or exchange of preferred stock, notes or other evidences of
indebtedness, the timing of which conversion, exercise or exchange thereof shall
be determined in the sole discretion of the Stockholder requesting registration
hereunder) intended to be disposed of by the Selling Stockholder and the
intended method of disposition thereof). The Company shall thereafter promptly
prepare and file with the SEC the registration statement to effect the Resale
Registration and shall use its reasonable best efforts to cause such
registration statement to become effective.
3.2 Restrictions on Resale Registration. The Company shall not be obligated
to effect the Resale Registration (i) in the event that the aggregate offering
value of the Eligible Securities to be registered in the Resale Registration
does not equal or exceed $3,000,000 or (ii) within three months after the
effective date of a previous Eligible Piggyback Registration in which Eligible
Securities were registered and the Selling Stockholders selling thereon were
able to sell at least 80% of the Eligible Securities they had requested to sell
on such Eligible Piggyback Registration. In the event that the Company does not
effect a Resale Registration because (x) the value of the Eligible Securities to
be registered in the Resale Registration does not equal or exceed $3,000,000,
the Company's obligation to file a registration statement for a Resale
Registration shall be terminated, and (y) the circumstances set forth in
subsection (ii) above apply, the Company's obligation to effect such Resale
Registration shall continue and the Company shall effect such Resale
Registration pursuant to the terms of this Article 3 upon the
5
<PAGE>
expiration of the three-month period referred to in subsection (ii) hereof,
notwithstanding the expiration of the Resale Registration Period. In addition,
the Company may postpone for up to three months the filing or effectiveness of a
registration statement for a Resale Registration if the Company believes that
such Resale Registration would reasonably be expected to have an adverse effect
on any proposal or plan by the Company or any of its subsidiaries to engage in
any acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction; provided, however,
that immediately following such postponement, the Company shall file or request
effectiveness of the Resale Registration notwithstanding the expiration of the
Resale Registration Period.
3.3 Registration Expenses. The Company (as between the Company and the
Selling Stockholders) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 3.
3.4 Holdback Agreements. If the Company shall have filed a registration
statement for the Resale Registration and such registration statement shall have
become effective, each of the Selling Stockholders agrees not to effect the sale
of more than 25% of the Eligible Securities beneficially owned by such Selling
Stockholder as of the effective date of such registration statement during any
period of six consecutive months following such effective date. This holdback
agreement will terminate on the second anniversary of the effective date of the
registration statement for the Resale Registration.
3.5 Black-Out Period. The Company may, by notice given to all Selling
Stockholders under the Resale Registration, require such Selling Stockholders
not to make any sale of Eligible Securities pursuant to the registration
statement for the Resale Registration if (i) in the opinion of counsel for the
Company, (x) securities laws applicable to such sale would require the Company
to disclose material non-public information ("Non-Public Information") and (y)
the disclosure of such Non-Public Information would adversely affect the Company
or (ii) such sale would occur during the measurement period (a "Measurement
Period") for determining the amount of Common Stock, or the amount of any other
consideration the amount of which will be based on the price of the Common
Stock, in connection with the acquisition of a business or assets by the
Company. In the event the sales under the Resale Registration are deferred
because of the existence of Non-Public Information, the Company will notify the
Selling Stockholders promptly upon such Non-Public Information being included by
the Company in a filing with the SEC, being otherwise disclosed to the public
(other than through the actions of a Selling Stockholder) or ceasing to be
material to the Company, and upon such notice being given by the Company, the
Selling Stockholders shall again be entitled to sell Eligible Securities
pursuant to the Resale Registration. In the event such sales are deferred
because it is proposed to be made during a Measurement Period, the Company shall
specify, in notifying the Selling Stockholders of the deferral of its sale, when
the Measurement Period will end, at which time the Selling Stockholders shall
again be entitled to sell Eligible Securities pursuant to the Resale
Registration. If the Measurement Period is thereafter changed, the Company will
promptly notify the Selling Stockholders of such change and upon the end of the
Measurement Period as so changed, the
6
<PAGE>
Selling Stockholders will again be entitled to sell Eligible Securities pursuant
to the Resale Registration. If the acquisition agreement to which such
Measurement Period relates is terminated prior to the end of the Measurement
Period, the deferral period hereunder shall end immediately and the Company will
notify the Selling Stockholders of the end of the deferral period. The Company
may defer proposed sales of Eligible Securities pursuant to this Section 3.5 for
not more than a total of 60 days in any 365-day period.
ARTICLE 4
REGISTRATION PROCEDURES
4.1 Registration and Qualification.
(a) If and whenever the Company is required to use reasonable efforts
to effect the registration of any Eligible Securities under the Securities Act
as provided in Article 2 or Article 3 hereof, the Company will as promptly as is
practicable register the Eligible Securities under the Securities Act and use
reasonable commercial efforts to cause the registration statement to become
effective;
(b) The Company shall prepare and file with the SEC such amendments
and supplements to any registration statement registering Eligible Securities
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective, and comply with the provisions of the
Securities Act with respect to the disposition of all Eligible Securities, until
the earlier of such time as all of such Eligible Securities have been disposed
of in accordance with the intended methods of disposition by the Selling
Stockholders as set forth in the registration statement or (i) with respect to
an Eligible Piggyback Registration, the expiration of thirty (30) days after
such registration statement has become effective (or, if such registration
statement relates to an underwritten offering, such longer period as in the
opinion of counsel for the underwriters a prospectus is required by law to be
delivered in connection with sales of Eligible Securities by an underwriter or
dealer), or (ii) with respect to the Resale Registration, the expiration of
three years after the date such registration statement has become effective;
provided, however, that in the event that the Company shall notify the Selling
Stockholders of the happening of any event which would cause the prospectus
included as part of such registration statement, as then in effect, to include
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, such
Selling Stockholders shall thereafter sell no shares under such registration
statement until the Company has filed an amendment or supplement to the
prospectus to cause the prospectus not to include an untrue statement of a
material fact or omit to state any material facts required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and, subject to Section 3.5 hereof, the
Company shall be obligated to promptly amend or supplement the prospectus so
that the prospectus does not include an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
7
<PAGE>
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(c) The Company will use its reasonable best efforts to register or
qualify such Eligible Securities under the blue sky laws of such jurisdictions
as any Selling Stockholder reasonably requests and to do any and all other acts
which may be reasonably necessary to enable such Selling Stockholder to
consummate the disposition in such jurisdictions of the Eligible Securities
owned by such Selling Stockholder (provided that the Company will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction);
(d) The Company may require the Selling Stockholders to furnish to the
Company such information regarding the Selling Stockholders and the distribution
of the Eligible Securities as the Company may from time to time reasonably
request in writing and as shall be required by law or by the SEC in connection
with any registration;
(e) The Company shall provide to each Selling Stockholder a reasonable
opportunity to review the registration statement prior to the filing of the
registration statement with the SEC;
(f) The Company shall provide to each Selling Stockholder such number
of copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Selling Stockholder may
reasonably request in order to facilitate the disposition of the Eligible
Securities registered pursuant to such registration statement; and
(g) The Company will provide a transfer agent and registrar for all
Eligible Securities not later than the effective date of the registration
statement, and use its reasonable best efforts to cause the Eligible Securities
to be listed on each securities exchange or national market system on which the
Common Stock is then listed.
4.2 Underwriting. In the event that any registration pursuant to Article 2
or Article 3 hereof shall involve, in whole or in part, an underwritten
offering, the Company may require Eligible Securities requested to be registered
pursuant to Article 2 or Article 3 to be included in such underwriting on the
same terms and conditions as shall be applicable to the Common Stock being sold
through underwriters under such registration. In such case, the holders of
Eligible Securities on whose behalf Eligible Securities are to be distributed by
such underwriters shall be parties to any such underwriting agreement. Such
agreement shall contain such representations and warranties by the Selling
Stockholders and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities and contribution to the effect and to the extent
provided in Article 5. The representations and warranties in such underwriting
agreement by,
8
<PAGE>
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such Selling
Stockholders.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification.
(a) In the event of any registration of any Eligible Securities
hereunder, the Company will enter into the customary indemnification
arrangements to indemnify and hold harmless each Stockholder who exercises his
or its registration rights hereunder and, to the extent applicable, its
directors and officers, its partners, its trustees and each Person who controls
any of such Persons, each Person who participates as an underwriter in the
offering or sale of any Eligible Securities, and each Person, if any, who
controls such underwriter within the meaning of the Securities Act against any
losses, claims, damages, liabilities and expenses, joint or several, to which
such Person may be subject under the Securities Act or otherwise insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities Act,
any final prospectus included therein, or any amendment or supplement thereto,
or any document incorporated by reference therein, or (ii) 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 the Company will
promptly reimburse each such Person for any legal or any other expenses
reasonably incurred by such Person in connection with investigating or defending
any such loss, claim, damage, liability, action or proceeding; provided that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any final
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company or such underwriter by such Selling
Stockholders expressly for use in the registration statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of a Selling Stockholder or any such Person and shall survive the
transfer of such securities by the Selling Stockholders.
(b) The Selling Stockholders, by virtue of exercising their
registration rights hereunder, agree and undertake to enter into customary
indemnification arrangements to severally and not jointly indemnify and hold
harmless (in the same manner and to the same extent as set forth in clause (a)
of this Article 5) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement, and each Person who
participates as an underwriter in the offering or sale of such securities, each
Person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act, with respect to any statement in or omission from
such registration statement, any final prospectus
9
<PAGE>
included therein, or any amendment or supplement thereto, but only to the extent
that such statement or omission was made in reliance upon and in conformity with
written information furnished by such Selling Stockholders to the Company
expressly for use in the registration statement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling Person and shall
survive the transfer of the registered securities by the Selling Stockholders
and the expiration of this Agreement.
(c) Indemnification similar to that specified in the preceding
subdivisions of this Article 5 (with appropriate modifications) shall be given
by the Company and the Selling Stockholders with respect to any required
registration or other qualification of such Eligible Securities under any
federal or state law or regulation of governmental authority other than the
Securities Act.
ARTICLE 6
BENEFITS
6.1 Benefits of Registration Rights. Subject to the limitations of Section
2.1 hereof, Stockholders may severally or jointly exercise the registration
rights hereunder in such manner and in such proportion as they shall agree among
themselves.
6.2 Qualification for Rule 144 Sales. Upon the written request of any
Stockholder, the Company will deliver to such Stockholder a written statement as
to whether it has complied with the filing requirements described in Rule
144(c)(1).
ARTICLE 7
MISCELLANEOUS
7.1 Captions. The captions or headings in this Agreement are for
convenience and reference only, and in no way define, describe, extend or limit
the scope or intent of this Agreement.
7.2 Severability. If any clause, provision or section of this Agreement
shall be invalid or unenforceable, the invalidity or unenforceability of such
clause, provision or section shall not affect the enforceability or validity of
any of the remaining clauses, provisions or sections hereof to the extent
permitted by applicable law.
7.3 Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Georgia, without reference to
its rules as to conflicts or choice of laws.
10
<PAGE>
7.4 Modification and Amendment. This Agreement may not be changed,
modified, discharged or amended, except by an instrument signed by the
Stockholders owning at least 75% of the Eligible Securities.
7.5 No Superior Registration Rights Agreement. The Company will not
hereafter enter into any registration rights agreement granting registration
rights that are superior to the registration rights granted hereby. The Company
may grant registration rights that are pari passu with the registration rights
granted hereby.
7.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
7.7 Entire Agreement. This Agreement constitutes the entire agreement and
understanding among the parties and supersedes any prior understandings and/or
written or oral agreements among them respecting the subject matter herein.
7.8 Notices. All notices, requests, demands, consents and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail, return receipt requested, postage prepaid. Notices shall
be deemed given when actually received, which shall be deemed to be not later
than the next Business Day if sent by overnight courier or after five (5)
Business Days if sent by mail. Notice to Stockholders shall be made to the
address listed on the stock transfer records of the Company.
7.9 Transfer of Registration Rights. The rights to cause the Company to
register Eligible Securities granted to Purchaser hereunder may be assigned to
one or more transferees or assignees in connection with any transfer or
assignment in a private transaction of Eligible Securities, or securities
convertible into or exercisable or exchangeable for Eligible Securities, in
accordance with the terms of such securities. Any transfer of registration
rights pursuant to this Section shall be effective upon receipt by the Company
of written notice from Purchaser or such other Stockholder transferring Eligible
Securities (i) stating the name and address of the transferee, (ii) the number
of Eligible Securities transferred and (iii) the date of transfer, which notice
shall be accompanied by an agreement of the transferee stating that all of the
terms and provisions of this Agreement will be binding upon and enforceable
against such transferee.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
------------------------------------
Title: President
---------------------------------
HFMI ACQUISITION CORPORATION
By: /s/ Saad J. Nadhir
------------------------------------
Title: Chief Executive Officer
---------------------------------
12
<PAGE>
EXHIBIT 4.12
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE
STATE SECURITIES ACTS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK
OF
HARRY'S FARMERS MARKET, INC.
============================
DATE OF INITIAL ISSUANCE: JANUARY 31, 1997
THIS CERTIFIES THAT, for value received, the Holder is entitled to purchase
from Harry's Farmers Market, Inc. (the "Company") at any time prior to January
31, 2001, up to 2,000,000 shares of Class A Common Stock of the Company, at any
time and from time to time, in whole or in part, on or after January 31, 1997,
at the following Exercise Prices per share:
Shares Purchased Prior to January 31, 1998. If this Warrant is exercised in
whole or in part on or after January 31, 1997 and prior to January 31, 1998, the
Exercise Price shall be (i) $4.00 per Share for the first 500,000 Shares
purchased, (ii) $4.50 per Share for the next 500,000 Shares purchased, (iii)
$5.00 per Share for the next 500,000 Shares purchased, and (iv) $5.50 per share
for the next 500,000 Shares purchased.
Shares Purchased Prior to January 31, 1999. If this Warrant is exercised in
whole or in part on or after January 31, 1998 and prior to January 31, 1999, the
Exercise Price shall be (i) $4.50 per Share for the first 1,000,000 Shares
purchased, (ii) $5.00 per Share for the next 500,000 Shares purchased, and (iii)
$5.50 per share for the next 500,000 Shares purchased. Provided, that the number
of Shares purchased prior to January 31, 1998, shall (i) reduce the number of
Shares purchasable at $4.50 per Share, and if greater than 1,000,000, (ii)
reduce the number of Shares purchasable at $5.00 per Share.
Shares Purchased Prior to January 31, 2000. If this Warrant is exercised in
whole or in part on or after January 31, 1999 and prior to January 31, 2000, the
Exercise Price shall be (i) $5.00 per Share for the first 1,500,000 Shares
purchased, and (ii) $5.50 per share for the next 500,000 Shares purchased.
Provided, that the number of Shares purchased prior to January 31, 1999, shall
reduce the number of Shares purchasable at $5.00 per Share.
Shares Purchased Prior to January 31, 2001. If this Warrant is exercised in
whole or in part on or after January 31, 2000 and prior to January 31, 2001, the
Exercise Price shall be $5.50 per Share.
This Warrant shall expire January 31, 2001.
<PAGE>
SECTION 1. DEFINITIONS.
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"Class A Common Stock" means the Company's Class A Common Stock, without
par value.
"Company" means Harry's Farmers Market, Inc., a Georgia corporation.
"Current Market Price" means the average of the daily closing prices of one
share of Class A Common Stock for the fifteen (15) consecutive business day
period ending the day before the day in question and such average will be
adjusted for any stock dividend, split, combination or reclassification that
took effect during such fifteen (15) business day period. The closing price for
each day shall be the last reported sales price regular way or, in case no such
reported sales took place on such day, the average of the last reported bid and
asked prices regular way, in either case on the principal national securities
exchange on which the Class A Common Stock is listed or admitted to trading, or
if the Class A Common Stock is not at the time listed or admitted for trading on
any such exchange, then such price as shall be equal to the average of the last
reported bid and asked prices, as reported by Nasdaq on such day, or if, on any
day in question, the Class A Common Stock shall not be quoted on Nasdaq, then
such price shall be equal to the average of the last reported bid and asked
prices on such day as reported by Nasdaq. Notwithstanding the foregoing, if the
Class A Common Stock is not traded in such manner that the prices referred to
above are available for the period required hereunder, the Current Market Price
shall be determined in good faith by the Board of Directors of the Company
(which determination shall be conclusive absent manifest error).
"Excluded Stock" means shares of Class A Common Stock (including options to
purchase or rights to subscribe for Class A Common Stock, securities by their
terms convertible into or exchangeable for Class A Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable securities)
issued by the Company in the following cases: (i) issuance of a stock dividend
payable in shares of Class A Common Stock, or (ii) any issuance described in
Section 9.7.8 of the Articles of Amendment to Articles of Incorporation of the
Company for the Series AA Preferred Stock, stated value $9.00 per share, of the
Company as in effect as of the date hereof.
"Holder" means HFMI Acquisition Corporation, a Delaware corporation, or its
registered assigns of all or any portion of this Warrant.
"Nasdaq" means the Nasdaq Stock Market.
"Notice of Exercise" means the Notice of Exercise in the form of Exhibit A.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant Shares" means the shares of Class A Common Stock obtainable by
the Holder upon the exercise of this Warrant.
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<PAGE>
SECTION 2. EXERCISE OF WARRANT.
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2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part, the Holder shall deliver to the Company at any time prior to January
31, 2001 (i) a Notice of Exercise; (ii) cash or certified or official bank
check, payable to the order of the Company in the amount of the Exercise Price;
and (iii) this Warrant. Upon payment of the Exercise Price, the Holder shall be
deemed to be the holder of record of the Warrant Shares, notwithstanding that
the stock transfer books of the Company may then be closed or that certificates
representing such Warrant Shares may not then be actually delivered to the
Holder. The Company shall, as promptly as practicable thereafter, cause to be
executed, and deliver to the Holder, or the Holder's nominee, a certificate or
certificates representing the aggregate number of Warrant Shares specified in
the Notice of Exercise. Each stock certificate so delivered shall be in such
denomination as may be requested by the Holder and shall be registered in the
name of the Holder or such other name as shall be designated by the Holder. If
this Warrant shall have been exercised only in part, the Company shall, at the
time of delivery of said stock certificate or certificates, deliver to the
Holder a new Warrant evidencing the right of the Holder to purchase the
remaining shares of Class A Common Stock covered by this Warrant. The Company
shall pay all expenses, taxes and other charges payable in connection with the
preparation, execution and delivery of such stock certificates regardless of the
name or names in which such stock certificates shall be registered.
2.2. Restrictive Legend. Each certificate for Warrant Shares shall be
legended as follows (unless such Warrant Shares shall be registered under the
Securities Act at the time of exercise):
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 or under any state securities laws and
shall not be transferred at any time in the absence of (i) an effective
registration statement under the Securities Act of 1933 and applicable
state securities laws, or (ii) an opinion of counsel reasonably
satisfactory to the Company that such registration is not required."
2.3. Character of Warrant Shares. The Company warrants that all Warrant
Shares shall be duly authorized, validly issued, and, upon payment of the
Exercise Price, fully paid and nonassessable.
2.4. Adjustment of Number of Shares. Upon each adjustment of the Exercise
Price as provided in Section 2.5 hereof (except 2.5.1), the Holder shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of Warrant Shares (calculated to the nearest one-tenth
(1/10) of a share) obtained by (i) multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares immediately
prior to such adjustment, and (ii) dividing the product thereof by the Exercise
Price resulting from such adjustment.
2.5. Adjustment of Exercise Price. The Exercise Price shall be subject to
adjustment from time to time as follows:
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<PAGE>
2.5.1 Anti-Dilution. If the Company issues shares of Class A Common Stock
other than Excluded Stock without consideration or for a consideration per share
less than the Exercise Price in effect immediately prior to the issuance of such
Class A Common Stock, the Exercise Price in effect immediately prior to each
such issuance shall forthwith be adjusted to a price equal to the quotient
obtained by dividing:
(i) an amount equal to the sum of:
(A) the total number of shares of Class A Common Stock
outstanding (including any shares of Class A Common Stock deemed to have
been issued pursuant to Section 2.5.1(iii)(C) hereof and to Section 2.5.2)
immediately prior to such issuance multiplied by the Exercise Price in
effect immediately prior to such issuance, plus
(B) the consideration received by the Company upon such issuance,
by
(ii) the total number of shares of Class A Common Stock outstanding
(including any shares of Class A Common Stock deemed to have been issued
pursuant to Section 2.5.1(iii)(C) and to Section 2.5.2) immediately after such
issuance of such Class A Common Stock.
(iii) For the purposes of any adjustment of the Exercise Price
pursuant to this Section 2.5.1, the following provisions shall be applicable:
(A) When Class A Common Stock is issued for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof;
(B) When Class A Common Stock is issued for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the Board of
Directors of the Company (which determination shall be conclusive absent
manifest error), irrespective of any accounting treatment; provided,
however, that such fair market value determined by the Board of Directors
shall not exceed the aggregate Current Market Price of the shares of Class
A Common Stock being issued;
(C) In the case of the issuance of options to purchase or rights
to subscribe for Class A Common Stock, securities by their terms
convertible into or exchangeable for Class A Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable
securities (other than in all cases, Excluded Securities):
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<PAGE>
(1) the aggregate maximum number of shares of Class A Common
Stock deliverable upon exercise of such options to purchase or rights
to subscribe for Class A Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in Section 2.5.1(iii)(A) and (B) above with the proviso in
Section 2.5.1(iii)(B) above being applied to the number of shares of
Class A Common Stock deliverable upon such exercise) received by the
Company upon the issuance of such options or rights, plus the minimum
purchase price provided in such options or rights for the Class A
Common Stock covered thereby;
(2) the aggregate maximum number of shares of Class A Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options
to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversions or exchanges
thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for a
consideration equal to the consideration received by the Company for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the additional consideration, if any, to be received by the Company
upon the conversion or exchange of such securities or the exercise of
any related options or rights (the consideration in each case to be
determined in the manner provided in Section 2.5.1(iii)(A) and (B)
above with the proviso in Section 2.5.1(iii)(B) above being applied to
the number of shares of Class A Common Stock deliverable upon such
conversion, exchange or exercise);
(3) on any change in the number of shares of Class A Common Stock
deliverable upon exercise of any such options or rights or conversion
of or exchange for such convertible or exchangeable securities, other
than a change resulting from any anti-dilution provisions thereof, the
Exercise Price shall forthwith be readjusted to such Exercise Price as
would have obtained had the adjustment made upon the issuance of such
options, rights or securities not converted prior to such change or
options or rights related to such securities not converted prior to
such change been made upon the basis of such change; and
(4) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Exercise Price shall forthwith be
readjusted to such Exercise Price as would have obtained had the
adjustment made upon the issuance of such options, rights, securities
or options or rights related to such securities been made upon the
basis of the issuance of only the number of shares of Class A
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<PAGE>
Common Stock actually issued upon the conversion or exchange
of such securities or upon the exercise of the options or
rights related to such securities.
2.5.2 Adjustment for Stock Splits, Reverse Stock Splits, and Stock
Dividends. In the event that the outstanding shares of Class A Common Stock
shall be subdivided (split), combined (reverse split), by reclassification or
otherwise, or in the event of any dividend payable on the Class A Common Stock
in shares of Class A Common Stock, the applicable Exercise Price and the number
of shares of Class A Common Stock available for purchase in effect immediately
prior to such subdivision, combination, or divided shall be proportionately
adjusted.
2.5.3 Other Distributions. If the Company shall distribute to
holders of the Class A Common Stock shares of its capital stock other than Class
A Common Stock, stock or other securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets (excluding cash
dividends and distributions) or options or rights (excluding options to purchase
and rights to subscribe for Class A Common Stock or other securities of the
Company convertible into or exchangeable for Class A Common Stock), then, in
each such case, the Exercise Price in effect immediately prior to such dividend
or distribution shall be adjusted as follows. Immediately following the record
date fixed for the determination of holders of Class A Common Stock entitled to
receive such dividend or distribution, the Exercise Price in effect thereafter
shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction of which the numerator shall be an
amount equal to (i) the Current Market Price of one share of Class A Common
Stock less (ii) the fair market value (as determined by the Board of Directors
of the Company, which determination shall be conclusive absent manifest error)
of the stock, securities, evidences of indebtedness, assets, options or rights
so distributed in respect of one share of Class A Common Stock, and of which the
denominator shall be the Current Market Price.
2.5.4 Adjustment for Capital Reorganizations. In the case of any
proposed consolidation or merger of the Company with another corporation, or the
proposed sale of all or substantially all of the Company's assets or any
proposed reorganization or reclassification of the securities of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
shall thereafter have the right to receive upon the terms and conditions
specified herein, in lieu of the Warrant Shares immediately theretofore
purchasable hereunder, such shares of stock or securities or assets (including
cash) as may by virtue of such consolidation, merger, sale, reorganization or
reclassification be issued or payable with respect to or in exchange for the
Warrant Shares purchasable hereunder immediately before such consolidation,
merger, sale, reorganization or reclassification as if this Warrant had
theretofore been exercised. The Company shall not effect any such consolidation,
merger or sale unless prior to or simultaneously with the consummation thereof
the successor corporation or purchaser shall assume by written instrument the
obligation to deliver to the Holder such shares of stock, securities or assets
as the Holder is entitled to receive hereunder.
2.5.5 Certificate as to Adjustments. Whenever the Exercise Price
shall be adjusted as provided in this Section 2.5, the Company shall prepare a
statement showing the facts requiring such adjustment and the Exercise Price and
the number of Warrant Shares that shall be in effect after
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<PAGE>
such adjustment. The Company shall cause a copy of such statement to be sent to
the Holder. Where appropriate, such copy may be given in advance.
2.5.6 Effective Date of Adjustment. Adjustments made pursuant to
Sections 2.5.2 and 2.5.3 shall be made on the date such dividend, subdivision,
split, combination or distribution is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of shareholders entitled to such dividend, subdivision, split,
combination or distribution.
2.5.7 Notice of Certain Proposed Actions. In the event the Company
shall propose to take any action of the types described in Sections 2.5.2 or
2.5.3 the Company shall forward, at the same time and in the same manner, to the
Holder such notice, if any, that the Company shall give to the holders of
capital stock of the Company. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any such action.
2.5.8 Exercise After Record Date. Whenever the provisions of this
Section 2.5 shall require that an adjustment shall become effective immediately
after the record date for an event and the Holder exercises its Warrant after
such record date and before the occurrence of such event, the Company may defer
until the occurrence of such event issuing to the Holder the additional shares
of Class A Common Stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of Class A Common Stock
issuable upon such exercise before giving effect to such adjustment; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
2.5.9 Treasury Shares. The sale or other disposition of any Class A
Common Stock theretofore held in the treasury of the Company shall be deemed to
be an issuance thereof.
SECTION 3. OWNERSHIP AND TRANSFER.
- ---------- -----------------------
3.1. Ownership. The Company may deem and treat the person in whose name
this Warrant is registered as the Holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary until
presentation of this Warrant for registration of transfer as provided in this
Section 3.
3.2. Transfer and Replacement. Subject to restrictions on transfer of this
Warrant under the Securities Act or applicable state securities laws, this
Warrant and all rights hereunder are transferable in whole or in part upon the
books of the Company by the Holder hereof in person or by duly authorized
attorney, and a new Warrant or Warrants, of the same tenor as this Warrant but
registered in the name of the transferee or transferees shall be made and
delivered by the Company upon surrender of this Warrant duly endorsed, at the
office of the Company. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft or destruction of this Warrant, and of
indemnity or security reasonably satisfactory to it, or upon surrender of
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<PAGE>
this Warrant if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant. This Warrant shall be promptly canceled by
the Company upon the surrender hereof in connection with any transfer or
replacement. Except as otherwise provided above in the case of the loss, theft
or destruction of a Warrant, the Company shall pay all expenses, taxes and other
charges payable in connection with any transfer or replacement of this Warrant.
SECTION 4. NO FRACTIONAL SHARES.
- ---------- --------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. In lieu thereof, a cash payment shall
be made equal to such fraction multiplied by the Exercise Price per share as
then in effect.
SECTION 5. CHARGES AND TAXES.
- ---------- -----------------
Issuance of certificates for shares of Class A Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax or other incidental expense in respect of the issuance of
such certificate, all of which taxes and expenses shall be paid by the Company.
SECTION 6. AUTHORIZED SHARES.
- ---------- -----------------
The Company covenants that during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Class A Common Stock a sufficient
number of shares to provide for the issuance of Class A Common Stock upon the
exercise of any purchase rights under this Warrant.
SECTION 7. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY.
- ---------- -------------------------------------------------
This Warrant shall not entitle the Holder to any of the rights of a
shareholder of the Company prior to exercise of warrants and payment of the
Exercise Price.
SECTION 8. LAW GOVERNING.
- ---------- -------------
This Warrant shall be governed by, and construed and enforced in accordance
with, the laws of the State of Georgia.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer as of the 31st day of January, 1997.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
-------------------------------
Title: President
-------------------------------
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<PAGE>
NOTICE OF EXERCISE
OF WARRANT TO PURCHASE
CLASS A COMMON STOCK OF HARRY'S FARMERS MARKET, INC.
====================================================
To: Harry's Farmers Market, Inc.
-------------------------------
-------------------------------
The undersigned, the registered owner of this Warrant, hereby irrevocably
elects to exercise the purchase rights represented thereby for, and to purchase
thereunder, _________ shares of Class A Common Stock of Harry's Farmers Market,
Inc. and herewith makes payment of $__________ therefor, and requests that the
certificates evidencing such shares be issued in the name of and be delivered
to:
Name:
--------------------------------
Address:
-----------------------------
-----------------------------
Tax I.D. Number
----------------
and if such shares shall not be all of the shares purchasable hereunder, that a
new Warrant of like tenor for the balance of the shares purchasable hereunder be
delivered to the undersigned.
Dated: 19
-------------, -- -------------------------------------------
Name of Holder
By:
----------------------------------
Title:
----------------------------
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<PAGE>
EXHIBIT 4.13
AMENDED AND RESTATED WARRANT CERTIFICATE
----------------------------------------
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR THE CLASS A COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND NEITHER MAY BE
SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES LAW UNLESS AN EXEMPTION FROM REGISTRATION IS THEN
AVAILABLE.
WARRANT TO PURCHASE CLASS A COMMON STOCK
OF
HARRY'S FARMERS MARKET, INC.
Date: December 30, 1994
This is to certify that, FOR VALUE RECEIVED, the registered holder hereof,
CREDITANSTALT-BANKVEREIN ("Creditanstalt", and together with any successors and
assigns hereunder, the "Holder" or the "Holders"), is entitled to purchase,
------ -------
subject to the provisions of this Warrant Certificate, from HARRY'S FARMERS
MARKET, INC., a Georgia corporation (the "Company"), 72,000 shares (as such
-------
number may be adjusted in accordance with Section 5 hereof) of the Company's
Class A Common Stock, no par value per share (such class of stock, together with
any capital stock of the Company into which such class of stock shall be
converted, being referred to herein as "Stock"), at $3.00 per share (as such
-----
number may be adjusted in accordance with Section 5 hereof) (the "Exercise
--------
Price"). The number of shares of Stock to be received upon the exercise of this
Warrant and the Exercise Price shall be adjusted from time to time as
hereinafter set forth. The shares of Stock or other securities or property
deliverable upon such exercise, as adjusted from time to time, are hereinafter
sometimes referred to as "Warrant Shares."
--------------
This Warrant Certificate is issued in partial replacement of the Warrant
Certificate originally issued in favor of NationsBank N.A. (South) pursuant to
the Warrant Agreement dated as of December 30, 1994, as amended and restated as
of May 8, 1996 (as amended, restated, supplemented or othewise modified from
time to time, the "Warrant Agreement"), which was assigned to Creditanstalt on
-----------------
January 31, 1997. This Warrant is subject to the provisions, and is entitled to
the benefits, of the Warrant Agreement.
Section 1. Exercise of Warrant.
-------------------
1.1. Manner of Exercise. (a) This Warrant may be exercised by the Holder,
------------------
in whole or in part, at any time or from time to time through and including the
<PAGE>
Expiration Date during normal business hours on any Business Day (as defined in
the Warrant Agreement) by surrender of this Warrant, together with the form of
subscription duly executed by such Holder in substantially the form attached as
Annex A hereto, to the Company at its office designated pursuant to Section 7.1
of the Warrant Agreement (or, if such exercise is in connection with an
underwritten public offering of Warrant Shares subject to this Warrant, at the
location at which the underwriting agreement requires that such Warrant Shares
be delivered).
(b) Payment of the Exercise Price for the Warrant Shares, if required,
shall be made, at the option of the Holder by certified or bank check or wire
transfer payable to the order of the Company, in any case, in an amount equal to
(A) the number of Warrant Shares specified in such form of subscription,
multiplied by (B) the then current Exercise Price. The Holder shall thereupon
be entitled to receive the number of Warrant Shares specified in such form of
subscription (plus cash in lieu of any fractional share as provided in Section
1.3 hereof).
(c) In lieu of exercising Warrants pursuant to the immediately preceding
clause (a), the Holder shall have the right to require the Company to convert
the Warrants, in whole or in part and at any time or times (the "Conversion
Right"), into Warrant Shares, by surrendering to the Company the Warrant
Certificate evidencing the Warrants to be converted, accompanied by a conversion
notice duly executed by the Holder substantially in the form of Annex C hereto.
Upon exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any Exercise Price) that number of Warrant
- --------
Shares which is equal to the quotient obtained by dividing (x) the value of the
number of Warrants being converted at the time the Conversion Right is exercised
(determined by subtracting the aggregate Exercise Price for all such Warrants
immediately prior to the exercise of the Conversion Right from the aggregate
current Market Price of that number of Warrant Shares purchasable upon exercise
of such Warrants immediately prior to the exercise of the Conversion Right
(taking into account all applicable adjustments pursuant to Section 5 hereof))
by (y) the Market Price of one share of Stock immediately prior to the exercise
of the Conversion Right. Any references in this Warrant Certificate or the
Warrant Agreement to the "exercise" of any Warrants, and the use of the term
"exercise" herein and therein, shall be deemed to include (without limitation)
any exercise of the Conversion Right.
1.2. Effective Date. Each exercise of this Warrant pursuant to Section
--------------
1.1 hereof shall be deemed to have been effected immediately prior to the close
of business on the Business Day on which this Warrant is surrendered to the
Company as provided in Section 1.1 hereof (except that if such exercise is in
connection with an underwritten public offering of Warrant Shares subject to
this Warrant, then such exercise shall be deemed to have been effected upon such
surrender of this Warrant). On each such day that an exercise of this Warrant
is deemed effected, the person or persons in whose name or names any certificate
or certificates for Warrant Shares are issuable upon such exercise (as provided
in Section 1.3 hereof) shall be deemed to have become the Holder or Holders of
record thereof.
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<PAGE>
1.3. Warrant Share Certificates, Cash for Fractional Warrant Shares and
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Reissuance of Warrants. As promptly as practicable after the exercise of this
- ----------------------
Warrant, in whole or in part, and in any event within five (5) Business Days
thereafter (unless such exercise shall be in connection with a public offering
of Warrant Shares subject to this Warrant, in which event concurrently with such
exercise), the Company at its expense (including the payment by it of any
applicable issue, stamp or other taxes) will cause to be issued in the name of
and delivered to the Holder or, subject to Section 6 of the Warrant Agreement,
such other person as the Holder may direct:
(a) a certificate or certificates for the number of Warrant Shares to
which the Holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which the Holder would otherwise be entitled, cash in
an amount equal to the same fraction of the Market Price (as defined in
Section 5.1 hereof) per Warrant Share on the effective date of such
exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants,
substantially identical hereto, representing the rights formerly
represented by this Warrant which have not expired or been exercised.
1.4. Acknowledgment of Obligation. The Company will, at the time of or at
----------------------------
any time after each exercise of this Warrant, upon the request of the Holder
hereof or of any Warrant Shares issued upon such exercise, acknowledge in
writing its continuing obligation to afford to such Holder all rights
(including, without limitation, any rights to registration of any such Warrant
Shares pursuant to the Registration Rights Annex of the Warrant Agreement (the
"Registration Rights Agreement")) to which such Holder shall continue to be
entitled under this Warrant Certificate, the Warrant Agreement and the
Registration Rights Agreement; provided, that if any such Holder shall fail to
--------
make any such request, the failure shall not affect the continuing obligation of
the Company to afford such rights to such Holder.
1.5. Conditional Exercise. Notwithstanding any other provision hereof, if
--------------------
any exercise of any portion of this Warrant is to be made in connection with a
public offering of Warrant Shares or any transaction described in Section 5.9
hereof, the exercise of any portion of this Warrant may, at the election of the
Holder, be conditioned upon the consummation of the public offering or such
transaction, in which case such exercise shall not be deemed to be effective
until the consummation of such public offering or transaction.
Section 2. Reservation of Shares.
---------------------
The Company shall at all times after the date hereof and until the
Expiration Date reserve for issuance and delivery upon exercise of this Warrant
the number of Warrant Shares as shall be required for issuance and delivery upon
exercise in full of this Warrant.
-3-
<PAGE>
Section 3. Transfer, Exchange, Assignment or Loss of Warrant.
-------------------------------------------------
3.1. Transfer. This Warrant may be assigned in whole or in part or
--------
transferred in whole or in part; subject, however, to compliance with the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Act").
3.2. Procedure for Assignment or Transfer. Any assignment or transfer
------------------------------------
hereunder shall be made by surrender of this Warrant to the Company at its
office designated pursuant to Section 7.1 of the Warrant Agreement, together
with the form of assignment duly executed by the Holder in substantially the
form attached as Annex B hereto and funds sufficient to pay any required
transfer tax. In such event the Company shall, without charge, execute and
deliver a new Warrant or Warrants substantially identical hereto in the name of
the assignee or assignees named in such instrument of assignment and designate
the assignee or assignees as the registered holder or holders on the Company's
records and this Warrant shall promptly be cancelled. This Warrant may be
divided or combined with other Warrants which carry the same rights upon
presentation thereof at the principal office of the Company together with a
written notice signed by the holder thereof, specifying the names and
denominations in which new Warrants are to be issued.
3.3. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company
--------------------------------------
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification to the Company or (in the case of mutilation)
presentation of this Warrant for surrender and cancellation, the Company will
execute and deliver a new Warrant identical hereto and any such lost, stolen,
destroyed or mutilated Warrant shall thereupon become void.
Section 4. Warrant Certificate Holder Not Deemed a Stockholder.
---------------------------------------------------
Except as otherwise provided herein, the Holders shall not, solely because
of holding this Warrant, be entitled to vote, receive dividends or be deemed the
holder of Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holders, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matters submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger,
conveyance or otherwise), or to receive notice of meetings or other actions
affecting stockholders, or to receive dividend or subscription rights, or
otherwise, until this Warrant shall have been exercised in accordance with the
provisions hereof.
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<PAGE>
Section 5. Anti-Dilution.
-------------
The number of Warrant Shares for which this Warrant is exercisable and/or
the Exercise Price at which such Warrant Shares may be purchased upon exercise
of this Warrant shall be subject to adjustment from time to time as set forth in
this Section 5. The Company shall give the Holders notice of any event described
below which requires an adjustment pursuant to this Section 5 at the time of
such event.
5.1. Special Definitions. For purposes of this Section 5 the following
-------------------
terms shall have the following meanings:
"Additional Shares of Stock" shall mean all shares of Stock issued by the
--------------------------
Company after the date hereof, other than (i) the Stock to be issued upon
exercise of any Warrants at any time issued in connection with the Warrant
Agreement, (ii) the Stock to be issued upon conversion of the Preferred Stock,
(iii) the Stock to be issued upon exercise of the Preferred Stock Warrants; (iv)
the Stock to be issued upon exercise of the Performance Warrants, (v) 200,000
shares of Stock to be issued pursuant to the Company's 1996 Directors Stock
Option Plan, (vi) 475,000 shares of Stock to be issued pursuant to the Company's
Management Incentive Plan and (vii) 300,000 shares of Stock issued or to be
issued pursuant to the Company's 1996 Employee Stock Purchase Plan.
"Convertible Securities" shall mean evidences of indebtedness, shares of
----------------------
Preferred Stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Stock, either immediately or upon the occurrence of a
specified date or a specified event, other than the Preferred Stock issued
pursuant to the Share and Warrant Purchase Agreements dated December 30, 1994
between the Company, Robert Fleming Nominees Ltd., and certain other investors
(such Agreements to be referred to herein collectively as the "Purchase
--------
Agreements" and Robert Fleming Nominees Ltd. and such other investors to be
- ----------
referred to herein collectively as the "Purchasers".
----------
"Expiration Date" means May 8, 2002. If, on or before May 8, 1997, the
---------------
Company delivers to the Holders either a legal opinion in form and substance
acceptable to the Holders from a law firm acceptable to the Holders, or a no
action letter from the Securities and Exchange Commission, in each case to the
effect that the holding period under Rule 144 for the amended and restated
Warrants commenced on December 30, 1994 and not as of the effective date of such
amendment and restatement, then the Expiration Date shall be December 30, 2000.
"Market Price" shall mean, in respect of any share of Stock on the date of
------------
determination thereof, the average of the closing prices of sales of the Stock
on all principal United States securities exchanges on which the Stock may at
the time be listed, or, if there shall have been no sales on any such exchange
on any relevant day, the last trading price of such Stock on such day, or if
there is no such price, the average of the bid and asked prices at the end of
such day on the Nasdaq Stock Market, in each such case averaged for a period of
twenty (20) consecutive business days prior to the day as of which "Market
-5-
<PAGE>
Price" is being determined. Notwithstanding the foregoing, with respect to the
issuance of Stock by the Company in an underwritten public offering, the Market
Price shall be the per share purchase price paid by the underwriters. If at any
time the Stock is not listed on any exchange or the Nasdaq Stock Market, the
"Market Price" shall be deemed to be the fair market value thereof determined by
an investment banking firm of nationally recognized standing selected by the
Board of Directors of the Company and acceptable to a majority of the Holders,
as of the most recent practicable date as of which the determination is to be
made, taking into account the value of the Company as a going concern, and
without taking into account any lack of liquidity of the Stock or any discount
for a minority interest.
"Performance Warrants" shall mean those performance warrants for 61,111
--------------------
shares of Stock issued on December 30, 1994 to the Purchasers (as defined
below).
"Preferred Stock" shall mean those shares of the Company's Series A
---------------
Redeemable Convertible Preferred Stock with a stated value of $9.00 per share.
"Preferred Stock Warrants" shall mean those warrants originally issued in
------------------------
connection with the issue and sale by the Company of its Preferred Stock
pursuant to the Purchase Agreements.
5.2. Stock Dividends, Subdivisions and Combinations.
----------------------------------------------
If at any time the Company shall:
(i) take a record of the holders of its Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Stock,
(ii) subdivide its outstanding shares of Stock into a larger number of
shares of Stock, or
(iii) combine its outstanding shares of Stock into a smaller number
of shares of Stock,
then (I) the Warrant Shares for which this Warrant is exercisable immediately
after the occurrence of any such event shall be adjusted to equal the number of
shares of Stock which a record holder of the same number of shares of Stock for
which this Warrant is exercisable immediately prior to the occurrence of such
event would own or be entitled to receive after the happening of such event, and
(II) the Exercise Price shall be adjusted to equal (x) the Exercise Price
multiplied by the Warrant Shares for which this Warrant is exercisable
immediately prior to the adjustment divided by (y) the Warrant Shares for which
this Warrant is exercisable immediately after such adjustment.
-6-
<PAGE>
5.3. Certain other Distributions. (a) Except as provided in Section 5.3(b),
---------------------------
if at any time the Company shall take a record of the holders of its Stock for
the purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its Stock or any
other securities or property of any nature whatsoever (other than cash or
Additional Shares of Stock), or
(iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any share of its Stock or any other
securities or property of any nature whatsoever (other than cash or
Additional Shares of Stock),
then, (I) the Warrant Shares for which this Warrant is exercisable shall be
adjusted to equal the product of the Warrant Shares for which this Warrant is
exercisable immediately prior to such adjustment multiplied by a fraction (x)
the numerator of which shall be the Market Price per share of Stock at the date
of taking such record and (y) the denominator of which shall be such Market
Price per share of Stock minus the amount allocable to one share of Stock of any
such cash so distributable and of the fair value (as determined in good faith by
the Board of Directors of the Company) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription or purchase rights so distributable, and (II) the Exercise Price
shall be adjusted to equal (x) the Exercise Price multiplied by the Warrant
Shares for which this Warrant is exercisable immediately prior to the adjustment
divided by (y) the Warrant Shares for which this Warrant is exercisable
immediately after such adjustment. A reclassification of the Stock (other than
a change in par value, or from par value to no par value or from no par value to
par value) into shares of Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the Holders of its Stock of such shares
of such other class of stock within the meaning of this Section 5.3 and, if the
outstanding shares of the Stock shall be changed into a larger or smaller number
of shares of the Stock as part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
shares of the Stock within the meaning of Section 5.2.
(b) If at any time the Company shall take a record of the holders of its
Stock for the purpose of entitling them to receive any cash dividend or other
distribution of property of any nature whatsoever (other than Additional Shares
of Stock), and the amount of such cash dividend and the fair market value of any
property so distributed, when added to the amount of cash dividends paid and the
fair market value of any property so distributed during the twelve (12) months
prior to the date of such dividend or distribution, exceeds five percent (5%) of
the aggregate Market Price of the Stock of all of the Company's Stock then
outstanding on the Business Day immediately preceding the record date for such
dividend or distribution, the Holders of the Warrant shall be entitled to
participate in such dividend or distribution as if the Holder had already
-7-
<PAGE>
exercised this Warrant in full, and such Holder shall receive, at the time such
dividend is paid or such property is distributed, the same kind and per-share
amount of cash or other property as is distributed to the holders of the
Company's Stock.
5.4. Issuance of Additional Shares of Stock. If at any time the Company
--------------------------------------
shall (except as hereinafter provided) issue or sell any Additional Shares of
Stock either (A) in exchange for consideration in an amount per Additional Share
of Stock less than the Exercise Price in effect immediately prior to such
issuance or sale of Additional Shares of Stock or (B) in exchange for
consideration in an amount per Additional Share of Stock less than the Market
Price in effect immediately prior to such issuance or sale of Additional Shares
of Stock, then the Exercise Price as to the Warrant Shares for which this
Warrant is exercisable immediately prior to such adjustment shall be adjusted to
equal the price determined by multiplying the Exercise Price by a fraction, of
which
(x) the numerator shall be (1) the number of shares of Stock
outstanding immediately prior to such issuance or sale of Additional
Shares of Stock plus (2) the number of shares of Stock which the
aggregate amount of consideration, if any, received by the Company for
the total number of such Additional Shares of Stock so issued or sold
would purchase at the greater of (I) the Market Price in effect
immediately prior to such issuance or sale of Additional Shares of
Stock or (II) the Exercise Price in effect immediately prior to such
issuance or sale of Additional Shares of Stock and
(y) the denominator shall be the number of shares of Stock
outstanding immediately after such issuance or sale of Additional
Shares of Stock;
provided, however, that such adjustment shall be made only if the Exercise Price
determined from such adjustment shall be less than the Exercise Price in effect
immediately prior to the issuance of such Additional Shares of Stock. The
provisions of this Section 5.4 shall not apply to any issuance of Additional
Shares of Common Stock for which an adjustment is provided under Section 5.2 or
5.3.
5.5. Issuance of Warrants or Other Rights. If at any time the Company
------------------------------------
shall take a record of the holders of its Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any warrants or other rights to subscribe for or purchase any
Additional Shares of Stock or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
consideration received for such warrants or other rights or such Convertible
Securities shall be less than the Exercise Price or the Market Price in effect
immediately prior to the time of such issue or sale, then the Exercise Price
shall be adjusted as provided in Section 5.4. No further adjustments of the
Exercise Price shall be made upon the actual issue of such Stock or of such
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<PAGE>
Convertible Securities upon exercise of such warrants or other rights or upon
the actual issue of such Stock upon such conversion or exchange of such
Convertible Securities.
5.6. Issuance of Convertible Securities. If at any time the Company shall
----------------------------------
take a record of the holders of its Stock for the purpose of entitling them to
receive a distribution of, or shall in any manner (whether directly or by
assumption in a merger in which the Company is the surviving corporation) issue
or sell, any Convertible Securities, whether or not the rights to convert
thereunder are immediately exercisable, and the consideration received for such
stock shall be less than the Exercise Price or the Market Price in effect
immediately prior to the time of such issue or sale, then the Exercise Price
shall be adjusted as provided in Section 5.4. No adjustment of the Exercise
Price shall be made under this Section 5.6 upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 5.5. No further adjustments of the Exercise Price shall be
made upon the actual issue of such Stock upon conversion of such Convertible
Securities and, if any issue or sale of such Convertible Securities is made upon
exercise of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Exercise Price have been or
are to be made pursuant to other provisions of this Section 5, no further
adjustments of the Exercise Price shall be made by reason of such issue or sale.
5.7. Antidilution Adjustments Under Other Securities. Without limiting any
-----------------------------------------------
other rights available hereunder to the Holders of the Warrants, if there is an
antidilution adjustment (i) under any Convertible Securities, whether issued
prior to or after the date hereof or (ii) under any rights, options or warrants
to purchase Additional Shares of Stock, whether issued prior to or after the
date hereof which, in either case, results in a reduction in the exercise or
purchase price with respect to such security or rights or results in an increase
in the number of Additional Shares of Stock obtainable under such Convertible
Security, right, option or warrant, then an adjustment shall be made to the
Exercise Price hereunder. Any such adjustment pursuant to this Section 5.7
shall be whichever of the following results in a lower Exercise Price: (A) a
reduction in the Exercise Price equal to the percentage reduction in such
exercise or purchase price with respect to such Convertible Security, right,
option or warrant or (B) a reduction in the Exercise Price which will result in
the same percentage increase in the number of Warrant Shares available hereunder
as the percentage increase in the number of Additional Shares of Stock available
under such Convertible Security, right, option or warrant. Any such adjustment
under this Section 5.7 shall only be made if it would result in a lower Exercise
Price than that which would be determined pursuant to any other antidilution
adjustment otherwise required hereunder as a result of the event or circumstance
which triggered the adjustment to such Convertible Security, right, option or
warrant, and if an adjustment is made pursuant to this Section 5.7, such other
antidilution adjustment otherwise required hereunder shall not be made as a
result of such event or circumstance.
5.8. Other Provisions Applicable to Adjustments under this Section. The
-------------------------------------------------------------
following provisions shall be applicable to the making of adjustments of the
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<PAGE>
Warrant Shares for which this Warrant is exercisable and the Exercise Price at
which such Warrant Shares may be purchased upon exercise of this Warrant
provided for in this Section 5:
(a) Computation of Consideration. To the extent that any Additional
----------------------------
Shares of Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Shares of Stock or any
Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the
cash received by the Company therefor, or, if such Additional Shares of
Stock or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares of
Stock or Convertible Securities are sold to underwriters or dealers for
public offering without a subscription offering, the public offering price
(in any such case subtracting any amounts paid or receivable for accrued
interest or accrued dividends and any compensation, discounts or expenses
paid or incurred by the Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that
such issuance shall be for a consideration other than cash, then except as
herein otherwise expressly provided, the amount of such consideration shall
be deemed to be the fair value of such consideration at the time of such
issuance as determined in good faith by the Board of Directors of the
Company. In case any Additional Shares of Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase
such Additional Shares of Stock or Convertible Securities shall be issued
in connection with any merger in which the Company issues any securities,
the amount of consideration therefor shall be deemed to be the fair value,
as determined in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving corporation as
such Board in good faith shall determine to be attributable to such
Additional Shares of Stock, Convertible Securities, warrants or other
rights, as the case may be. The consideration for any Additional Shares of
Stock issuable pursuant to any warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for
issuing such warrants or other rights plus the additional consideration
payable to the Company upon exercise of such warrants or other rights. The
consideration for any Additional Shares of Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by
the Company for issuing warrants or other rights to subscribe for or
purchase such Convertible Securities, plus the consideration paid or
payable to the Company in respect of the subscription for or purchase of
such Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at any
time of any Additional Shares of Stock or Convertible Securities in payment
or satisfaction of any dividends upon any class of stock other than Stock,
the Company shall be deemed to have received for such Additional Shares of
Stock or Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied.
-10-
<PAGE>
(b) When Adjustments to Be Made. The adjustments required by this
---------------------------
Section 5 shall be made whenever and as often as any event requiring an
adjustment shall occur, except that any adjustment of the Warrant Shares
for which this Warrant is exercisable that would otherwise be required may
be postponed (except in the case of a subdivision or combination of shares
of the Stock, as provided for in Section 5.2) up to, but not beyond the
date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than l% of the
shares of the Stock for which this Warrant is exercisable immediately prior
to the making of such adjustment. Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed
shall be carried forward and made as soon as such adjustment, together with
other adjustments required by this Section 5 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose
of any adjustment, any event shall be deemed to have occurred at the close
of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this Section 5,
--------------------
fractional interests in the Stock shall be taken into account to the nearest
1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a record of
----------------------------
the holders of the Stock for the purpose of entitling them to receive a dividend
or distribution or subscription or purchase rights and shall, thereafter and
before the distribution to stockholders thereof, legally abandon its plan to pay
or deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(e) Challenge to Good Faith Determination. Whenever the Board of
-------------------------------------
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 5, such determination may be
challenged in good faith by a Holder and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by the Company
and acceptable to such Holder. The fees of such investment banker shall be
borne by the Holder if the Company's calculation is determined to be correct and
otherwise by the Company.
(f) Escrow of Property. If the Company shall take a record of the holders
------------------
of its Stock for the purpose of entitling them to receive any distribution of
any kind of property whatsoever, but prior to the payment of such distribution
the Holder exercises this Warrant, upon payment of the Exercise Price, such
property shall be held in escrow for the Holder by the Company to be issued to
the Holder upon the occurrence of such distribution and to the extent such
distribution actually takes place. Notwithstanding any other provision to the
contrary herein, if the distribution for which such record was taken fails to
occur or is rescinded, then such escrowed property shall be returned to the
Company.
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<PAGE>
5.9. Reorganization, Reclassification, Merger or Consolidation. If the
---------------------------------------------------------
Company shall at any time reorganize or reclassify the outstanding shares of
Stock (other than a change in par value, or from no par value to par value, or
from par value to no par value, or as a result of a subdivision or combination)
or consolidate with or merge into another corporation (where the Company is not
the continuing corporation after such merger or consolidation), the Holders
shall thereafter be entitled to receive upon exercise of this Warrant in whole
or in part, the same kind and number of shares of stock and other securities,
cash or other property (and upon the same terms and with the same rights) as
would have been distributed to the Holder upon such reorganization,
reclassification, consolidation or merger had the Holder exercised this Warrant
immediately prior to such reorganization, reclassification, consolidation or
merger (subject to subsequent adjustments under Section 5 hereof). The Holders
shall pay upon such exercise the Exercise Price that otherwise would have been
payable pursuant to the terms of this Warrant. If any such reorganization,
reclassification, consolidation or merger results in a cash distribution in
excess of the Exercise Price provided by this Warrant, a Holder may, at the
Holder's option, exercise this Warrant without making payment of the Exercise
Price, and in such case the Company shall, upon distribution to the Holder,
consider the Exercise Price to have been paid in full, and in making settlement
to the Holder, shall deduct an amount equal to the Exercise Price from the
amount payable to the Holder. Notwithstanding anything herein to the contrary,
the Company will not effect any such reorganization, reclassification, merger or
consolidation unless prior to the consummation thereof, the corporation who may
be required to deliver any stock, securities or other assets upon the exercise
of this Warrant shall agree by an instrument in writing to deliver such stock,
cash, securities or other assets to the Holder. A sale, transfer or lease of
all or substantially all of the assets of the Company to another person shall be
deemed a reorganization, reclassification, consolidation or merger for the
foregoing purposes.
5.10. Exceptions to Adjustment of Exercise Price and/or Warrant Shares.
----------------------------------------------------------------
Anything herein to the contrary notwithstanding, the Company shall not make any
adjustment of the Exercise Price or the Warrant Shares issuable upon the
exercise of this Warrant in the case of (i) the issuance of the Warrants or any
other Warrants at any time issued in connection with the Warrant Agreement or
the issuance of shares of the Stock upon exercise of any such Warrants, (ii) the
issuance of shares of Stock to holders of the Company's Preferred Stock upon
conversion of all or any portion of their shares of Preferred Stock, (iii) the
issuance of the Preferred Stock Warrants or the issuance of the shares of Stock
upon exercise of such Preferred Stock Warrants or (iv) the issuance of the
Performance Warrants or the issuance of the shares of Stock upon exercise of
such Performance Warrants.
5.11. Chief Financial Officer's Opinion. Upon each adjustment of the
---------------------------------
Exercise Price and upon each change in the Warrant Shares issuable upon the
exercise of this Warrant, and in the event of any change in the rights of a
Holder by reason of other events herein set forth, then and in each such case,
the Company will promptly obtain an opinion of the chief financial officer of
the Company, stating the adjusted Exercise Price and the new Warrant Shares so
issuable, or specifying the other shares of the Stock, securities or assets and
the amount thereof receivable as a result of such change in rights, and setting
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<PAGE>
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company will promptly mail a copy of such
opinion to the Holders. If a Holder disagrees with such calculation, the
Company agrees to obtain within thirty (30) business days an opinion of a firm
of independent certified public accountants selected by the Company's Board of
Directors and acceptable to such Holder to review such calculation and the
opinion of such firm of independent certified public accountants shall be final
and binding on the parties and shall be conclusive evidence of the correctness
of the computation with respect to any such adjustment of the Exercise Price and
any such change in the number of Warrant Shares so issuable. The fees of such
accountants shall be borne by the Holder if the Company's calculation is
determined by such accountants to be correct and otherwise by the Company.
5.12. Company to Prevent Dilution. In case at any time or from time to
---------------------------
time conditions arise by reason of action taken by the Company, which in the
good faith opinion of its Board of Directors or a majority of the Holders are
not adequately covered by the provisions of this Section 5, and which might
materially and adversely affect the exercise rights of the Holders, the Board of
Directors of the Company shall appoint such firm of independent certified public
accountants acceptable to a majority of the Holders, which shall give their
opinion upon the adjustment, if any, on a basis consistent with the standards
established in the other provisions of this Section 5, necessary with respect to
the Exercise Price, so as to preserve, without dilution (other than as
specifically contemplated by this Warrant), the exercise rights of the Holders.
Upon receipt of such opinion, the Board of Directors of the Company shall
forthwith make the adjustments described therein.
Section 6. Character of Shares of Stock.
----------------------------
All shares of the Stock issuable upon the exercise of this Warrant shall,
when issued to a Holder, be duly authorized, validly issued, fully paid and
nonassessable, free and clear of any lien or encumbrance and without any
preemptive rights.
Section 7. Notice to Holder.
----------------
So long as this Warrant shall be outstanding, (i) if the Company shall pay
any dividend or make any distribution upon the Stock otherwise than in cash,
(ii) if the Company shall offer to the holders of Stock, for subscription or
purchase by them, any shares of any class of stock of the Company or any other
rights or (iii) if there shall be any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company, voluntary or
involuntary dissolution, liquidation or winding up of the Company, then in any
such event, the Company shall cause to be mailed by certified mail to each
Holder, at least 30 days prior to the event described above, a notice containing
a brief description of the proposed action and stating the date or expected date
on which a record is to be taken for the purpose of such dividend, distribution
or rights, or the date or expected date such reclassification, reorganization,
consolidation, merger, conveyance, lease or transfer, dissolution, liquidation
-13-
<PAGE>
or winding up shall take place or be voted upon by holders of the Stock of
record, and the date or expected date as of which the holders of Stock of record
shall be entitled to exchange their shares of Stock for securities or other
property deliverable upon any such event.
Section 8. Disposition of Warrant Shares.
-----------------------------
The stock certificates of the Company that will evidence the Warrant Shares
or any other security issued or issuable upon exercise of this Warrant will be
imprinted with a conspicuous legend in substantially the following form:
The securities represented by this Certificate have not been registered
under the Securities Act of 1933 (the "Act") or any applicable state
securities laws and may not be sold, pledged, hypothecated, donated or
otherwise transferred (whether or not for consideration) unless registered
under the Act and any applicable state securities laws or in a transaction
exempt from such registrations.
Except as provided in the Registration Rights Agreement, the Company does not
agree to register any of the Warrant Shares for distribution in accordance with
the provisions of the Act or any applicable state securities laws, and the
Company has not agreed to comply with any exemption from registration under the
Act or any applicable state securities laws for the resale of the Warrant
Shares. Hence, it is the understanding of the Holder that by virtue of the
provisions of certain rules respecting "restricted securities" promulgated by
---------------------
the Securities and Exchange Commission, the Warrant Shares may be required to be
held indefinitely, unless and until registered under the Act and any applicable
state securities laws unless an exemption from such registration is available,
in which case the Holders may still be limited as to the number of Warrant
Shares that may be sold.
Section 9. Governing Law.
-------------
This Warrant shall be construed in accordance with the laws of the State of
Georgia applicable to contracts executed and to be performed wholly within such
state without regard to any conflicts of laws principles.
Section 10. Notice.
------
Any notice, demand, document or other communication given or delivered
hereunder shall be in writing, and may be (i) personally delivered, (ii) given
or made by United States registered or certified mail, return receipt requested,
postage prepaid, or (iii) given or made by overnight courier, delivery charges
prepaid, addressed as follows:
If to the Company: Harry's Farmers Market, Inc.
- ------------------
1180 Upper Hembree Road
Roswell, GA 30076
Attention: Chief Financial Officer
-14-
<PAGE>
With a Copy to: Nelson, Mullins, Riley & Scarborough, L.L.P.
- ---------------
400 Colony Square, Suite 2200
1201 Peachtree Street, Suite 2200
Atlanta, Georgia 30361
Attention: John Latham, Esq.
If to Creditanstalt: Creditanstalt-Bankverein
- --------------------
2 Greenwich Plaza, 4/th/ Floor
Greenwich, Connecticut 06830
Attention: Dennis O'Dowd
With a Copy to: Creditanstalt-Bankverein
- ---------------
Two Ravinia Drive, N.E.
Suite 1680
Atlanta, Georgia 30346
Attention: Robert M. Biringer and Joseph Longosz
With a copy to: Troutman Sanders
- --------------
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308
Attention: Hazen Dempster, Esq.
The Company and the Holder shall each have the right to designate a different
address for itself by notice similarly given. All such notices, demands,
documents or other communication will be deemed to be delivered (i) upon
receipt, if personally delivered, (ii) on the third full Business Day following
the day of mailing, if sent by United States registered or certified mail and
(iii) on the Business Day following the date it was sent, if sent by overnight
courier.
Section 11. Remedies.
--------
The Company stipulates that the remedies at law of the Holder in the event
of any default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will not be
adequate, and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise, in addition to any
other remedies which may be available at law or in equity.
Section 12. Company Will Avoid Certain Actions.
----------------------------------
The Company will not, by amendment of its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger, issue or
sale of securities or otherwise, avoid or take any action which would have the
-15-
<PAGE>
effect of avoiding the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all of the provisions of this Warrant Certificate
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Warrant Certificate against dilution
or other impairment, and in particular, will not cause the par value, if any, of
any share of Stock, to be or become greater than the then effective Exercise
Price.
Section 13. Company Will Not Close Books.
----------------------------
The Company will at no time close its transfer books against the transfer
of this Warrant or of any shares of Stock issued or issuable upon the exercise
of this Warrant in any manner which interferes with the timely exercise of this
Warrant.
Section 14. Successors and Assigns.
----------------------
This Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of the Holders hereof. The provisions of this Warrant are intended to be for
the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder.
Section 15. Amendment.
---------
This Warrant Certificate may be modified or amended and any provision
hereof may be waived by a writing executed by the Company and holders of
Warrants representing a majority of the Warrant Shares obtainable upon exercise
of the Warrants.
Section 16. Headings.
--------
Section headings in this Warrant are for reference only and shall not
affect the meaning or construction of any of the provisions hereof.
[Signature on following page]
-16-
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
--------------------------
Name: Harry A. Blazer
Title: President
-17-
<PAGE>
ANNEX A
FORM OF SUBSCRIPTION
--------------------
(To be executed only upon exercise of the Warrant in whole or in part)
To HARRY'S FARMERS MARKET, INC.
The undersigned registered holder of the accompanying Warrant hereby
irrevocably exercises such Warrant or portion thereof for, and purchases
thereunder, _______/1/ Warrant Shares (as defined in such Warrant) and herewith
makes payment therefor of $________. The undersigned requests that the
certificates for such Warrant Shares be issued in the name of, and delivered to
_______________________________, whose address is
_________________________________.
Dated:__________________
________________________________
(Name must conform to name of holder as specified
on the face of the Warrant)
_________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
- -----------
/1/ Insert the number of Warrant Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of this Warrant, to
the holder surrendering the same.
-18-
<PAGE>
ANNEX B
FORM OF ASSIGNMENT
------------------
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto _______________________________ [Name] of ____________________[Address] the
right represented by the within Warrant to purchase _________ shares of Class A
Common Stock of HARRY'S FARMERS MARKET, INC. to which the within Warrant
relates, and appoints _____________ Attorney to transfer such right on the books
of HARRY'S FARMERS MARKET, INC. with full power of substitution in the premises.
Dated: ________________
________________________________
(Name must conform to name of holder as specified
on the face of the Warrant)
_________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
Signed in the presence of:
________________________
-19-
<PAGE>
ANNEX C
FORM OF CONVERSION NOTICE
-------------------------
(To be executed only upon conversion of the Warrant in whole or in part)
To HARRY'S FARMERS MARKET, INC.
The undersigned registered holder of the accompanying Warrant hereby
irrevocably elects to exercise its right to convert such Warrant or portion
thereof into _______/2/ Warrant Shares (as defined in such Warrant). The
undersigned requests that the certificates for such Warrant Shares be issued in
the name of, and delivered to __________________________, whose address is
______________________________.
Dated:_______________
________________________________
(Name must conform to name of holder as specified
on the face of the Warrant)
_________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
- -----------
/2/ Insert the number of Warrant Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of this Warrant, to
the holder surrendering the same.
-20-
<PAGE>
EXHIBIT 4.14
AMENDED AND RESTATED WARRANT CERTIFICATE
----------------------------------------
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR THE CLASS A COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND NEITHER MAY BE
SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES LAW UNLESS AN EXEMPTION FROM REGISTRATION IS THEN
AVAILABLE.
WARRANT TO PURCHASE CLASS A COMMON STOCK
OF
HARRY'S FARMERS MARKET, INC.
Date: May 8, 1996
This is to certify that, FOR VALUE RECEIVED, the registered holder hereof,
CREDITANSTALT-BANKVEREIN ("Creditanstalt", and together with any successors and
-------------
assigns hereunder, the "Holder" or the "Holders"), is entitled to purchase,
------ -------
subject to the provisions of this Warrant Certificate, from HARRY'S FARMERS
MARKET, INC., a Georgia corporation (the "Company"), 48,000 shares (as such
-------
number may be adjusted in accordance with Section 5 hereof) of the Company's
Class A Common Stock, no par value per share (such class of stock, together with
any capital stock of the Company into which such class of stock shall be
converted, being referred to herein as "Stock"), at $3.00 per share (as such
-----
number may be adjusted in accordance with Section 5 hereof) (the "Exercise
--------
Price"). The number of shares of Stock to be received upon the exercise of this
- -----
Warrant and the Exercise Price shall be adjusted from time to time as
hereinafter set forth. The shares of Stock or other securities or property
deliverable upon such exercise, as adjusted from time to time, are hereinafter
sometimes referred to as "Warrant Shares."
--------------
This Amended and Restated Warrant Certificate (this "Warrant Certificate")
amends and restates the Warrant Certificate (the "Warrants", which term includes
--------
all Warrants issued in substitution therefor) originally issued in connection
with the amendment and restatement on May 8, 1996 of the Warrant Agreement dated
as of December 30, 1994 (as amended, restated, supplemented or otherwise
modified from time to time, the "Warrant Agreement"). The Warrants so issued in
-----------------
connection with such amendment and restatement evidence rights to purchase an
aggregate of 120,000 Warrant Shares at the Exercise Price. This Warrant is
subject to the provisions, and is entitled to the benefits, of the Warrant
Agreement.
<PAGE>
Section 1. Exercise of Warrant.
-------------------
1.1. Manner of Exercise. (a) This Warrant may be exercised by the Holder,
------------------
in whole or in part, at any time or from time to time through and including the
sixth (6th) anniversary of the date hereof (the "Expiration Date") during normal
---------------
business hours on any Business Day (as defined in the Warrant Agreement) by
surrender of this Warrant, together with the form of subscription duly executed
by such Holder in substantially the form attached as Annex A hereto, to the
Company at its office designated pursuant to Section 7.1 of the Warrant
Agreement (or, if such exercise is in connection with an underwritten public
offering of Warrant Shares subject to this Warrant, at the location at which the
underwriting agreement requires that such Warrant Shares be delivered).
(b) Payment of the Exercise Price for the Warrant Shares, if required,
shall be made, at the option of the Holder by certified or bank check or wire
transfer payable to the order of the Company, in any case, in an amount equal to
(A) the number of Warrant Shares specified in such form of subscription,
multiplied by (B) the then current Exercise Price. The Holder shall thereupon
be entitled to receive the number of Warrant Shares specified in such form of
subscription (plus cash in lieu of any fractional share as provided in Section
1.3 hereof).
(c) In lieu of exercising Warrants pursuant to the immediately preceding
clause (a), the Holder shall have the right to require the Company to convert
the Warrants, in whole or in part and at any time or times (the "Conversion
Right"), into Warrant Shares, by surrendering to the Company the Warrant
Certificate evidencing the Warrants to be converted, accompanied by a conversion
notice duly executed by the Holder substantially in the form of Annex C hereto.
Upon exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any Exercise Price) that number of Warrant
- --------
Shares which is equal to the quotient obtained by dividing (x) the value of the
number of Warrants being converted at the time the Conversion Right is exercised
(determined by subtracting the aggregate Exercise Price for all such Warrants
immediately prior to the exercise of the Conversion Right from the aggregate
current Market Price of that number of Warrant Shares purchasable upon exercise
of such Warrants immediately prior to the exercise of the Conversion Right
(taking into account all applicable adjustments pursuant to Section 5 hereof))
by (y) the Market Price of one share of Stock immediately prior to the exercise
of the Conversion Right. Any references in this Warrant Certificate or the
Warrant Agreement to the "exercise" of any Warrants, and the use of the term
"exercise" herein and thereon, shall be deemed to include (without limitation)
any exercise of the Conversion Right.
1.2. Effective Date. Each exercise of this Warrant pursuant to Section
--------------
1.1 hereof shall be deemed to have been effected immediately prior to the close
of business on the Business Day on which this Warrant is surrendered to the
Company as provided in Section 1.1 hereof (except that if such exercise is in
connection with an underwritten public offering of Warrant Shares subject to
this Warrant, then such exercise shall be deemed to have been effected upon such
surrender of this Warrant). On each such day that an exercise of this Warrant
is deemed effected, the person or persons in whose name or names any certificate
or certificates for Warrant Shares are issuable upon such exercise (as provided
in Section 1.3 hereof) shall be deemed to have become the Holder or Holders of
record thereof.
2
<PAGE>
1.3. Warrant Share Certificates, Cash for Fractional Warrant Shares and
------------------------------------------------------------------
Reissuance of Warrants. As promptly as practicable after the exercise of this
- ----------------------
Warrant, in whole or in part, and in any event within five (5) Business Days
thereafter (unless such exercise shall be in connection with a public offering
of Warrant Shares subject to this Warrant, in which event concurrently with such
exercise), the Company at its expense (including the payment by it of any
applicable issue, stamp or other taxes) will cause to be issued in the name of
and delivered to the Holder or, subject to Section 6 of the Warrant Agreement,
such other person as the Holder may direct:
(a) a certificate or certificates for the number of Warrant Shares to which
the Holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which the Holder would otherwise be entitled, cash in
an amount equal to the same fraction of the Market Price (as defined in
Section 5.1 hereof) per Warrant Share on the effective date of such
exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants,
substantially identical hereto, representing the rights formerly
represented by this Warrant which have not expired or been exercised.
1.4. Acknowledgment of Obligation. The Company will, at the time of or at any
----------------------------
time after each exercise of this Warrant, upon the request of the Holder hereof
or of any Warrant Shares issued upon such exercise, acknowledge in writing its
continuing obligation to afford to such Holder all rights (including, without
limitation, any rights to registration of any such Warrant Shares pursuant to
the Registration Rights Annex of the Warrant Agreement (the "Registration
Rights Agreement")) to which such Holder shall continue to be entitled under
this Warrant Certificate, the Warrant Agreement and the Registration Rights
Agreement; provided, that if any such Holder shall fail to make any such
--------
request, the failure shall not affect the continuing obligation of the Company
to afford such rights to such Holder.
1.5. Conditional Exercise. Notwithstanding any other provision hereof, if any
--------------------
exercise of any portion of this Warrant is to be made in connection with a
public offering of Warrant Shares or any transaction described in Section 5.9
hereof, the exercise of any portion of this Warrant may, at the election of the
Holder, be conditioned upon the consummation of the public offering or such
transaction, in which case such exercise shall not be deemed to be effective
until the consummation of such public offering or transaction.
Section 2. Reservation of Shares.
---------------------
The Company shall at all times after the date hereof and until the Expiration
Date reserve for issuance and delivery upon exercise of this Warrant the number
of Warrant Shares as shall be required for issuance and delivery upon exercise
in full of this Warrant.
3
<PAGE>
Section 3. Transfer, Exchange, Assignment or Loss of Warrant.
-------------------------------------------------
3.1. Transfer. This Warrant may be assigned in whole or in part or
--------
transferred in whole or in part; subject, however, to compliance with the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Act").
3.2. Procedure for Assignment or Transfer. Any assignment or transfer
------------------------------------
hereunder shall be made by surrender of this Warrant to the Company at its
office designated pursuant to Section 7.1 of the Warrant Agreement, together
with the form of assignment duly executed by the Holder in substantially the
form attached as Annex B hereto and funds sufficient to pay any required
transfer tax. In such event the Company shall, without charge, execute and
deliver a new Warrant or Warrants substantially identical hereto in the name of
the assignee or assignees named in such instrument of assignment and designate
the assignee or assignees as the registered holder or holders on the Company's
records and this Warrant shall promptly be cancelled. This Warrant may be
divided or combined with other Warrants which carry the same rights upon
presentation thereof at the principal office of the Company together with a
written notice signed by the holder thereof, specifying the names and
denominations in which new Warrants are to be issued.
3.3. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company of
--------------------------------------
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification to the Company or (in the case of mutilation)
presentation of this Warrant for surrender and cancellation, the Company will
execute and deliver a new Warrant identical hereto and any such lost, stolen,
destroyed or mutilated Warrant shall thereupon become void.
Section 4. Warrant Certificate Holder Not Deemed a Stockholder.
---------------------------------------------------
Except as otherwise provided herein, the Holders shall not, solely because of
holding this Warrant, be entitled to vote, receive dividends or be deemed the
holder of Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holders, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matters submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger,
conveyance or otherwise), or to receive notice of meetings or other actions
affecting stockholders, or to receive dividend or subscription rights, or
otherwise, until this Warrant shall have been exercised in accordance with the
provisions hereof.
Section 5. Anti-Dilution.
-------------
The number of Warrant Shares for which this Warrant is exercisable and/or the
Exercise Price at which such Warrant Shares may be purchased upon exercise of
this Warrant shall be subject to adjustment from time to time as set forth in
this Section 5. The Company shall give the Holders notice of any event described
below which requires an adjustment pursuant to this Section 5 at the time of
such event.
4
<PAGE>
5.1. Special Definitions. For purposes of this Section 5 the following terms
-------------------
shall have the following meanings:
"Additional Shares of Stock" shall mean all shares of Stock issued by the
--------------------------
Company after the date hereof, other than (i) the Stock to be issued upon
exercise of any Warrants at any time issued in connection with the Warrant
Agreement, (ii) the Stock to be issued upon conversion of the Preferred Stock ,
(iii) the Stock to be issued upon exercise of the Preferred Stock Warrants; (iv)
the Stock to be issued upon exercise of the Performance Warrants, (v) 200,000
shares of Stock to be issued pursuant to the Company's 1996 Directors Stock
Option Plan, (vi) 475,000 shares of Stock to be issued pursuant to the Company's
Management Incentive Plan and (vii) 300,000 shares of Stock issued or to be
issued pursuant to the Company's 1996 Employee Stock Purchase Plan.
"Convertible Securities" shall mean evidences of indebtedness, shares of
----------------------
Preferred Stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Stock, either immediately or upon the occurrence of a
specified date or a specified event, other than the Preferred Stock issued
pursuant to the Share and Warrant Purchase Agreements dated December 30, 1994
between the Company, Robert Fleming Nominees Ltd., and certain other investors
(such Agreements to be referred to herein collectively as the "Purchase
--------
Agreements" and Robert Fleming Nominees Ltd. and such other investors to be
- ----------
referred to herein collectively as the "Purchasers".
----------
"Market Price" shall mean, in respect of any share of Stock on the date of
------------
determination thereof, the average of the closing prices of sales of the Stock
on all principal United States securities exchanges on which the Stock may at
the time be listed, or, if there shall have been no sales on any such exchange
on any relevant day, the last trading price of such Stock on such day, or if
there is no such price, the average of the bid and asked prices at the end of
such day on the Nasdaq Stock Market, in each such case averaged for a period of
twenty (20) consecutive business days prior to the day as of which "Market
Price" is being determined. Notwithstanding the foregoing, with respect to the
issuance of Stock by the Company in an underwritten public offering, the Market
Price shall be the per share purchase price paid by the underwriters. If at any
time the Stock is not listed on any exchange or the Nasdaq Stock Market, the
"Market Price" shall be deemed to be the fair market value thereof determined by
an investment banking firm of nationally recognized standing selected by the
Board of Directors of the Company and acceptable to a majority of the Holders,
as of the most recent practicable date as of which the determination is to be
made, taking into account the value of the Company as a going concern, and
without taking into account any lack of liquidity of the Stock or any discount
for a minority interest.
"Performance Warrants" shall mean those performance warrants for 61,111 shares
--------------------
of Stock issued on December 30, 1994 to the Purchasers (as defined below).
"Preferred Stock" shall mean those shares of the Company's Series A Redeemable
---------------
Convertible Preferred Stock with a stated value of $9.00 per share.
"Preferred Stock Warrants" shall mean those warrants originally issued in
------------------------
connection with the issue and sale by the Company of its Preferred Stock
pursuant to the Purchase Agreements.
5
<PAGE>
5.2. Stock Dividends, Subdivisions and Combinations.
----------------------------------------------
If at any time the Company shall:
(i) take a record of the holders of its Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Stock,
(ii) subdivide its outstanding shares of Stock into a larger number of
shares of Stock, or
(iii) combine its outstanding shares of Stock into a smaller number of
shares of Stock,
then (I) the Warrant Shares for which this Warrant is exercisable immediately
after the occurrence of any such event shall be adjusted to equal the number of
shares of Stock which a record holder of the same number of shares of Stock for
which this Warrant is exercisable immediately prior to the occurrence of such
event would own or be entitled to receive after the happening of such event, and
(II) the Exercise Price shall be adjusted to equal (x) the Exercise Price
multiplied by the Warrant Shares for which this Warrant is exercisable
immediately prior to the adjustment divided by (y) the Warrant Shares for which
this Warrant is exercisable immediately after such adjustment.
5.3. Certain other Distributions. (a) Except as provided in Section 5.3(b), if
---------------------------
at any time the Company shall take a record of the holders of its Stock for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its Stock or any
other securities or property of any nature whatsoever (other than cash or
Additional Shares of Stock), or
(iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any share of its Stock or any other
securities or property of any nature whatsoever (other than cash or
Additional Shares of Stock),
then, (I) the Warrant Shares for which this Warrant is exercisable shall be
adjusted to equal the product of the Warrant Shares for which this Warrant is
exercisable immediately prior to such adjustment multiplied by a fraction (x)
the numerator of which shall be the Market Price per share of Stock at the date
of taking such record and (y) the denominator of which shall be such Market
Price per share of Stock minus the amount allocable to one share of Stock of any
such cash so distributable and of the fair value (as determined in good faith by
the Board of Directors of the Company) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription or purchase rights so distributable, and (II) the Exercise Price
shall be adjusted to equal (x) the Exercise Price multiplied by the Warrant
Shares for which this Warrant is exercisable immediately prior to the adjustment
divided by (y) the Warrant Shares for which this Warrant is exercisable
6
<PAGE>
immediately after such adjustment. A reclassification of the Stock (other than
a change in par value, or from par value to no par value or from no par value to
par value) into shares of Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the Holders of its Stock of such shares
of such other class of stock within the meaning of this Section 5.3 and, if the
outstanding shares of the Stock shall be changed into a larger or smaller number
of shares of the Stock as part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
shares of the Stock within the meaning of Section 5.2.
(b) If at any time the Company shall take a record of the holders of its Stock
for the purpose of entitling them to receive any cash dividend or other
distribution of property of any nature whatsoever (other than Additional Shares
of Stock), and the amount of such cash dividend and the fair market value of any
property so distributed, when added to the amount of cash dividends paid and the
fair market value of any property so distributed during the twelve (12) months
prior to the date of such dividend or distribution, exceeds five percent (5%) of
the aggregate Market Price of the Stock of all of the Company's Stock then
outstanding on the Business Day immediately preceding the record date for such
dividend or distribution, the Holders of the Warrant shall be entitled to
participate in such dividend or distribution as if the Holder had already
exercised this Warrant in full, and such Holder shall receive, at the time such
dividend is paid or such property is distributed, the same kind and per-share
amount of cash or other property as is distributed to the holders of the
Company's Stock.
5.4. Issuance of Additional Shares of Stock. If at any time the Company shall
--------------------------------------
(except as hereinafter provided) issue or sell any Additional Shares of Stock
either (A) in exchange for consideration in an amount per Additional Share of
Stock less than the Exercise Price in effect immediately prior to such issuance
or sale of Additional Shares of Stock or (B) in exchange for consideration in an
amount per Additional Share of Stock less than the Market Price in effect
immediately prior to such issuance or sale of Additional Shares of Stock, then
the Exercise Price as to the Warrant Shares for which this Warrant is
exercisable immediately prior to such adjustment shall be adjusted to equal the
price determined by multiplying the Exercise Price by a fraction, of which
(x) the numerator shall be (1) the number of shares of Stock
outstanding immediately prior to such issuance or sale of Additional
Shares of Stock plus (2) the number of shares of Stock which the
aggregate amount of consideration, if any, received by the Company for
the total number of such Additional Shares of Stock so issued or sold
would purchase at the greater of (I) the Market Price in effect
immediately prior to such issuance or sale of Additional Shares of
Stock or (II) the Exercise Price in effect immediately prior to such
issuance or sale of Additional Shares of Stock and
(y) the denominator shall be the number of shares of Stock
outstanding immediately after such issuance or sale of Additional
Shares of Stock;
provided, however, that such adjustment shall be made only if the Exercise Price
determined from such adjustment shall be less than the Exercise Price in effect
7
<PAGE>
immediately prior to the issuance of such Additional Shares of Stock. The
provisions of this Section 5.4 shall not apply to any issuance of Additional
Shares of Common Stock for which an adjustment is provided under Section 5.2 or
5.3.
5.5. Issuance of Warrants or Other Rights. If at any time the Company shall
------------------------------------
take a record of the holders of its Stock for the purpose of entitling them to
receive a distribution of, or shall in any manner (whether directly or by
assumption in a merger in which the Company is the surviving corporation) issue
or sell, any warrants or other rights to subscribe for or purchase any
Additional Shares of Stock or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
consideration received for such warrants or other rights or such Convertible
Securities shall be less than the Exercise Price or the Market Price in effect
immediately prior to the time of such issue or sale, then the Exercise Price
shall be adjusted as provided in Section 5.4. No further adjustments of the
Exercise Price shall be made upon the actual issue of such Stock or of such
Convertible Securities upon exercise of such warrants or other rights or upon
the actual issue of such Stock upon such conversion or exchange of such
Convertible Securities.
5.6. Issuance of Convertible Securities. If at any time the Company shall
----------------------------------
take a record of the holders of its Stock for the purpose of entitling them to
receive a distribution of, or shall in any manner (whether directly or by
assumption in a merger in which the Company is the surviving corporation) issue
or sell, any Convertible Securities, whether or not the rights to convert
thereunder are immediately exercisable, and the consideration received for such
stock shall be less than the Exercise Price or the Market Price in effect
immediately prior to the time of such issue or sale, then the Exercise Price
shall be adjusted as provided in Section 5.4. No adjustment of the Exercise
Price shall be made under this Section 5.6 upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 5.5. No further adjustments of the Exercise Price shall be
made upon the actual issue of such Stock upon conversion of such Convertible
Securities and, if any issue or sale of such Convertible Securities is made upon
exercise of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Exercise Price have been or
are to be made pursuant to other provisions of this Section 5, no further
adjustments of the Exercise Price shall be made by reason of such issue or sale.
5.7. Antidilution Adjustments Under Other Securities. Without limiting any
-----------------------------------------------
other rights available hereunder to the Holders of the Warrants, if there is an
antidilution adjustment (i) under any Convertible Securities, whether issued
prior to or after the date hereof or (ii) under any rights, options or warrants
to purchase Additional Shares of Stock, whether issued prior to or after the
date hereof which, in either case, results in a reduction in the exercise or
purchase price with respect to such security or rights or results in an increase
in the number of Additional Shares of Stock obtainable under such Convertible
Security, right, option or warrant, then an adjustment shall be made to the
Exercise Price hereunder. Any such adjustment pursuant to this Section 5.7
shall be whichever of the following results in a lower Exercise Price: (A) a
reduction in the Exercise Price equal to the percentage reduction in such
exercise or purchase price with respect to such Convertible Security, right,
option or warrant or (B) a reduction in the Exercise Price which will result in
8
<PAGE>
the same percentage increase in the number of Warrant Shares available hereunder
as the percentage increase in the number of Additional Shares of Stock available
under such Convertible Security, right, option or warrant. Any such adjustment
under this Section 5.7 shall only be made if it would result in a lower Exercise
Price than that which would be determined pursuant to any other antidilution
adjustment otherwise required hereunder as a result of the event or circumstance
which triggered the adjustment to such Convertible Security, right, option or
warrant, and if an adjustment is made pursuant to this Section 5.7, such other
antidilution adjustment otherwise required hereunder shall not be made as a
result of such event or circumstance.
5.8. Other Provisions Applicable to Adjustments under this Section. The
-------------------------------------------------------------
following provisions shall be applicable to the making of adjustments of the
Warrant Shares for which this Warrant is exercisable and the Exercise Price at
which such Warrant Shares may be purchased upon exercise of this Warrant
provided for in this Section 5:
(a) Computation of Consideration. To the extent that any Additional
----------------------------
Shares of Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Shares of Stock or any
Convertible Securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the
cash received by the Company therefor, or, if such Additional Shares of
Stock or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares of
Stock or Convertible Securities are sold to underwriters or dealers for
public offering without a subscription offering, the public offering price
(in any such case subtracting any amounts paid or receivable for accrued
interest or accrued dividends and any compensation, discounts or expenses
paid or incurred by the Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that
such issuance shall be for a consideration other than cash, then except as
herein otherwise expressly provided, the amount of such consideration shall
be deemed to be the fair value of such consideration at the time of such
issuance as determined in good faith by the Board of Directors of the
Company. In case any Additional Shares of Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase
such Additional Shares of Stock or Convertible Securities shall be issued
in connection with any merger in which the Company issues any securities,
the amount of consideration therefor shall be deemed to be the fair value,
as determined in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving corporation as
such Board in good faith shall determine to be attributable to such
Additional Shares of Stock, Convertible Securities, warrants or other
rights, as the case may be. The consideration for any Additional Shares of
Stock issuable pursuant to any warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for
issuing such warrants or other rights plus the additional consideration
payable to the Company upon exercise of such warrants or other rights. The
consideration for any Additional Shares of Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by
the Company for issuing warrants or other rights to subscribe for or
purchase such Convertible Securities, plus the consideration paid or
payable to the Company in respect of the subscription for or purchase of
such Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at any
time of any Additional Shares of Stock or Convertible Securities in payment
9
<PAGE>
or satisfaction of any dividends upon any class of stock other than Stock,
the Company shall be deemed to have received for such Additional Shares of
Stock or Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this
---------------------------
Section 5 shall be made whenever and as often as any event requiring an
adjustment shall occur, except that any adjustment of the Warrant Shares
for which this Warrant is exercisable that would otherwise be required may
be postponed (except in the case of a subdivision or combination of shares
of the Stock, as provided for in Section 5.2) up to, but not beyond the
date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than l% of the
shares of the Stock for which this Warrant is exercisable immediately prior
to the making of such adjustment. Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed
shall be carried forward and made as soon as such adjustment, together with
other adjustments required by this Section 5 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose
of any adjustment, any event shall be deemed to have occurred at the close
of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this Section 5,
--------------------
fractional interests in the Stock shall be taken into account to the nearest
1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a record of the
----------------------------
holders of the Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and before
the distribution to stockholders thereof, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(e) Challenge to Good Faith Determination. Whenever the Board of Directors
-------------------------------------
of the Company shall be required to make a determination in good faith of the
fair value of any item under this Section 5, such determination may be
challenged in good faith by a Holder and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by the Company
and acceptable to such Holder. The fees of such investment banker shall be
borne by the Holder if the Company's calculation is determined to be correct and
otherwise by the Company.
(f) Escrow of Property. If the Company shall take a record of the holders of
------------------
its Stock for the purpose of entitling them to receive any distribution of any
kind of property whatsoever, but prior to the payment of such distribution the
Holder exercises this Warrant, upon payment of the Exercise Price, such property
shall be held in escrow for the Holder by the Company to be issued to the Holder
upon the occurrence of such distribution and to the extent such distribution
actually takes place. Notwithstanding any other provision to the contrary
herein, if the distribution for which such record was taken fails to occur or is
rescinded, then such escrowed property shall be returned to the Company.
10
<PAGE>
5.9. Reorganization, Reclassification, Merger or Consolidation. If the
---------------------------------------------------------
Company shall at any time reorganize or reclassify the outstanding shares of
Stock (other than a change in par value, or from no par value to par value, or
from par value to no par value, or as a result of a subdivision or combination)
or consolidate with or merge into another corporation (where the Company is not
the continuing corporation after such merger or consolidation), the Holders
shall thereafter be entitled to receive upon exercise of this Warrant in whole
or in part, the same kind and number of shares of stock and other securities,
cash or other property (and upon the same terms and with the same rights) as
would have been distributed to the Holder upon such reorganization,
reclassification, consolidation or merger had the Holder exercised this Warrant
immediately prior to such reorganization, reclassification, consolidation or
merger (subject to subsequent adjustments under Section 5 hereof). The Holders
shall pay upon such exercise the Exercise Price that otherwise would have been
payable pursuant to the terms of this Warrant. If any such reorganization,
reclassification, consolidation or merger results in a cash distribution in
excess of the Exercise Price provided by this Warrant, a Holder may, at the
Holder's option, exercise this Warrant without making payment of the Exercise
Price, and in such case the Company shall, upon distribution to the Holder,
consider the Exercise Price to have been paid in full, and in making settlement
to the Holder, shall deduct an amount equal to the Exercise Price from the
amount payable to the Holder. Notwithstanding anything herein to the contrary,
the Company will not effect any such reorganization, reclassification, merger or
consolidation unless prior to the consummation thereof, the corporation who may
be required to deliver any stock, securities or other assets upon the exercise
of this Warrant shall agree by an instrument in writing to deliver such stock,
cash, securities or other assets to the Holder. A sale, transfer or lease of
all or substantially all of the assets of the Company to another person shall be
deemed a reorganization, reclassification, consolidation or merger for the
foregoing purposes.
5.10. Exceptions to Adjustment of Exercise Price and/or Warrant Shares.
----------------------------------------------------------------
Anything herein to the contrary notwithstanding, the Company shall not make any
adjustment of the Exercise Price or the Warrant Shares issuable upon the
exercise of this Warrant in the case of (i) the issuance of the Warrants or any
other Warrants at any time issued in connection with the Warrant Agreement or
the issuance of shares of the Stock upon exercise of any such Warrants, (ii) the
issuance of shares of Stock to holders of the Company's Preferred Stock upon
conversion of all or any portion of their shares of Preferred Stock, (iii) the
issuance of the Preferred Stock Warrants or the issuance of the shares of Stock
upon exercise of such Preferred Stock Warrants or (iv) the issuance of the
Performance Warrants or the issuance of the shares of Stock upon exercise of
such Performance Warrants.
5.11. Chief Financial Officer's Opinion. Upon each adjustment of the
---------------------------------
Exercise Price and upon each change in the Warrant Shares issuable upon the
exercise of this Warrant, and in the event of any change in the rights of a
Holder by reason of other events herein set forth, then and in each such case,
the Company will promptly obtain an opinion of the chief financial officer of
the Company, stating the adjusted Exercise Price and the new Warrant Shares so
issuable, or specifying the other shares of the Stock, securities or assets and
the amount thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company will promptly mail a copy of such
opinion to the Holders. If a Holder disagrees with such calculation, the
Company agrees to obtain within thirty (30) business days an opinion of a firm
11
<PAGE>
of independent certified public accountants selected by the Company's Board of
Directors and acceptable to such Holder to review such calculation and the
opinion of such firm of independent certified public accountants shall be final
and binding on the parties and shall be conclusive evidence of the correctness
of the computation with respect to any such adjustment of the Exercise Price and
any such change in the number of Warrant Shares so issuable. The fees of such
accountants shall be borne by the Holder if the Company's calculation is
determined by such accountants to be correct and otherwise by the Company.
5.12. Company to Prevent Dilution. In case at any time or from time to
---------------------------
time conditions arise by reason of action taken by the Company, which in the
good faith opinion of its Board of Directors or a majority of the Holders are
not adequately covered by the provisions of this Section 5, and which might
materially and adversely affect the exercise rights of the Holders, the Board of
Directors of the Company shall appoint such firm of independent certified public
accountants acceptable to a majority of the Holders, which shall give their
opinion upon the adjustment, if any, on a basis consistent with the standards
established in the other provisions of this Section 5, necessary with respect to
the Exercise Price, so as to preserve, without dilution (other than as
specifically contemplated by this Warrant), the exercise rights of the Holders.
Upon receipt of such opinion, the Board of Directors of the Company shall
forthwith make the adjustments described therein.
Section 6. Character of Shares of Stock.
----------------------------
All shares of the Stock issuable upon the exercise of this Warrant shall, when
issued to a Holder, be duly authorized, validly issued, fully paid and
nonassessable, free and clear of any lien or encumbrance and without any
preemptive rights.
Section 7. Notice to Holder.
----------------
So long as this Warrant shall be outstanding, (i) if the Company shall pay any
dividend or make any distribution upon the Stock otherwise than in cash, (ii) if
the Company shall offer to the holders of Stock, for subscription or purchase by
them, any shares of any class of stock of the Company or any other rights or
(iii) if there shall be any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company, voluntary or
involuntary dissolution, liquidation or winding up of the Company, then in any
such event, the Company shall cause to be mailed by certified mail to each
Holder, at least 30 days prior to the event described above, a notice containing
a brief description of the proposed action and stating the date or expected date
on which a record is to be taken for the purpose of such dividend, distribution
or rights, or the date or expected date such reclassification, reorganization,
consolidation, merger, conveyance, lease or transfer, dissolution, liquidation
or winding up shall take place or be voted upon by holders of the Stock of
record, and the date or expected date as of which the holders of Stock of record
shall be entitled to exchange their shares of Stock for securities or other
property deliverable upon any such event.
12
<PAGE>
Section 8. Disposition of Warrant Shares.
-----------------------------
The stock certificates of the Company that will evidence the Warrant Shares or
any other security issued or issuable upon exercise of this Warrant will be
imprinted with a conspicuous legend in substantially the following form:
The securities represented by this Certificate have not been registered
under the Securities Act of 1933 (the "Act") or any applicable state
securities laws and may not be sold, pledged, hypothecated, donated or
otherwise transferred (whether or not for consideration) unless registered
under the Act and any applicable state securities laws or in a transaction
exempt from such registrations.
Except as provided in the Registration Rights Agreement, the Company does not
agree to register any of the Warrant Shares for distribution in accordance with
the provisions of the Act or any applicable state securities laws, and the
Company has not agreed to comply with any exemption from registration under the
Act or any applicable state securities laws for the resale of the Warrant
Shares. Hence, it is the understanding of the Holder that by virtue of the
provisions of certain rules respecting "restricted securities" promulgated by
---------------------
the Securities and Exchange Commission, the Warrant Shares may be required to be
held indefinitely, unless and until registered under the Act and any applicable
state securities laws unless an exemption from such registration is available,
in which case the Holders may still be limited as to the number of Warrant
Shares that may be sold.
Section 9. Governing Law.
-------------
This Warrant shall be construed in accordance with the laws of the State of
Georgia applicable to contracts executed and to be performed wholly within such
state without regard to any conflicts of laws principles.
Section 10. Notice.
------
Any notice, demand, document or other communication given or delivered
hereunder shall be in writing, and may be (i) personally delivered, (ii) given
or made by United States registered or certified mail, return receipt requested,
postage prepaid, or (iii) given or made by overnight courier, delivery charges
prepaid, addressed as follows:
If to the Company: Harry's Farmers Market, Inc.
- ------------------
1180 Upper Hembree Road
Roswell, GA 30076
Attention: Chief Financial Officer
With a Copy to: Nelson, Mullins, Riley & Scarborough, L.L.P
- ---------------
400 Colony Square, Suite 2200
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Attention: John Latham, Esq.
13
<PAGE>
If to Creditanstalt: Creditanstalt-Bankverein
- --------------------
2 Greenwich Plaza, 4/th/ Floor
Greenwich, Connecticut 06830
Attention: Dennis O'Dowd
With a Copy to: Creditanstalt-Bankverein
- ---------------
Two Ravinia Drive, N.E.
Suite 1680
Atlanta, Georgia 30346
Attention: Robert M. Biringer and Joseph Longosz
With a Copy to: Troutman Sanders
- --------------
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308
Attention: Hazen Dempster, Esq.
The Company and the Holder shall each have the right to designate a different
address for itself by notice similarly given. All such notices, demands,
documents or other communication will be deemed to be delivered (i) upon
receipt, if personally delivered, (ii) on the third full Business Day following
the day of mailing, if sent by United States registered or certified mail and
(iii) on the Business Day following the date it was sent, if sent by overnight
courier.
Section 11. Remedies.
--------
The Company stipulates that the remedies at law of the Holder in the event of
any default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will not be
adequate, and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise, in addition to any
other remedies which may be available at law or in equity.
Section 12. Company Will Avoid Certain Actions.
----------------------------------
The Company will not, by amendment of its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger, issue or
sale of securities or otherwise, avoid or take any action which would have the
effect of avoiding the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all of the provisions of this Warrant Certificate
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Warrant Certificate against dilution
or other impairment, and in particular, will not cause the par value, if any, of
any share of Stock, to be or become greater than the then effective Exercise
Price.
14
<PAGE>
Section 13. Company Will Not Close Books.
----------------------------
The Company will at no time close its transfer books against the transfer of
this Warrant or of any shares of Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
Section 14. Successors and Assigns.
----------------------
This Warrant and the rights evidenced hereby shall inure to the benefit of and
be binding upon the successors of the Company and the successors and assigns of
the Holders hereof. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder.
Section 15. Amendment.
---------
This Warrant Certificate may be modified or amended and any provision hereof
may be waived by a writing executed by the Company and holders of Warrants
representing a majority of the Warrant Shares obtainable upon exercise of the
Warrants.
Section 16. Headings.
--------
Section headings in this Warrant are for reference only and shall not affect
the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
HARRY'S FARMERS MARKET, INC.
By: /S/ Harry A. Blazer
_____________________________
Name: Harry A. Blazer
Title: President
15
<PAGE>
ANNEX A
FORM OF SUBSCRIPTION
--------------------
(To be executed only upon exercise of the Warrant in whole or in part)
To HARRY'S FARMERS MARKET, INC.
The undersigned registered holder of the accompanying Warrant hereby
irrevocably exercises such Warrant or portion thereof for, and purchases
thereunder, _______/1/ Warrant Shares (as defined in such Warrant) and herewith
makes payment therefor of $________. The undersigned requests that the
certificates for such Warrant Shares be issued in the name of, and delivered to
________________________________, whose address is
_________________________________.
Dated:
________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
_________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
- ---------
/1/ Insert the number of Warrant Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or Warrants will
be issued and delivered, representing the unexercised portion of this
Warrant, to the holder surrendering the same.
16
<PAGE>
ANNEX B
FORM OF ASSIGNMENT
------------------
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers unto
_______________________________ [Name] of ____________________[Address] the
right represented by the within Warrant to purchase _________ shares of Class A
Common Stock of HARRY'S FARMERS MARKET, INC. to which the within Warrant
relates, and appoints _____________ Attorney to transfer such right on the books
of HARRY'S FARMERS MARKET, INC. with full power of substitution in the premises.
Dated: ________________
________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
_________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
Signed in the presence of:
________________________
17
<PAGE>
ANNEX C
FORM OF CONVERSION NOTICE
-------------------------
(To be executed only upon conversion of the Warrant in whole or in part)
To HARRY'S FARMERS MARKET, INC.
The undersigned registered holder of the accompanying Warrant hereby
irrevocably elects to exercise its right to convert such Warrant or portion
thereof into _______/2/ Warrant Shares (as defined in such Warrant). The
undersigned requests that the certificates for such Warrant Shares be issued in
the name of, and delivered to ______________________________, whose address is
_________________________________.
Dated:
________________________________
(Name must conform to name of holder as specified
on the face of the Warrant)
_________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
- ------------
/2/ Insert the number of Warrant Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or Warrants will
be issued and delivered, representing the unexercised portion of this
Warrant, to the holder surrendering the same.
18
<PAGE>
EXHIBIT 10.1
================================================================================
TRANSACTION AGREEMENT
AMONG
HFMI ACQUISITION CORPORATION,
and
HARRY'S FARMERS MARKET , INC.
DATED AS OF JANUARY 31, 1997
================================================================================
<PAGE>
Exhibits
--------
Exhibit A Secured Loan Agreement
Exhibit B Series B Preferred Stock
Exhibit C Warrant Certificate
Exhibit D Registration Rights Agreement
Exhibit E IP Acquisition Agreement
Exhibit F Company Preferred Stock Agreement
Exhibit G Bank Agreement
Exhibit H Opinion of Sutherland, Asbill & Brennan
Exhibit I Opinion of Alston & Bird
<PAGE>
TRANSACTION AGREEMENT
---------------------
This Agreement dated as of January 31, 1997, is by and between Harry's
Farmers Market, Inc., a Georgia corporation (the "Company"), and HFMI
Acquisition Corporation, a Delaware corporation ("Newco").
In consideration of the mutual promises and covenants contained in this
Agreement, and intending to be legally bound by the terms and conditions of this
Agreement, the parties hereto hereby agree as follows:
1. Transactions Between Newco and the Company.
------------------------------------------
1.1 Secured Loan. Subject to the terms and conditions of this
Agreement, at the Closing (as defined in Section 2) Newco and the Company shall
enter into a secured loan agreement in the form attached as Exhibit A hereto
(the "Secured Loan Agreement") and Newco shall fund the Refinancing Loan (as
defined in the Secured Loan Agreement). The Secured Loan Agreement will also
grant to Newco an option (the "Option") to acquire, on the terms provided in the
Secured Loan Agreement, 500,000 shares (the "Preferred Shares") of Series B
Preferred Stock, stated value $40 per share, of the Company ("Series B Preferred
Stock"), which Series B Preferred Stock shall have the terms of the Articles of
Amendment in the form of Exhibit B hereto.
1.2 Purchase of Warrants. Subject to the terms and conditions of this
Agreement, at the Closing the Company shall sell and issue to Newco, warrants
(the "Warrants") to purchase 2,000,000 shares (the "Warrant Shares") of Class A
Common Stock, no par value, of the Company (the "Class A Common Stock"), which
shall have the terms set forth in the Warrant Certificate in the form of Exhibit
C hereto (the "Warrants"), for an aggregate purchase price of One Million
Dollars ($1,000,000), payable in cash.
1.3 Registration Rights. Subject to the terms and conditions of this
Agreement, at the Closing Newco and the Company shall enter into a Registration
Rights Agreement in the form of Exhibit D hereto.
1.4 Intellectual Property Acquisition. Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Section 2) the
Company shall transfer certain intellectual property to HFMI Trust, a newly-
organized Delaware business trust (the "IP Trust"), the Company shall transfer a
certificate of interest in the IP Trust to Newco, the IP Trust shall enter into
an administration and servicing agreement with Newco and the IP Trust shall
enter into license agreements with each of
<PAGE>
Newco and the Company, all on the terms provided in the acquisition agreement
between Newco and the Company in the form set forth as Exhibit E hereto (the "IP
Acquisition Agreement").
1.5 Consulting Services Agreement. Subject to the terms and conditions
of this Agreement, at the Closing Newco shall make the payments to the Company
provided for in the consulting services agreement of even date herewith among
Newco, the Company and HB (the "Consulting Services Agreement").
2. The Closing. The closing of the Loans, the purchase and sale of the
Warrants and the transactions contemplated by the IP Acquisition Agreement and
the Consulting Services Agreement shall take place at the offices of Sutherland,
Asbill & Brennan, L.L.P., 999 Peachtree Street, N.E., Atlanta, Georgia 30309-
3996, or at such other time, date, and place as are mutually agreeable to the
Company and Newco (the "Closing"). The date of the Closing is hereinafter
referred to as the "Closing Date." At the Closing, (i) the Company shall deliver
to Newco the Refinancing Note (as defined in the Secured Loan Agreement) and
Newco shall pay to the Company by wire transfer the proceeds of the Refinancing
Loan, (ii) the Company shall deliver to Newco a certificate evidencing the
Warrants and Newco shall pay to the Company by wire transfer the purchase price
therefor, (iii) the Company and Newco shall execute and deliver the Registration
Rights Agreement, (iv) the Company and Newco shall make the deliveries, and take
the other actions, required to be made or taken by them under the IP Acquisition
Agreement, and (v) Newco shall pay to the Company by wire transfer the
Consulting Fee (as defined in the Consulting Services Agreement).
3. Representations of the Company. The Company hereby represents and
warrants to Newco as follows:
3.1 Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) Each of the Company and each of the persons listed in Section
3.1(a) of the Disclosure Schedule (the "Company Disclosure Schedule") delivered
to Newco by the Company prior to the date of this Agreement (collectively, the
"Company Subsidiaries") has been duly organized, and is validly existing and,
where applicable, in good standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the requisite power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect (as defined below). Each of the Company and the Company Subsidiaries is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties
2
<PAGE>
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that could not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
For purposes of this Agreement, "Company Material Adverse Effect" means any
change, event or effect in, on or relating to the business of the Company and
the Company Subsidiaries that is, or is reasonably likely to be, materially
adverse to the business, assets (including intangible assets), liabilities
(contingent or otherwise), condition (financial or otherwise), prospects or
results of operations of the Company and the Company Subsidiaries taken as a
whole, other than any change or effect arising out of general economic
conditions in the United States.
(b) The copies of the Company's Articles of Incorporation, together
with the Articles of Incorporation of each Company Subsidiary of the Company, as
amended to the date hereof (including the Articles of Amendment designating the
Company's Series AA Preferred Stock and the Company's Series B Preferred Stock),
and the Company's Bylaws, together with the Bylaws of each Company Subsidiary of
the Company, as amended to the date hereof (collectively, the "Company Charter
Documents"), that have been provided to Newco by the Company are complete and
correct copies thereof. Each of the Company Charter Documents are in full force
and effect. Neither the Company nor any of the Company Subsidiaries are in
violation of any of the provisions of the Company Charter Documents.
(c) The Company Subsidiaries are the only persons in which the Company
owns an equity interest.
3.2 Capitalization of the Company and its Subsidiaries.
--------------------------------------------------
(a) The authorized capital stock of the Company consists of:
22,000,000 shares of Class A Common Stock, of which as of the date hereof,
4,159,253 shares are issued and outstanding; 3,000,000 shares of Class B Common
Stock, no par value ("Class B Common Stock"), of which as of the date hereof,
2,050,071 shares are issued and outstanding; and 3,000,000 shares of Preferred
Stock, of which as of the date hereof, 1,222,221 shares have been issued in
series designated as the Series A Redeemable Convertible Preferred Stock, and
are issued and outstanding. (The Class A Common Stock and the Class B Common
Stock are herein sometimes collectively referred to as the "Company Common
Stock" and the Preferred Stock is sometimes referred to as the "Company
Preferred Stock".) All of the issued and outstanding shares of Company Common
Stock and Company Preferred Stock have been duly authorized, validly issued and
are fully paid, nonassessable and free of preemptive rights, except as set forth
in the Company Disclosure Schedule. As the date hereof, approximately 434,200
shares of Class A Common Stock are reserved for issuance and issuable upon or
otherwise deliverable in connection with the exercise of outstanding options to
purchase Class A Common Stock ("Company Options")
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issued pursuant to the Management Incentive Plan and the Outside Directors
Incentive Plan (the "Company Plans") and 833,611 shares of Class A Common Stock
are reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding warrants to purchase Class A Common
Stock ("Company Warrants"). Section 3.2(a) of the Company Disclosure Schedule
sets forth, as of the date hereof, (i) the persons to whom Company Options and
Company Warrants have been granted, (ii) the exercise price for the Company
Options and Company Warrants held by each such person and (iii) whether such
Company Options are exercisable. Except as described in the Company Filed SEC
Reports (as defined below) and as disclosed in Section 3.2(a) of the Company
Disclosure Schedule, as of the date hereof, since January 31, 1996 (i) no shares
of the Company's capital stock have been issued other than pursuant to the
exercise of Company Options and (ii) no stock options have been granted by the
Company. Except as set forth above or in Section 3.2(a) of the Company
Disclosure Schedule, as of the date hereof, there are outstanding (i) no shares
of capital stock or other voting securities of the Company, (ii) no securities
of the Company or any Company Subsidiary convertible into or exchangeable for
shares of capital stock or voting securities of the Company, (iii) no options,
warrants or other rights to acquire from the Company or any Company Subsidiary,
and no obligations of the Company or any Company Subsidiary to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company, (iv) no equity
equivalents, interests in the ownership or earnings of the Company or any
Company Subsidiary or other similar rights (including stock appreciation rights)
(the items listed in subclauses (i), (ii), (iii) and (iv) being referred to,
collectively, as "Company Securities") and (v) no obligations of the Company or
any Company Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities. Except as set forth in Section 3.2(a) of the Company Disclosure
Schedule, there are no shareholder agreements, voting trusts or other agreements
or understandings to which the Company is a party or to which it is bound
relating to the voting or registration of any shares of capital stock of the
Company. Except as disclosed in Section 3.2(a) of the Company Disclosure
Schedule, the Company has not taken any action that would result in any Company
Stock Options that are unvested becoming vested in connection with or as a
result of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(b) The direct or indirect interest of the Company in each Company
Subsidiary, as described next to the name of such Company Subsidiary in Section
3.1(a) of the Company Disclosure Schedule, is the only direct or indirect
interest of the Company in such Company Subsidiary. Each outstanding share of
capital stock of each Company Subsidiary that is a corporation is duly
authorized, validly issued, fully paid and nonassessable and each share of
capital stock and/or each other direct or indirect interest of the Company in
each Company Subsidiary described in Section 3.1(a) of the Company Disclosure
Schedule as being owned by the Company or a Company Subsidiary is owned by the
Company or a Company Subsidiary free and clear of all
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security interests, liens, claims, pledges, options, rights of first refusal,
limitations on voting rights, charges and other encumbrances of any nature
whatsoever (collectively, "Liens"), except where failure to own such shares or
other interests free and clear could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, and except
for the pledge of stock of Company Subsidiaries to Creditanstalt-Bankverein.
Except as set forth in Schedule 3.2(b) of the Company Disclosure Schedule and
except as contemplated by this Agreement, there are no securities of the Company
or any Company Subsidiary convertible into or exchangeable for, no options or
other rights to acquire from the Company or any Company Subsidiary, and no other
contract, understanding, arrangement or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly, of, any capital
stock of or other ownership interests in, or any other securities of, any
Company Subsidiary. There are no outstanding contractual obligations of the
Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other ownership interests in or make any
other investment (in the form of a loan, capital contribution of otherwise) in
any Company Subsidiary or any other person.
(c) The Class A Common Stock constitutes the only class of securities
of the Company or any Company Subsidiary registered or required to be registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
3.3 Authority Relative to this Agreement; Board Action; Preferred
Shares, Conversion Shares, Warrant Shares. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of the
Company (the "Company Board") and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby or thereby. One million two hundred twenty-two
thousand two hundred twenty-one shares of the Company's Preferred Stock have
been designated Series AA Preferred Stock and 500,000 shares of the Company's
Preferred Stock have been designated Series B Preferred Stock. The Preferred
Shares, the shares of Class A Common Stock issuable upon exercise of the Option
(the "Conversion Shares") and the Warrant Shares have been duly authorized and
reserved for issuance by all necessary corporate action on the part of the
Company. The Preferred Shares, the Conversion Shares and the Warrant Shares,
when issued and delivered upon exercise of the Option, upon conversion of the
Preferred Shares, or upon exercise of the Warrants in accordance with their
respective terms, as applicable, will be duly and validly issued, fully paid and
nonassessable. This Agreement has been duly and validly executed and delivered
by the Company and constitutes the valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
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3.4 SEC Reports; Financial Statements.
---------------------------------
(a) Since May 26, 1993, the Company has filed all forms, reports,
registration statements and other documents (including all exhibits thereto)
(the "Company SEC Reports") required to be filed with the Securities and
Exchange Commission (the "SEC") each of which has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act, each as in effect on the
dates such forms, reports, registration statements and other documents were
filed. The Company has heretofore delivered to Newco a true, correct and
complete copy of each of the following (the "Company Filed SEC Reports"): (i)
its Annual Reports on Form 10-K for each of the fiscal years ended February 2,
1994, February 1, 1995 and January 31, 1996, (ii) all definitive proxy
statements relating to the Company's meetings of shareholders (whether annual or
special) held since May 26, 1993 and prior to the date of this Agreement and
(iii) all other Company SEC Reports filed prior to the date of this Agreement by
the Company with the SEC since May 26, 1993. None of the Company SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company included in the
Company SEC Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto and all of such financial statements fairly present, in
conformity with generally accepted accounting principles applied on a consistent
basis ("GAAP") (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and the consolidated Company
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments).
(b) There are no material amendments or modifications, which have not
yet been filed with the SEC, to agreements, documents or other instruments which
prior to the date of this Agreement had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
3.5 [Intentionally omitted]
3.6 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), no filing, registration or submission
with or notice to, and no permit, authorization, consent or approval of or with,
any court or tribunal or
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administrative, governmental or regulatory body, agency or authority (each a
"Governmental Entity") is necessary for the execution and delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby, including the issuance and delivery of the Preferred
Shares, the Conversion Shares and the Warrant Shares. Except as set forth in the
Company Disclosure Schedule, neither the execution, delivery and performance of
this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the Company Charter Documents, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which any of them or any of their respective properties or assets
may be bound, or (iii) assuming that all consents, permits, approvals,
authorizations and other actions described in the preceding sentence have been
obtained and all filings described in the preceding sentence have been made,
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any Company Subsidiary or any of their respective
properties or assets, except in the case of clause (ii) or (iii) for violations,
breaches or defaults which could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
3.7 No Default. None of the Company or any Company Subsidiary is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (i) the Company Charter Documents, (ii) any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any Company Subsidiary is now a party or by
which any of them or any of their respective properties or assets may be bound
or (iii) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company, any Company Subsidiary or any of their respective
properties or assets, except in the case of clause (ii) or (iii) for violations,
breaches or defaults that could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
3.8 No Undisclosed Liabilities; Absence of Changes. Except as and to
the extent disclosed in the Company Filed SEC Reports or in Section 3.8 of the
Company Disclosure Schedule, as of January 31, 1996, neither the Company nor any
Company Subsidiary had any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, and whether due or to become due or
asserted or unasserted, which would be required by GAAP to be reflected in,
reserved against or otherwise described in the consolidated balance sheet of the
Company and the consolidated Company Subsidiaries (including the notes thereto)
of such date included
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in the consolidated financial statements included in the Company Filed SEC
Reports (the "Company Balance Sheet") and which could reasonably be expected to
have a Company Material Adverse Effect. Except as disclosed by in the Company
Filed SEC Reports or in Section 3.8 of the Company Disclosure Schedule, since
January 31, 1996, the business of the Company and the Company Subsidiaries has
been carried on only in the ordinary and usual course and in a manner consistent
with past practice, neither the Company nor any Company Subsidiary has incurred
any liabilities of any nature, whether or not accrued, contingent or otherwise
and whether due or to become due or asserted or unasserted, which could
reasonably be expected to have, and there have been no events, changes or
effects with respect to the Company or any Company Subsidiary having or which
could reasonably be expected to have, a Company Material Adverse Effect. Except
as disclosed in the Company Filed SEC Reports or in Section 3.8 of the Company
Disclosure Schedule, since January 31, 1996, there has not been (i) any material
change by the Company in its accounting methods, principles or practices, (ii)
any declaration, setting aside or payment of any dividend or distribution in
respect of Shares or any redemption, purchase or other acquisition of any of the
Company Securities or (iii) any increase in the compensation or benefits or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable or to become
payable to any executive officers of the Company or any Company Subsidiary
except in the ordinary course of business consistent with past practice or
except as required by applicable law.
3.9 Litigation. Except as disclosed in Section 3.9 of the Company
Disclosure Schedule or in the Company Filed SEC Reports, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary or any of
their respective properties or assets which (i) if adversely determined, could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect or (ii) questions the validity of this Agreement or any
action to be taken by the Company in connection with the consummation of the
transactions contemplated hereby. Except as disclosed by the Company, neither
the Company nor any Company Subsidiary is subject to any outstanding order,
writ, injunction or decree which, insofar as can be reasonably foreseen in the
future, could reasonably be expected to have a Company Material Adverse Effect.
3.10 Compliance with Applicable Law. Except as disclosed in the
Company Filed SEC Reports, the Company and all Company Subsidiaries have made or
have obtained and hold all material registrations, filings, submissions,
certificates, determinations, permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses
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(collectively, the "Company Permits"). Except as disclosed in the Company Filed
SEC Reports, the Company and all Company Subsidiaries are in compliance, in all
material respects, with the terms of the Company Permits. Except as disclosed by
the Company in the Company Filed SEC Reports, the businesses of the Company and
the Company Subsidiaries are not being conducted in violation, in any material
respect, of any law, ordinance or regulation of any Governmental Entity. Except
as disclosed in the Company Filed SEC Reports, no material investigation or
review by any Governmental Entity with respect to the Company or any Company
Subsidiary is pending or, to the knowledge of the Company, threatened, nor has
the Company received notice that any Governmental Entity indicated an intention
to conduct the same other than in the ordinary course of business.
3.11 Employees; Employee Plans.
-------------------------
(a) With respect to each employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit plan"), as
defined in section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), maintained or contributed to by the Company or any Company
Subsidiary, or with respect to which the Company or any Company Subsidiary could
incur any liability under section 4069, 4212(c) or 4204 of ERISA (collectively,
the "Company Benefit Plans"), the Company will make available to Newco, promptly
after the date hereof, a true and complete copy of (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (ii)
such Company Benefit Plan, (iii) each trust agreement relating to such Company
Benefit Plan, (iv) the most recent summary plan description for each Company
Benefit Plan for which a summary plan description is required, (v) the most
recent actuarial report or valuation relating to a Company Benefit Plan subject
to Title IV of ERISA and (vi) the most recent determination letter, if any,
issued by the IRS with respect to any Company Benefit Plan qualified under
section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
(b) Except as set forth in Section 3.11(b) of the Company Disclosure
Schedule, with respect to the Company Benefit Plans, no event has occurred and
there exists no condition or set of circumstances in connection with or relating
to the Company or any Company Benefit Plan, ERISA, the Code or any other
applicable Law which could reasonably be expected to have a Company Material
Adverse Effect.
(c) Neither the Company nor any Company Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement or other labor union contract is being negotiated by the Company or
any Company Subsidiary. There is no labor dispute, strike or work stoppage
against the Company or any Company Subsidiary pending or threatened in writing
which may interfere with the
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respective business activities of the Company or any Company Subsidiary. None of
the Company, any Company Subsidiary, or their respective representatives or
employees, has committed any unfair labor practices in connection with the
operation of the respective businesses of the Company or any Company Subsidiary,
and, to the knowledge of the Company, there is no charge or complaint against
the Company or any Company Subsidiary by the National Labor Relations Board or
any comparable state or foreign agency pending or threatened.
(d) The Company has made available to Newco true and complete: (i) copies
of all written severance and employment agreements with officers of the Company
and each Company Subsidiary; (ii) copies of all written severance programs and
policies of the Company and each Company Subsidiary with or relating to its
employees; and (iii) copies of all plans, programs, agreements and other
arrangements of the Company and each Company Subsidiary with or relating to its
employees which contain change of control provisions.
(e) Except as provided in Section 3.11(e) of the Company Disclosure
Schedule or as otherwise required by law, no Company Benefit Plan provides
retiree medical or retiree life insurance benefits to any person.
(f) Neither the Company nor any Company Subsidiary is a party to or
obligated under any agreement, plan, contract or other arrangement pursuant to
which the Company or any Company Subsidiary is or might be required to make
payments that would not be deductible or capitalizable for federal income tax
purposes by reason of the application of Section 280G of the Code.
(g) As of the date hereof, none of the Company, the Company Subsidiaries or
any ERISA Affiliate has incurred any liability or obligation under the Worker
Adjustment and Retraining Notification Act, as it may be amended from time to
time ("WARN").
3.12 Environmental Laws and Regulations.
----------------------------------
(a) Except as disclosed in Section 3.12(a) of the Company Disclosure
Schedule or the Company Filed SEC Reports, (i) each of the Company and each
Company Subsidiary is in compliance, in all material respects, with all
applicable federal, state and local laws and regulations relating to pollution
or protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), which compliance includes, but is not
limited to, the possession by the Company and the Company Subsidiaries of all
material permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (ii)
neither the Company nor any Company Subsidiary has received
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written notice of, or, to the knowledge of the Company, is the subject of, any
material action, cause of action, claim, investigation, demand or notice by any
person or entity alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim"); and (iii) to the knowledge of the
Company, there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as disclosed in the Company Filed SEC Reports, there are no
material Environmental Claims that are pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary or, to the
knowledge of the Company, against any person whose liability for any
Environmental Claim the Company or any Company Subsidiary has or may have
retained or assumed either contractually or by operation of law.
3.13 Tax Matters. The Company and all Company Subsidiaries have accurately
prepared and duly filed with the appropriate federal, state, local and foreign
taxing authorities all tax returns, information returns and reports required to
be filed with respect to the Company and the Company Subsidiaries and have paid
in full or made adequate provision, in accordance with GAAP, for the payment of
all Taxes (as defined below). Neither the Company nor any Company Subsidiary is
delinquent in the payment of Taxes. As used herein, the term "Taxes" means all
federal, state, local and foreign taxes, charges, fees, levies and other similar
assessments, including, without limitation, income, profits, franchise,
employment, transfer, withholding, property, excise, sales and use taxes
(including interest and penalties thereon and additions thereto).
3.14 Intangible Property. Exhibit D to the Trust Agreement creating the IP
Trust sets forth a list of all federal, state and foreign patents, patent
applications, trademarks (registered and unregistered), trademark applications,
service marks (registered and unregistered) service mark applications, trade
names, trade name rights and publicity rights, copyrights and copyright
registrations, trade secrets, know-how and other intellectual property of the
Company and all Company Subsidiaries (the "Intellectual Property"). The Company
and the Company Subsidiaries own or possess adequate licenses or other valid
rights to use all of the Intellectual Property in connection with the business
of the Company and the Company Subsidiaries as currently conducted or as
contemplated by the Company's management to be conducted, and the Company is
unaware of any assertion or claim challenging the validity of any of the
Intellectual Property which, individually or in the aggregate, could reasonably
be expected to have a Company Material Adverse Effect. The conduct of the
business of the Company and the Company Subsidiaries as heretofore and currently
conducted has not and does not conflict in any way with any intellectual
property rights of any third party that, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse Effect. To the
knowledge
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of the Company, there are no infringements of any intellectual property rights
owned by or licensed by or to the Company or any Company Subsidiary which,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect.
3.15 Material Contracts.
------------------
(a) The Company has delivered or otherwise made available to Newco true,
correct and complete copies of all contracts and agreements in effect on the
date hereof (and all amendments, modifications and supplements thereto and all
related letter agreements to which the Company is a party affecting the
obligations of any party thereunder) to which the Company or any Company
Subsidiaries is a party or by which any of its properties or assets are bound
that are material to the financial condition, results of operations, business,
properties, prospects or assets of the Company and the Company Subsidiaries
taken as whole (collectively, the "Company Material Contracts"). The Company
Material Contracts shall be deemed to include all: (i) employment, consulting,
non-competition, severance, golden parachute or indemnification contracts
(including, without limitation, any contract to which the Company is a party
involving employees of the Company); (ii) licensing, merchandising or
distribution agreements; (iii) contracts granting a right of first refusal or
first negotiation; (iv) partnership or joint venture agreements; (v) agreements
for the acquisition, sale or lease of material properties or assets of the
Company (by merger, purchase or sale of assets or stock or otherwise) entered
into since May 26, 1993 (other than the acquisition of the Brentwood, Tennessee
property, which has been disposed of by the Company); (vi) contracts or
agreements with any Governmental Entity; (vii) all material agreements relating
to indebtedness of the Company or any Company Subsidiary or guarantees of
indebtedness by the Company or any Company Subsidiary; (viii) all
noncompetition, exclusivity or other agreements restricting the ability of the
Company or any Company Subsidiary to operate its business as now, or
contemplated to be, conducted; (ix) agreements between the Company and any of
its officers, its directors, holders of 5% of the outstanding Shares or other
affiliates of the Company or any Company Subsidiary (all of which agreements are
also listed in Section 3.15(a)(ix) of the Company Disclosure Schedule); and (x)
all commitments and agreements to enter into any of the foregoing.
(b) Except as set forth in Section 3.15(b) of the Company Disclosure
Schedule:
(i) There is no default under any Company Material Contract either by
the Company or, to the knowledge of the Company, by any other party
thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder by the
Company or, to the knowledge of the Company, any other party, in any such
case in which such
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default or event could reasonably be expected to have a Company Material
Adverse Effect.
(ii) No party to any such Company Material Contract has given notice
to the Company of or made a claim against the Company with respect to any
breach or default thereunder, in any such case in which such breach or
default could reasonably be expected to have a Company Material Adverse
Effect.
3.16 Title to Properties; Retail Stores; Real Estate.
-----------------------------------------------
(a) The Company and each Company Subsidiary has the ownership in fee and
good marketable title to all real property owned by it, each parcel of which is
legally described in Section 3.16(a) of the Company Disclosure Schedule, and
good title to its other owned properties and assets, tangible and intangible,
including, without limitation, the properties and assets reflected in the
Company Balance Sheet (except personal properties since sold or otherwise
disposed of in the ordinary course of business and except for personal
properties and assets not material to the operation of its business), free and
clear of all Liens whatsoever, except as disclosed in Section 3.16(a) of the
Company Disclosure Schedule or (i) as reflected in the Company Balance Sheet,
(ii) Liens in respect of pledges or deposits under workers' compensation,
unemployment insurance, social security and public liability laws and other
similar legislation, (iii) Liens imposed by law, such as carriers',
warehousemen's, supplier's, contractor's, or mechanics' liens incurred in good
faith in the ordinary course of business, (iv) such imperfections of title and
other Liens, if any, which do not in the aggregate materially interfere with the
use of such properties or assets or otherwise could not reasonably be expected
to have a Company Material Adverse Effect, (v) Liens in favor of Creditanstalt-
Bankverein as agent ("Agent") under the Amended and Restated Credit Agreement
dated as of December 30, 1994, as amended, among the Company, the Lenders party
thereto and the Agent, and (vi) Liens in favor of Nationwide Life Insurance
Company.
(b) The Company has previously made available to Newco correct and complete
copies of all leases or agreements under which the Company or any Company
Subsidiary is lessee of, or holds or operates, any real property owned by any
third party which is material to the operation of its business. Neither the
Company nor any Company Subsidiary is in material default under the terms of any
such lease or agreement. Each such lease under which the lessor is an officer,
director, 5% or greater shareholder or other related party of the Company has
been identified on Section 3.16(b) of the Company Disclosure Schedule and was,
at the time entered into, on terms not materially less favorable to the Company
than if made with an independent third party in an arm's length transaction. The
Company or the applicable Company Subsidiary, and to the knowledge of the
Company, each lessor, have in all material
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respects performed all the obligations required to be performed by them to date
and are not in default in any material respect under any such lease or
agreement. None of the rights of the Company or any Company Subsidiary in such
property under any such lease or agreement is subject to termination as the
result of the transactions contemplated by this Agreement.
(c) Neither the Company nor any Company Subsidiary is in violation of any
applicable zoning regulation, ordinance or other similar laws, order, regulation
or requirement relating to its operations or properties which, if enforced,
could reasonably be expected to have a Company Material Adverse Effect.
3.17 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company except for William J. Horvath.
3.18 Prevention or Delay of the Contemplated Transactions. To the best of
the Company's knowledge, no change, event, effect or circumstance has occurred
or exists relating to the Company or any Company Subsidiary that could
reasonably be expected to prevent or materially hinder or delay the transactions
contemplated by this Agreement or the performance by the Company of its
obligations under this Agreement.
4. Representations of Newco. Newco represents and warrants to the
Company as follows:
4.1 Organization. Newco has been duly organized and is validly existing and
in good standing under the laws of the State of Delaware.
4.2 Authority Relative to this Agreement. Newco has all necessary corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Newco (the "Newco Board"), and
no other corporate proceedings on the part of Newco are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Newco and
constitutes the valid, legal and binding agreement of Newco, enforceable against
Newco in accordance with its terms.
4.3 Consents and Approvals; No Violations. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the HSR Act, no filing with or notice to, and no
permit,
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authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by Newco of this Agreement or the consummation by
Newco of the transactions contemplated hereby. Neither the execution, delivery
and performance of this Agreement by Newco nor the consummation by Newco of the
transactions contemplated hereby or thereby will (a) conflict with or result in
any breach of any provision of the Certificate of Incorporation or Bylaws of
Newco (b) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Newco is
a party or by which Newco or its properties or assets may be bound or (c)
assuming that all consents, permits, approvals, authorizations and other actions
described in the preceding sentence have been made, violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Newco or any
of its properties or assets, except in the case of clause (ii) or (iii) for
violations, breaches or defaults which could not reasonably be expected to have,
individually or in the aggregate, a Newco Material Adverse Effect. For purposes
of this Agreement, "Newco Material Adverse Effect" means any change, event or
effect in, on or relating to the business of Newco that is, or is reasonably
likely to be, materially adverse to the business, assets (including intangible
assets), liabilities (contingent or otherwise), conditions (financial or
otherwise), prospects or results of operations of Newco other than any change or
affect arising out of general economic conditions in the United States.
4.4 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Newco.
4.5 Prevention or Delay of the Contemplated Transactions. No change, event,
effect or circumstance has occurred or exists relating to Newco that could
reasonably be expected to prevent or materially delay the transactions
contemplated by this Agreement or the performance by Newco of its obligations
under this Agreement.
4.6 Investment Representation.
-------------------------
(a) Newco is an "accredited investor," as defined in Regulation D under the
Securities Act.
(b) Newco understands and agrees that the Note, the Preferred Shares, the
Conversion Shares and the Warrant Shares have not been registered under the
Securities Act or under the securities laws of any state or other jurisdiction
in reliance upon exemptions for private offerings, and that, while the Company
may in the
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future register the Conversion Shares or the Warrant Shares, except as set forth
in the Registration Rights Agreement (as hereinafter defined) the Company is
under no obligation to do so. Newco acknowledges and agrees that the Preferred
Shares, the Conversion Shares and the Warrant Shares cannot be resold unless
they are registered under the Securities Act and any applicable state securities
law, or an exemption from registration is available.
(c) Newco represents that the Note is being acquired solely for its own
account, for investment and not with a view to or for the resale, distribution,
subdivision, or fractionalization thereof.
5. Covenants.
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5.1 Conduct of Business of the Company. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, the
Company will, and will cause each of the Company Subsidiaries to, conduct its
operations in the ordinary course of business consistent with past practice and,
to the extent consistent herewith, with no less diligence and effort than would
be applied in the absence of this Agreement, seek to preserve intact its
reputation and current business organizations, keep available the service of its
current officers and key employees and preserve in all material respects its
relationships with customers, suppliers, and others having business dealings
with it to the end that goodwill and ongoing businesses shall not be materially
impaired at the Closing Date. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in or contemplated by this Agreement,
prior to the Closing Date, the Company will not, and will cause the Company
Subsidiaries not to, without the prior consent of Newco:
(a) amend the Company Charter Documents or the comparable organizational
documents of any Company Subsidiary;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase (whether or not
contingent) or otherwise) any stock of any class or any other securities or
equity equivalents (including, without limitation, any stock options or stock
appreciation rights), and the issuance or sale of shares of Class A Common Stock
pursuant to options granted to employees under the Option Plans (in each case,
in the ordinary course of business and consistent with past practice);
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock (other than
dividends or distributions required to be made to the holders of the Company
Preferred Stock or
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made by wholly-owned Company Subsidiaries), make any other actual, constructive
or deemed distribution in respect of any shares of its capital stock or
otherwise make any payments to shareholders in their capacity as such (other
than such dividends or distributions), or redeem or otherwise acquire any of its
securities;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any Company Subsidiary;
(e) alter through merger, liquidation, recapitalization, restructuring or
in any other fashion the corporate structure or ownership of any Company
Subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings from the Banks under existing lines of credit
in the ordinary course of business; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary course of business
consistent with past practice and in amounts not material to the Company and the
Company Subsidiaries, taken as a whole, except for obligations of the wholly-
owned Company Subsidiaries; (iii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to the wholly-
owned Company Subsidiaries or customary loans or advances to employees in the
ordinary course of business consistent with past practice and in amounts not
material to the maker of such loan or advance); (iv) pledge or otherwise
encumber shares of capital stock of the Company or any Company Subsidiary; or
(v) mortgage or pledge any of the Company's or any Company Subsidiary's material
assets, tangible or intangible, or create or suffer to exist any material Lien
thereupon;
(g) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund, award or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or (except for normal increases in
the ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company or any Company Subsidiary, as required under existing
agreements or in the ordinary course of business generally consistent with past
practice, or to the extent permitted pursuant to paragraph (b) above) increase
in any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan and arrangement as in
effect as of the date hereof (including, without limitation, the granting of
stock options, warrants or stock appreciation rights);
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(h) acquire, sell, lease or dispose of any assets outside the ordinary
course of business or any assets which in the aggregate are material to the
Company and the Company Subsidiaries, taken as a whole, or enter into any
commitment or transaction outside the ordinary course of business consistent
with past practice;
(i) except as may be required as a result of a change in law or in GAAP,
change any of the accounting principles or practices used by it;
(j) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business;
(k) (i) acquire (by merger, consolidation, or acquisition of stock, debt
securities or assets) any person or any division thereof, any equity interest
therein or indebtedness thereof; (ii) enter into any contract or agreement,
other than in the ordinary course of business consistent with past practice or
amend any of the Company Material Contracts, including, without limitation, the
agreements referred to in Section 3.15 and those identified in any subsection of
Section 3.15 of the Company Disclosure Schedule; (iii) authorize any new capital
expenditure or expenditures which, individually, is in excess of $50,000 or, in
the aggregate, are in excess of $250,000; or (iv) enter into or amend any
contract, agreement, commitment or arrangement providing for the taking of any
action that would be prohibited hereunder;
(l) make or revoke any tax election or settle or compromise any tax
liability material to the Company and the Company Subsidiaries taken as a whole
or change (or make a request to any taxing authority to change) any material
aspect of its method of accounting for tax purposes;
(m) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and the
Company Subsidiaries or incurred in the ordinary course of business consistent
with past practice;
(n) enter into or amend or otherwise modify any agreement or arrangement
with persons that are affiliates or, as of the date hereof, are officers,
directors or employees of the Company or any Company Subsidiary;
(o) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby;
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(p) without Newco's written consent, which shall not be unreasonably
withheld, close any Company or Company Subsidiary operated store; or
(q) take, propose to any third party to take or agree in writing or
otherwise to take, any of the actions described in Sections 5.1(a) through
5.1(p) or any action which would make any of the representations or warranties
of the Company contained in this Agreement that are qualified as to materiality
untrue or incorrect or any such representations or warranties that are not so
qualified untrue or incorrect in any material respect.
5.2 Other Actions. Each of the Company and Newco shall not, and the
Company shall cause the Company Subsidiaries not to, take any action or agree in
writing or otherwise to take any action that would result in (i) any of the
representations and warranties of such party (without giving effect to any
"knowledge" qualification) set forth in this Agreement that are qualified as to
materiality becoming untrue or incorrect, (ii) any of such representations and
warranties (without giving effect to any "knowledge" qualification) that are not
so qualified becoming untrue or incorrect in any material respect or (iii) any
of the conditions to the Closing set forth in Article 6 not being satisfied.
5.3 Access to Information.
(a) Between the date hereof and the Closing Date, the Company will give
Newco and Newco's authorized representatives reasonable access to all of its
employees, plants, offices, warehouses and other facilities and to all of its
books and records, will permit Newco to make such inspections as Newco may
reasonably require and will cause its officers and those of the Company
Subsidiaries to furnish Newco with such financial and operating data and other
information with respect to its and the Company Subsidiaries' business,
properties and personnel as Newco from time to time reasonably request, but in
any such case only to the extent as not to unreasonably interfere with its
business and operations or those of the Company Subsidiaries; provided that no
investigation pursuant to this Section 5.3(a) shall affect or be deemed to
modify any of the representations or warranties made by either party in this
Agreement or in any certificate required to be delivered pursuant to Section 6.2
or 6.3.
(b) Between the date hereof and the Closing Date, the Company shall furnish
to Newco (i) within 15 days after the end of each retail period, an unaudited
balance sheet, income statement and statement of cash flows of the Company and
the Company Subsidiaries on a consolidated basis and (ii) within 30 days after
the end of each fiscal quarter, an unaudited balance sheet, income statement and
statement of cash flows of the Company and the Company Subsidiaries on a
consolidated basis, each prepared in accordance with GAAP in conformity with the
practices consistently applied by the Company with respect to its retail period
or quarterly financial
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statements (as the case may be). All the foregoing shall be in accordance with
the books and records of the Company and fairly present the consolidated
financial position of the Company as of the last day of the period then ended
and the consolidated results of operations of the Company as of the last day of
the period then ended (in each case, taking into account the differences between
retail period and quarterly statements prepared by the Company in conformity
with its past practices).
(c) Newco will hold and will cause its consultants and advisors to hold in
confidence all documents and information concerning the Company furnished to
Newco in connection with the transactions contemplated by this Agreement in
accordance with the terms of that certain Confidentiality Agreement entered into
between the Company and Newco dated as of January 14, 1997 (collectively the
"Confidentiality Agreement").
5.4 Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to fulfill all conditions to
the obligations of the parties under this Agreement and to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated hereby, including, but not limited to, (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings under the HSR Act and all other filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval, waiver or exemption from, or to avoid an action or
proceeding by, any Governmental Entity; (ii) the obtaining of all necessary
consents, approvals, waivers or exemption from non-governmental third parties;
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed; and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by and to
fully carry out the purposes of, this Agreement.
5.5 Public Announcements. Newco and the Company, as the case may be,
will consult and cooperate with one another before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law or by obligations pursuant to any listing agreement with the
Nasdaq Stock Market, as determined by Newco or the Company, as the case may be,
but only upon the advice of independent counsel.
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5.6 Notification of Certain Matters. The Company shall give prompt
notice to Newco, and Newco shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement that is qualified as to materiality to be untrue or inaccurate or any
such representation or warranty not so qualified to be untrue or inaccurate in
any material respect, in either case, at or prior to the Closing Date, (ii) any
material failure of the Company or Newco, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, (iii) any notice of, or other communication relating to, a default
or event which, with notice or lapse of time or both, would become a default,
received by it (or in the case of the Company, any Company Subsidiaries)
subsequent to the date of this Agreement and prior to the Closing Date, under
any contract or agreement material to the financial condition, businesses, or
results of operations of it (and Subsidiaries) taken as a whole to which it (and
in the case of the Company, any Company Subsidiary) is a party or is subject,
(iv) any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement or (v) any Newco Material Adverse
Effect (in the case of Newco) or Company Material Adverse Effect (in the case of
the Company); provided, however, that the delivery of any notice pursuant to
this Section 5.6 shall not cure such breach or non-compliance or limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.7 SEC Filings. The Company shall promptly provide Newco (or its
counsel) with copies of all filings made by it or any Company Subsidiaries with
the SEC or any other local, state or federal Governmental Entity in connection
with this Agreement and the transactions contemplated hereby.
5.8 Right of First Negotiation; Right of First Refusal Regarding Future
Financings. If at any time the Company determines that it requires additional
financing (whether debt or equity) (including, but not limited to, all capital-
type transactions and sale/leaseback transactions), the Company agrees (a) to
negotiate in good faith with Newco for a period of 20 days with regard to any
portion of the entire amount (at the option of Newco) of such financing prior to
negotiating with any other entity with regard thereto, (b) if the Company has
engaged in good faith negotiations under clause (a) of this Section 5.8 and such
negotiations have been unsuccessful, to notify Newco of the existence of any
other financing arrangement it proposes to consummate and the terms and
conditions thereof and grant to Newco a right of first refusal with respect to
such financing on the same terms and subject to the same conditions contained
therein and upon receipt of such notice (setting forth in detail all relevant
terms and conditions of such financing), in which event Newco shall have 30 days
thereafter in which to agree to provide all of the financing on the same terms
and conditions, and (c) with respect to any financing other than a pure debt
financing in
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which the debt instrument to be offered has no equity-type features, to grant to
Newco a right to participate therein on a fully diluted basis. As used herein "a
right to participate therein on a fully diluted basis" shall mean Newco's right
to maintain the same percentage equity interest in Company (calculated by
including as outstanding the shares subject to all outstanding conversion
rights, options and warrants, including shares which Newco has a right to
purchase or acquire, whether or not currently exercisable) after such financing
is completed as it had prior to such financing.
5.9 Right of First Negotiation; Right of Final Offer Regarding Sale of
Business. If at any time the Company desires to sell substantially all of its
assets, merge, consolidate or engage in any other business combination
transaction (a "Transaction"), the Company agrees (a) to negotiate in good faith
with Newco for a period of 20 days with regard to the Transaction prior to
negotiating with any other entity with regard thereto, (b) if the Company has
engaged in good faith negotiations under clause (a) of this Section 5.9 and such
negotiations have been unsuccessful, to make a final offer to Newco (the "Final
Company Offer") prior to engaging in negotiations with, soliciting offers from
or accepting any offer of, any third party with respect to a Transaction. In
the event Newco does not accept the Final Company Offer within 20 days after the
date it is received by Newco, the Company shall thereupon have the right, during
the six-month period following the expiration of such twenty-day period, to
enter into an agreement to enter into a definitive agreement relating to a
Transaction (which transaction shall be consummated within the nine-month period
following the execution of such twenty-day period) with any third party at a
price and on terms no less favorable to the Company than the terms set forth in
the Final Company Offer, and provided, however, that if the Company does not
enter into a Transaction during such six-month period or consummate a
Transaction during the nine-month period following the expiration of such
twenty-day period, as the case may be, this Section 5.9 shall once again become
applicable to any Transaction.
6. Conditions to Closing
6.1 Conditions to the Obligations of Newco and the Company. The
respective obligations of each party hereto to effect the Closing and the other
transactions contemplated hereby are subject to the satisfaction at or prior to
the Closing Date of the following conditions:
(a) no statute, rule, regulation, executive order, decree, ruling,
injunction or other legal prohibition shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits, restrains,
enjoins or imposes material restrictions on the consummation of the transactions
contemplated hereby;
(b) any waiting period applicable to the transactions contemplated hereby
under the HSR Act shall have terminated or expired; and
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(c) all governmental or regulatory notices (other than those in connection
with the HSR Act) or approvals required with respect to the transactions
contemplated hereby shall have been either filed or received, except where the
failure to file such notices or receive such approvals, individually or in the
aggregate, could not reasonably be expected to have a Newco Material Adverse
Effect or a Company Material Adverse Effect and could not reasonably be expected
to adversely affect the ability of Newco or the Company (as applicable) to
consummate such transactions.
6.2 Conditions to the Obligations of the Company. The obligation of the
Company to effect the Closing is subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(a) the representations and warranties of Newco set forth in this Agreement
that are qualified as to materiality shall be true and correct, and the
representations and warranties of Newco set forth in this Agreement that are not
so qualified shall be true and correct in all material respects, in each case as
of the Closing Date, as though made on and as of the Closing Date, except to the
extent the representation or warranty is expressly limited by its terms to
another date, and the Company shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as the
representations and warranties of Newco contained herein are so qualified)
signed on behalf of Newco by an executive officer of Newco to such effect;
(b) each of the obligations of Newco to be performed at or before the
Closing Date pursuant to the terms of this Agreement shall have been duly
performed in all material respects at or before the Closing Date and at the
Closing Newco shall have delivered to the Company a certificate signed on behalf
of Newco by an executive officer of Newco to such effect;
(c) each holder of shares of Company Preferred Stock issued and outstanding
on the date hereof shall have entered into an agreement with the Company in the
form set forth as Exhibit F hereto (the "Company Preferred Stock Agreement");
(d) the Banks shall have entered into an agreement with the Company in the
form set forth in Exhibit G hereto (the "Bank Agreement");
(e) the Company shall have received the opinion of Sutherland, Asbill &
Brennan, L.L.P., in the form set forth in Exhibit H hereto.
6.3 Conditions to the Obligations of Newco. The obligations of Newco to
effect the Closing are subject to the satisfaction at or prior to the Closing
Date of the following conditions:
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(a) the representations and warranties of the Company set forth in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations and warranties of the Company set forth in this Agreement
that are not so qualified shall be true and correct in all material respects, in
each case as of the Closing Date, as though made on and as of the Closing Date,
except to the extent the representation or warranty is expressly limited by its
terms to another date, and Newco shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as the
representations and warranties of the Company contained herein are so qualified)
signed on behalf of the Company by an executive officer of the Company to such
effect;
(b) each of the obligations of the Company to be performed at or before the
Closing Date pursuant to the terms of this Agreement shall have been duly
performed in all material respects at or before the Closing Date and at the
Closing the Company shall have delivered to Newco a certificate signed on behalf
of the Company by an executive officer of the Company to such effect;
(c) the Company shall have obtained the consent, approval or waiver of each
non-governmental person whose consent, approval or waiver shall be required in
order for each of them to consummate the transactions contemplated hereby,
except those for which the failure to obtain such consent, approval or waiver,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect;
(d) Newco shall have obtained the consent, approval or waiver of each non-
governmental person whose consent, approval or waiver shall be required in order
for Newco to consummate the transactions contemplated hereby, except those for
which the failure to obtain such consent, approval or waiver, individually or in
the aggregate, could not reasonably be expected to have a Newco Material Adverse
Effect;
(e) each holder of shares of Company Preferred Stock issued and outstanding
on the date hereof shall have entered into the Preferred Stock Agreement;
(f) the Banks shall have entered into the Bank Agreement;
(g) Newco shall have obtained the opinion of Alston & Bird, counsel to the
Company, in the form set forth as Exhibit I hereto.
7. Termination; Fees and Expenses; Amendment; Waiver
7.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
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(a) by written consent of Newco and the Company, duly authorized by Newco
Board and the Company Board;
(b) by either Newco or the Company, if the Closing shall not have occurred
on or before February 3, 1997; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to the party
whose failure to fulfill any obligation under this Agreement shall have been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date;
(c) by either Newco or the Company, if any final order, decree or ruling
preventing the consummation of the Closing shall have been entered by any court
of competent jurisdiction or Governmental Entity and shall have become final and
nonappealable;
(d) by Newco, (i) in the case of the Company's representations and
warranties set forth in this Agreement that are not qualified as to materiality,
upon a material breach by the Company of any such representation or warranty, or
if any such representation or warranty shall have become untrue in any material
respect and (ii) in the case of the Company's representations and warranties set
forth in this Agreement that are qualified as to materiality, upon a breach by
the Company of any such representation or warranty, or if any such
representation or warranty shall have become untrue (any, a "Terminating Company
Breach"), in any case such that the conditions set forth in Section 6.3(a) could
not reasonably be expected to be satisfied within 30 days following such
Terminating Company Breach upon the Company's exercise of its reasonable best
efforts or such breach has not in any event been cured within 30 days following
notification by Newco to the Company of such Terminating Company Breach;
(e) by the Company, (i) in the case of Newco's representations and
warranties set forth in this Agreement that are not qualified as to materiality,
upon a material breach by Newco or Sub of any such representation or warranty,
or if any such representation or warranty shall have become untrue in any
material respect and (ii) in the case of Newco's representations and warranties
set forth in this Agreement that are qualified as to materiality, upon a breach
by Newco of any such representation or warranty, or if any such representation
or warranty shall become untrue (any, a "Terminating Newco Breach"), in any case
such that the conditions set forth in Section 6.2(a) could not reasonably be
expected to be satisfied within 30 days following such Terminating Newco Breach
upon Newco's exercise of its reasonable best efforts or such Terminating Newco
Breach has not in any event been cured within 30 days following notification by
the Company to Newco of such Terminating Newco Breach;
(f) by Newco, upon the material breach by the Company of any covenant or
agreement of the Company set forth in this Agreement which is not
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reasonably capable of being cured within 30 days following such breach upon the
Company's exercise of its reasonable best efforts or, in any event, upon the
30th day following notification by Newco to the Company of such breach if such
breach has not been cured by such 30th day; or
(g) by the Company, upon the material breach by Newco of any covenant or
agreement of Newco set forth in this Agreement which is not reasonably capable
of being cured within 30 days following such breach upon Newco's exercise of its
reasonable best efforts or, in any event, upon the 30th day following
notification by the Company to Newco of such breach if such breach has not been
cured by such 30th day.
7.2 Fees and Expenses. Each party shall bear its own expenses in
connection with this Agreement and the transactions contemplated hereby.
7.3 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Closing, each party
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of either party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
8. Miscellaneous
8.1 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall survive the Closing without
limitation, except that the representations and warranties in Sections 3.1, 3.2,
3.3, 3.5, 4-1, 4-2, 4-3, and 4.6 this Agreement shall expire on the fifth
anniversary of the Closing and all other representations and warranties in this
Agreement shall expire on the fifth anniversary of the Closing. Each party
agrees that, except for the representations and warranties contained in this
Agreement and the Company Disclosure Schedule, no party hereto has made any
other representations and warranties, and each party hereby disclaims any other
representations and warranties, made by itself or any of its officers,
directors, employees, agents, financial and legal advisors or other
representatives with respect to the execution and delivery of this Agreement or
the transactions contemplated hereby, notwithstanding the delivery of disclosure
to any other party or any party's
26
<PAGE>
representatives of any documentation or other information with respect to any
one or more of the foregoing.
8.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
8.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
8.4 Validity. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid or unenforceable, the
remainder of this Agreement, and the application of such provision to other
persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.
8.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to Newco: 14103 Denver West Parkway
Golden, Colorado 80401
Attention: Saad J. Nadhir
Facsimile: (303) 216-5550
if to the Company to: Harry's Farmers Market, Inc.
1180 Upper Hembree Road
Roswell, Georgia 30076
Attention: Harry A. Blazer
Facsimile: (770) 664-4920
with a copy to: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309
Attention: John Latham
Facsimile: (404) 881-7777
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
27
<PAGE>
8.7 Further Assurances. The Company hereby agrees to execute and deliver
such other documents and instruments and to take such other actions as are
necessary or desirable in the reasonable opinion of Newco to carry out the
transactions contemplated by this Agreement, including, without limitation, any
actions (required under Section 7.13 of the Secured Loan Agreement or otherwise)
required to permit the exercise of the Options or the Warrants.
8.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
8.9 Specific Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise; provided, that after the Closing, each
party agrees that rescission of this Agreement or any of the transactions
contemplated hereby shall not be an available remedy for my breach of this
Agreement or any of the other agreements contemplated hereby.
8.10 Brokers. The Company agrees to indemnify and hold harmless Newco,
and Newco agrees to indemnify and hold harmless the Company, from and against
any and all liability to which Newco, on the one hand, or the Company, on the
other hand, may be subjected by reason of any brokers, finders or similar fees
or expenses with respect to the transactions contemplated by this Agreement to
the extent such similar fees and expenses are attributable to any action
undertaken by or on behalf of the Company or Newco, as the case may be.
8.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
8.12 Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a schedule, section, exhibit or
annex, such reference shall be to a schedule, section of or exhibit or annex to
this Agreement unless otherwise indicated. All capitalized terms used without
definition in any such schedule, section, exhibit or annex shall have the
meaning assigned to them in this Agreement and any capitalized terms used
without definition in this Agreement shall have the meanings
28
<PAGE>
assigned to them in such schedules, exhibits and annexes. Where the reference
"hereby" or "herein" appears in this Agreement, such reference shall be deemed
to be a reference to this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
8.13 Certain Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
"person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
8.14 Governing Law; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL
BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF GEORGIA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDI TIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO (i) A TRIAL BY JURY OR (ii) ANY PUNITIVE OR
EXEMPLARY DAMAGES THAT MAY OTHERWISE BE AWARDED, IN CONNECTION WITH ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY RELATED AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY RELATED AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(iii) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (iv) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (v) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (vi) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SEC TION 8.14.
29
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
HFMI ACQUISITION CORPORATION
By /s/ Saad J. Nadhir
-----------------------------
Name: Saad J. Nadhir
Title: Chief Executive Officer
HARRY'S FARMERS MARKET, INC.
By /s/ Harry A. Blazer
-----------------------------
Name: Harry A. Blazer
Title: President
30
<PAGE>
EXHIBIT 10.2
SECURED LOAN AGREEMENT
----------------------
This secured loan agreement (the "Agreement") is made and entered into as
of the 31st day of January, 1997 between HFMI ACQUISITION CORPORATION, a
Delaware corporation ("Newco"), and HARRY'S FARMERS MARKET, INC., a Georgia
corporation (the "Company").
RECITALS
--------
Newco and Company have entered into a transaction agreement pursuant to
which Newco has agreed to enter into a secured loan agreement providing for
certain secured loans to the Company. This Agreement is being entered into to
provide two separate credit facilities to Company: (i) a refinancing credit
facility and (ii) a development credit facility.
COVENANTS
---------
In consideration of the mutual representations, warranties, and covenants
set forth herein, and in consideration of any advances made hereunder to or for
the benefit of Company by Newco, the parties hereto agree as follows:
ARTICLE I
THE REFINANCING LOAN
--------------------
1.1 The Refinancing Loan. Newco agrees, on the terms and subject to the
--------------------
conditions hereinafter set forth, including, but not limited to, the conditions
to loan advances set forth in Article V hereof and the limitation on the amount
available from time to time to be borrowed set forth in Section 3.2 hereof, to
advance on the Closing (as defined in Section 3.7 hereof) the principal amount
of $12,000,000 (the "Refinancing Loan"). The Refinancing Loan shall be advanced
by wire transfer of Newco to the account of Company.
1.2 Purposes of the Refinancing Loan. Proceeds of the Refinancing Loan
--------------------------------
shall be used by Company to repay $12,000,000 in principal amount of
indebtedness owed to NationsBank, N.A. (South).
<PAGE>
ARTICLE II
THE DEVELOPMENT LOAN
--------------------
2.1 The Development Loan. Newco agrees, on the terms and subject to the
--------------------
conditions hereinafter set forth, including, but not limited to, the conditions
to loan advances set forth in Article V hereof and the limitation on the amount
available from time to time to be borrowed set forth in Section 3.2 hereof, to
advance at any time and from time to time during the period commencing on the
date hereof and ending on the fifth anniversary of the date hereof (the "Draw
Loan Termination Date"), amounts requested by Company in an aggregate principal
amount not to exceed an $8,000,000 (the "Development Loan"). Each advance of
the Development Loan shall be in a minimum amount of $100,000 and shall be made
by wire transfer of Newco to the account of Company.
2.2 Purposes of the Development Loan. Proceeds of the Development Loan
--------------------------------
shall be used by Company solely (i) to fund expenditures of the Company provided
for in Section 3 of the Consulting Services Agreement of even date herewith
among Newco, the Company and Harry A. Blazer and (ii) for general corporate
purposes in accordance with the last sentence of Section 3.2 hereof.
ARTICLE III
GENERAL PROVISIONS
------------------
3.1 Promissory Notes. The Refinancing Loan and the Development Loan
----------------
(together, the "Loans") shall be evidenced by promissory notes (the "Notes") of
even date herewith in the form attached hereto as Exhibit A-1 (the "Refinancing
Note") and Exhibit A-2 (the "Development Note").
3.2 Maximum Principal Balance. The aggregate outstanding principal
-------------------------
balance of the Loans shall at no time exceed $20,000,000, less the principal
amount of debt contributed in respect of option exercises under Section 3.9 (the
"Maximum Principal Balance"); provided, however, that Newco shall have no
obligation to fund, nor shall Company have any right to borrow hereunder, during
any fiscal year, any portion of the Development Loan unless Newco and the
Company have approved a budget setting forth the use of the proceeds of such
funding. Notwithstanding the foregoing, the Company may use proceeds of, and
Newco shall be obligated to fund without regard to any budget and/or approval
thereof by Newco, the Development Loan for general corporate purposes in an
amount not to exceed $500,000 from the Closing through the first anniversary of
the Closing, $1,000,000 from the Closing through the second anniversary of the
Closing, $1,500,000
2
<PAGE>
from the Closing through the third anniversary of the Closing and $2,000,000
from the Closing through the fourth anniversary of the Closing ("Committed
Loans").
3.3 The Loan Account. Newco shall maintain a loan account on its books in
----------------
which shall be recorded all advances under the Loans (collectively, "Advances")
made by Newco to Company pursuant to this Agreement, and all payments made by
Company with respect to the Loans; provided, however, that failure to maintain
such account or record any advances therein shall not relieve Company of its
obligations to repay the outstanding principal amount of the Loans, all accrued
interest thereon, and any amount payable with respect thereto in accordance with
the terms of this Agreement and the Notes.
3.4 Interest Rate.
-------------
(a) Interest shall accrue daily on the aggregate outstanding principal
balance of the Loans, for the period commencing on the date the Loans are made
until the Loans are paid in full, (i) during the period commencing on the date
the Loans are made until the Draw Loan Termination Date, at a per annum rate of
5%, and (ii) thereafter at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest ("B of A")
from time to time as its "reference rate" in effect at its principal office in
Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from time to
time, on the same day on which B of A adjusts its "reference rate." Interest on
the outstanding principal amount of the Loans shall be payable in arrears on the
dates set forth herein and at maturity (whether at stated maturity, by
acceleration or otherwise).
(b) Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
(c) Any principal payment due under a Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Agreement in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
3.5 Payment of Interest. During the Interest Payment Period (as defined
-------------------
below) Company shall pay to Newco interest only on the outstanding principal
balance of the Loans on the first day of each fiscal quarter of the Company.
The "Interest Payment Period" shall mean the period commencing on the first day
of the fiscal quarter immediately following the date on which the Company
initially draws on the Loans under this Agreement and continuing through and
including
3
<PAGE>
the Draw Loan Termination Date. Thereafter Company shall pay principal and
interest as provided in Section 3.6 hereof.
3.6 Repayment of the Loans. If not earlier paid, exchanged in accordance
----------------------
with Section 3.9, or if not accelerated for payment, the outstanding principal
amount of the Loans shall, at the close of business on the Draw Loan Termination
Date, thereafter become an amortized term loan payable as follows: the
principal balance of the Loans shall be payable to Newco in 20 substantially
equal quarterly installments of principal (the amount of which periodic
installments of principal shall be determined at the close of business on the
Draw Loan Termination Date based on a schedule amortizing such outstanding
principal balance of the Loans as of such date in 40 substantially equal
quarterly installments of principal), plus accrued but unpaid interest, on the
first day of each of Newco's 20 consecutive fiscal quarters, commencing on the
first day of the first quarter commencing after the Draw Loan Termination Date
and continuing until the first day of the first quarter commencing after the
fifth anniversary of the Draw Loan Termination Date, when the entire remaining
principal balance of the Loans and all interest accrued thereon shall be due and
payable.
3.7 Term of this Agreement. This Agreement and all covenants and
----------------------
agreements of Newco hereunder shall be effective as of January 31, 1997 and
shall continue in effect until the last to occur of (i) the exercise,
expiration, or other termination of all remaining option rights granted in
Section 3.9 hereof, (ii) the date on which there is no amount (principal or
interest) remaining outstanding under the Notes and (iii) the date on which
Newco no longer has an obligation to make any Advances hereunder if Company were
to make a valid request for an Advance pursuant to and in accordance with
Article V hereof. Notwithstanding the effective date of this Agreement, the
closing of the loan transaction contemplated hereby (the "Closing") shall take
place at the offices of Sutherland, Asbill & Brennan, L.L.P., 999 Peachtree
Street, N.E., Atlanta, Georgia, at 8:00 a.m., local time, on January 31, 1997
(the "Closing Date").
3.8 Subordination of the Loans. The Loans and other obligations of the
--------------------------
Company under the Notes and this Agreement have been subordinated in right of
payment, and the liens and security interest granted by the Company or its
Subsidiaries to secure the Loans have been subordinated in right of priority, to
certain indebtedness and any refinancing of such indebtedness, in each case
pursuant to a certain Intercreditor Agreement, dated as of the date hereof (the
"Intercreditor Agreement"), between Newco and Creditanstalt-Bankverein, as the
agent (in such capacity and together with any successor Agents, the "Agent") for
the lenders party to the Amended and Restated Credit Agreement, dated as of
December 30, 1994, or any agreement governing such refinancing indebtedness
(such agreement as amended, supplemented or refinanced, the "Bank Credit
Agreement"), among the Company, such lenders and the Agent. Any instrument,
document or agreement evidencing or securing the Loans, including, but not
limited to, the Notes, will on the date hereof or on the date of execution
thereof, whichever is later, shall either provide by its terms, or
4
<PAGE>
shall be inscribed with a legend indicating, that such instrument, document or
agreement has been subordinated pursuant to the Intercreditor Agreement and is
subject to the terms and conditions thereof.
3.9 Option and Mandatory Share Purchase.
-----------------------------------
(a) Subject to the provisions of Section 3.9(b), Newco shall have the
option, at any time and from time to time after the earlier of (i) the
acceleration of either of the Loans or (ii) July 30, 1998 and up to the later of
the first day of the first fiscal quarter of the Company commencing after the
Draw Loan Termination Date, to purchase (the "Option") at a purchase price of
$40 per share (the "Option Price") up to that number of shares of Series B
Preferred Stock of the Company equal to (A) the Maximum Principal Balance,
divided by (B) the Option Price, provided, however, that Newco shall be
permitted to exercise the Option to purchase the shares of Series B Preferred
Stock in excess of 3,000,0000 shares (adjusted in the same manner as provided in
Section 3.9(e)) only to the extent it has initially funded the Development Loan
(at a rate of one share becoming exercisable for each $40 of funding) unless
such Development Loan was not funded due to a material breach of any of the
Company's obligations to Newco under the agreements entered into between the
Company and Newco on January 31, 1997 (which breach was not cured pursuant to
any applicable right to notice and cure).
(b) Newco shall be required to exercise the Option and thereby
purchase from the Company, and the Company shall be required to sell to Newco,
that number of shares of Series B Preferred Stock equal to (A) $12,000,000,
divided by (B) the Option Price, not later than the fifth anniversary of the
date hereof, provided that Newco shall not be required to consummate such
purchase if on such date there exists any Refinancing Default unless such
Refinancing Default is cured in accordance with the provisions of Section 10.2
hereof, in which event Newco shall be required to consummate such purchase upon
such cure.
(c) Newco shall pay the purchase price upon any exercise of the Option
by the contribution to the Company of a principal amount of the Loans equal to
the purchase price, and, to the extent the principal amount of outstanding Loans
is insufficient for this purpose, by delivery of cash.
(d) Upon exercise of any portion of the Option under this Section 3.9,
Newco's obligations to make additional Advances to Company under this Agreement
shall be reduced by an aggregate amount equal to the amount paid upon such
Option exercise.
5
<PAGE>
(e) In case of any reclassification or change of outstanding shares of
Series B Preferred Stock of the Company or in case of any consolidation or
merger of Company with or into any partnership, corporation, or other entity
(other than a merger in which Company is the surviving entity and which does not
result in any reclassification or change of outstanding shares of Series B
Preferred Stock of the Company, other than a change in number of shares of
Series B Preferred Stock of the Company issuable upon exercise of the Option) or
in case of any sale or conveyance to any partnership, corporation, or other
entity of the property of Company as an entirety or substantially as an
entirety, then the holder of the Notes shall have the right thereafter to
exercise the Option for the kind and amount of units and other securities and
property receivable upon such reclassification, change, consolidation, merger,
sale, or conveyance by a holder of the number of shares of Series B Preferred
Stock of Company issuable upon exercise of the Option immediately prior to such
reclassification, change, consolidation, merger, sale, or conveyance, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for herein.
3.10 Obligations. Subject to Section 10.2 hereof, all Advances made
-----------
hereunder, and all interest accrued thereon, shall constitute one obligation of
Company with regard to enforcing the security interests granted by this
Agreement and by all other security interests, liens, claims, and encumbrances
from time to time hereafter granted to Newco by Company. For all other
purposes, the Development Loan and the Refinancing Loan shall be separate
obligations. In the event Newco makes one or more payments to a senior lender
to the Company to cure any payment default by the Company, such amounts shall be
considered Advances hereunder, shall bear interest (compounded monthly) at a
rate which is 2% per annum in excess of the rate referred to in Section
3.4(a)(ii), shall be payable on demand and shall be subordinated in accordance
with the terms of the Intercreditor Agreement.
3.11 Credit Resources. Company acknowledges that Newco has informed it
----------------
that Newco may not from time to time in the future have cash, cash equivalents,
and credit resources sufficient to permit Newco to necessarily make all
requested Advances under this Agreement while maintaining sufficient working
capital for Newco's operating needs. Company agrees that in the event Newco
shall fail to fund the Loans as and to the extent required hereby solely as a
result of the unavailability to Newco of cash and/or credit resources to fund
the Loans and not as a result of any failure of Company to satisfy the
conditions precedent to Advances or of the occurrence of a Development Default
or Event of Default hereunder (a "Funding Default"), such Funding Default shall
not (a) constitute fraud (by any person or entity, including Newco and its
successors and assignees) or (b) give rise to any liability of any person or
entity (other than Newco and its successors and assignees) in any other tort,
and Company further agrees that it shall be limited to its remedies in contract
and in a non-fraud tort action against Newco. Newco and Company agree that this
Section 3.11 shall not diminish or otherwise affect in any way the amount of
damages for which Newco may be liable to Company in a contract or non-fraud tort
action for a Funding Default.
6
<PAGE>
3.12 Payment Method. All payments to be made by Company hereunder shall be
--------------
made in lawful money of the United States, in immediately available funds,
without set off, counterclaims, deduction or withholding of any type.
3.13 Tax Treatment. Company and Newco both covenant and agree that they
-------------
will each treat aggregate outstanding principal balances of the Refinancing Loan
and the Development Loan created hereunder as debt for income, state and local
tax purposes, unless the parties expressly otherwise agree.
ARTICLE IV
SECURITY AND COLLATERAL
-----------------------
4.1 Security Interest. To secure payment and performance of Company's
-----------------
obligations hereunder and under the Notes, and any and all other indebtedness,
obligations or liabilities of any kind of Company to Newco arising under this
Agreement, whether now existing or hereafter arising, direct or indirect,
absolute or contingent, joint and/or several, Company hereby grants to Newco a
continuing security interest in and to the following property and interests in
property, whether now owned or hereafter acquired by Company and wheresoever
located:
(a) all of Company's property and rights and interest therein (except
in connection with the Nationwide Debt Agreement (as defined in Section 4.2),
accounts, equipment (including, but not limited to machinery, furniture,
fixtures, tools, and other tangible property), inventory, lease hold
improvements, contract rights (including its rights as lessee under all leases
of real property), general intangibles (other than intellectual property that is
required to be contributed to the HFMI Trust but including the Company's
interest in the HFMI Trust evidenced by HFMI Trust Certificate and the license
granted thereby), deposit accounts, tax refunds, chattel paper, instruments,
notes, letters of credit, documents, and documents of title, capital stock or
other ownership interests of all Subsidiaries (as defined in Section 8.10
hereof) and all shares of common stock of Newco owned by Company;
(b) all insurance proceeds of or relating to any of the foregoing;
(c) all of Company's books, records, and computer programs and data
relating to any of the foregoing; and
7
<PAGE>
(d) all accessories and additions to, substitutions for, and
replacements, products, and proceeds of, any of the foregoing (all of the
foregoing, and all of the security described in Sections 4.2 and 4.3, being
referred to collectively as the "Collateral").
4.2 Subsidiary Security Documents. Company shall cause each person or
-----------------------------
entity becoming a Subsidiary of Company from time to time to execute and deliver
to Newco, within thirty (30) days after such person or entity becomes a
Subsidiary, a guarantee substantially in the form attached hereto as Exhibit B-1
and a security agreement substantially in the form attached hereto as Exhibit B-
2, together with all financing statements and other related documents (including
real estate deeds to secure debt) as Newco may reasonably request and such
closing documents with respect to such Subsidiary of the type described in
Article IX as Newco may reasonably request, sufficient to grant to Newco a
second-priority lien and security interest in all assets of each Subsidiary of
the type described in Section 4.1, except to the extent prohibited by the Bank
Credit Agreement or the Company's and/or any Subsidiary's agreements with
Nationwide Life Insurance Company, or any refinancing of such indebtedness (such
agreements, together with any refinancing thereof, the "Nationwide Debt
Agreement").
4.3 Preservation of Collateral and Perfection of Security Interests
---------------------------------------------------------------
Therein.
- -------
(a) Company shall execute and deliver to Newco, and shall, except to
the extent prohibited by the Nationwide Debt Agreement, execute and deliver or
cause any Subsidiary of Company to execute and deliver to Newco at any time or
times hereafter at the request of Newco or the Agent (as defined in Section 4.4
below), all financing statements or other documents, including real estate deeds
to secure on debt on real estate owned by Company or its Subsidiaries and
Subsidiary security agreements (the "Security Instruments") (and pay the cost of
filing or recording the same in all public offices deemed reasonably necessary
by Newco), as Newco or the Agent may reasonably request, in forms satisfactory
to Newco, and take all further action that Newco or the Agent may request, or
which may be reasonably necessary or desirable, to perfect and keep perfected a
second-priority security interest in the Collateral granted by Company to Newco,
to create and perfect a second-priority security interest in the assets of any
Subsidiaries of Company provided in Section 4.2 hereof, or otherwise to protect
and preserve the Collateral and Newco's security interest therein. Should
Company fail to do so after receipt of five (5) business days' notice in
writing, Newco is authorized to sign any such Security Instruments as Company 's
agent.
(b) Company will furnish to Newco from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Newco may reasonably request, all
in reasonable detail.
8
<PAGE>
(c) Company shall notify Newco, within thirty (30) days after the
occurrence thereof, of the acquisition of any property by Company that is not
subject to the existing liens and security interests, in favor of Newco, of any
person or entity's becoming a Subsidiary, and of any other event or condition
that may require additional action of any nature in order to create, preserve,
or perfect the liens and security interests of Newco.
(d) Company shall, except to the extent prohibited by the Nationwide
Debt Agreement, cause each Subsidiary to cause all tangible Collateral to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with any manufacturer's
manual.
4.4 Alternate Security Agreements. If requested by Newco in order for the
-----------------------------
transactions contemplated by this Agreement to comply with the limitations and
restrictions of any applicable agreement between Newco and its lender or between
its lender and its lender's banks and any bank designated as agent for its
lender's banks ("Newco Bank Agent"), as amended from time to time, or to obtain
a waiver therefrom, Company hereby agrees that a security interest as referred
to in Section 4.1 hereof, and the additional security interests described in
Sections 4.2 and 4.3 hereof may be assigned by Newco to Newco's lender or to the
Newco Bank Agent.
ARTICLE V
CONDITIONS TO ADVANCES
----------------------
Notwithstanding any other provisions contained in this Agreement, Newco's
obligations to make any Advance (including an initial Advance) provided for in
Section 1.1 and Section 2.1 shall be conditioned upon the following:
5.1 No Material Adverse Change. No material adverse change, in the
--------------------------
financial condition, results of operations, assets, or business of Company,
shall have occurred at any time or times subsequent to the date thereof, or, in
the event such a material adverse change shall have occurred, such change shall
have been fully remedied without any material adverse effect on the financial
condition, results of operations, assets or other business of Company and its
Subsidiaries taken as a whole, provided, however, that changes resulting from
the activities of Newco and the Company under the consulting agreement of even
date herewith between Newco and the Company shall not be taken into account for
this purpose ("Material Adverse Effect").
9
<PAGE>
5.2 No Default. Neither a Development Default (as that term is defined in
----------
Article X hereof) nor any event which, through the passage of time or the
service of notice or both, would mature into a Development Default (an "Event of
Default") shall have occurred and be continuing. The condition set forth in this
Section 5.2 shall be a condition only to Advances under the Development Loan.
5.3 Representations and Warranties. The representations and warranties
------------------------------
contained in Article VI hereof and in the other Security Instruments shall be
true and correct on and as of the date such Advance is made.
5.4 Other Requirements. Newco shall have received, in form and substance
------------------
satisfactory to it, all certificates, consents, affidavits, schedules,
instruments, and other documents which Company is obligated to provide to Newco
hereunder or which Newco may at any time reasonably request.
5.5 Advance Request. Other than the initial Advance, Newco shall have
---------------
received, at least five business days prior to the day an Advance is to be made
hereunder, (i) a certificate of Company in the form attached hereto as Exhibit
C, which shall be signed by the chief operating officer, chief financial officer
or other officer of the Company that Newco deems appropriate, and (ii) copies of
all other documents required to be delivered to Newco under Section 7.1 below or
otherwise reasonably requested.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
Company represents and warrants that:
6.1 Financial Statements. The financial statements to be furnished to
--------------------
Newco or the Agent in accordance with Section 7.1 below will be prepared in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved, and will fairly present in all material
respects the financial condition of Company and its Subsidiaries at the dates
thereof and its results of operations for the periods indicated (subject, in the
case of financial statements covering less than one full fiscal year, to normal
recurring year-end adjustments).
6.2 [Intentionally Omitted.]
---------------------
10
<PAGE>
6.3 [Intentionally Omitted.]
---------------------
6.4 No Pending Material Litigation or Proceedings. There are no actions,
---------------------------------------------
suits, investigations or proceedings pending or, to the knowledge of Company or
its Subsidiaries, threatened against or affecting Company or its Subsidiaries or
the business or properties of Company or its Subsidiaries, in any court or
before or by any governmental department, commission, board, agency or
instrumentality, or any arbitrator which could reasonably be expected to have a
Material Adverse Effect. Neither Company nor any of its Subsidiaries is in
default with respect to any order, writ, injunction, or decree of any court or
arbitrator or governmental agency.
6.5 Valid Organization; Due Authorization; Valid and Binding Agreement.
------------------------------------------------------------------
(a) Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Georgia, with power and authority
to enter into and perform this Agreement and to issue the Notes and incur the
indebtedness to be evidenced thereby. The Company is qualified to do business in
each additional jurisdiction in which failure to so qualify could have a
material adverse affect on its property, business, operations, or prospects.
(b) This Agreement and the Notes have each been duly authorized by
all required action on the part of Company, and each of this Agreement and the
Notes has been duly executed and delivered by Company and constitutes the legal,
valid, and binding obligation of Company enforceable in accordance with its
terms.
(c) The execution and delivery of this Agreement and the Note and the
performance by Company of its obligations hereunder and thereunder are not in
contravention of any law, rule or regulation, including without limitation
Regulation G, T, U, or X of the Board of Governors of the Federal Reserve
System, and will not conflict with or result in any breach of any of the
provisions, or constitute a default under or result in the creation or
imposition of any lien or encumbrance (except as expressly provided herein) upon
any of the property of Company pursuant to any of the provisions of the articles
of incorporation or bylaws of the Company, as amended to date, or any agreement
or instrument to which Company is a party or by which it or its assets is bound.
(d) No consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body or any
other person, which has not been
11
<PAGE>
obtained or taken, is required for the execution and delivery of, or the
performance by Company of its obligations under, this Agreement or the Note.
6.6 Conduct of Business. Since their inception, Company and each
-------------------
Subsidiary has conducted its business and operations in a manner consistent with
that of an owner and operator of retail food stores, food processing facilities,
baking and food distribution facilities and other activities incidental thereto
(the "Company Business").
6.7 Absence of Material Liabilities. Neither Company nor any Subsidiary
-------------------------------
has any material liabilities or obligations, either accrued, absolute,
contingent, or otherwise, except (a) as set forth in its most recent unaudited
balance sheet, (b) normal liabilities and obligations incurred in the ordinary
course of business since the date of its most recent unaudited balance sheet,
and (c) obligations under contracts and agreements entered into in the ordinary
course of business.
6.8 Tax Matters. Company and its Subsidiaries have filed all federal,
-----------
state, and local tax returns which are required to be filed, except for
extensions duly obtained, and has paid, or made provisions for the payment of,
all taxes which have become due pursuant to such returns or pursuant to any
assessment received by Company or any Subsidiary, except such taxes, if any, as
are being contested in good faith and as to which adequate reserves have been
provided.
6.9 Ownership of Collateral; Security Interest Priority. At the time any
---------------------------------------------------
Collateral becomes subject to a security interest of Newco hereunder, unless
Newco shall otherwise consent, (a) Company or a Subsidiary shall be the lawful
owner of such Collateral and have the right and authority to subject the same to
the security interest of Newco, (b) none of the Collateral or collateral granted
by any Subsidiary under a Subsidiary Security Agreement shall be subject to any
lien or encumbrance other than (i) those in favor of Newco and that in favor of
the Agent, (ii) those set forth in the Company Disclosure Schedule (as defined
in the Transaction Agreement of even date herewith between Newco and the
Company) and refinancings or renewals thereof, (iii) those permitted by the Bank
Credit Agreement, and (iv) those liens that secure indebtedness permitted by
Section 8.5 hereof (collectively, the "Permitted Liens"), nor shall there be an
effective financing statement covering any such Collateral on file in any public
office, other than those which evidence Permitted Liens. This Agreement creates
in favor of Newco a valid and perfected second-priority security interest in the
Collateral enforceable against Company or its Subsidiary, as the case may be,
and all third parties (other than the Agent) and secures the payment of
Company's obligations hereunder and under the Note, and all other obligations of
Company to Newco, whether now existing or hereafter arising, and all filings and
other actions necessary or desirable to create, preserve, or perfect such
security interest have been duly taken. Notwithstanding the foregoing
provisions of this Section 6.9, clause (b) and (c) and the immediately preceding
sentence of this Section 6.9 shall not be inaccurate by reason of
12
<PAGE>
any purchase money security interest (including pursuant to a financing lease)
in any equipment for Company's stores.
6.10 Location of Offices, Records, and Facilities. Company's chief
--------------------------------------------
executive office and chief place of business and the office where Company keeps
its records concerning its accounts, contract rights, chattel papers,
instruments, general intangibles, and other obligations arising out of or in
connection with the operation of its business or otherwise ("Receivables"), and
all originals of all leases and other chattel paper which evidence Receivables,
are located in the State of Georgia, at the address of Company set forth in
Section 11.4 hereof (as such address may be changed from time to time in
accordance therewith). The federal tax identification number of Company is 58-
2037452. The name of Company is "Harry's Farmers Market, Inc." and Company
operates under no other names other than the names "Harry's Farmers Market(R) "
and "Harry's In A Hurry(R)" on its stores.
6.11 Location of Inventory, Fixtures, Machinery, and Equipment.
---------------------------------------------------------
(a) All Collateral consisting of inventory, fixtures, machinery, or
equipment is located in the following locations: 1180 Upper Hembree Road,
Roswell, Georgia; 1075 Northfield Way, Roswell, Georgia; 2025 Satellite Pointe,
Duluth, Georgia; 1875 Peachtree Street, Atlanta, Georgia; 3804 Roswell Road,
N.E., Atlanta, Georgia; 70 Powers Ferry Road, Marietta, Georgia and 1780 Nolan
Court, Morrow, Georgia (the "Clayton Property"), and at no other locations
without at least 30 days prior notice.
(b) If the Collateral described in clause (a) is kept at leased
locations, Company will, at the request of Newco, use reasonable best efforts to
obtain appropriate landlord lien waivers or subordination satisfactory to Newco,
unless such has been waived in writing by Newco for the particular instance.
(c) If the Collateral described in clause (a) is warehoused, Company
will, at the request of Newco, use reasonable best efforts to appropriate
warehousemen's notices, each reasonably satisfactory to Newco, unless such has
been waived by Newco for the particular instance.
6.12 Investment Company Act. Company is not an "investment company", or a
----------------------
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
13
<PAGE>
6.13 Public Utility Holding Company Act. Company is not a "holding
----------------------------------
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", within the meaning of the Public Utility Holding Newco Act
of 1935, as amended.
6.14 Subsidiaries. Company has no Subsidiaries as of the date of this
------------
Agreement, other than Roman Properties, Inc., Karelea, Inc., and Marthasville
Trading Company.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
Company covenants and agrees that so long as this Agreement remains in
effect:
7.1 Financial Statements.
--------------------
(a) Company shall cause to be furnished to Newco and, at Newco's
request, to Newco's lender or to the Agent: (i) as soon as practicable and in
any event within 45 days after the end of each interim fiscal quarter,
statements of income and cash flows of Company and its Subsidiaries for such
period and for the period from the beginning of the then current fiscal year to
the end of such quarter and a balance sheet of Company and its Subsidiaries as
of the end of such quarter, setting forth in each case, in comparative form,
figures for the corresponding periods in the preceding fiscal year, certified as
accurate by the chief financial officer or treasurer of the of Company, subject
to changes resulting from normal, recurring year-end adjustments; (ii) as soon
as practicable and in any event within 90 days after the end of each fiscal
year, statements of income and cash flows of Company and its Subsidiaries for
such year, and a balance sheet of Company and its Subsidiaries as of the end of
such year, setting forth in each case, in comparative form, corre sponding
figures for the preceding fiscal year and as of the end of the preceding fiscal
year, audited by independent certified public accountants selected by Company
and reasonably satisfactory to Newco; and (iii) as soon as practicable (but in
any event not more than five business days after the president or chief
financial officer of the Company obtains knowledge of the occurrence of an event
or the existence of a circumstance giving rise to an Event of Default or a
Development Default), notice of any and all Events of Default or Development
Defaults hereunder. All financial statements delivered to Newco, and if
applicable, Newco's lender or the Agent pursuant to the requirements of Section
7.1(a) shall be prepared in accordance with generally accepted accounting
principles consistently applied. Company authorizes Newco to discuss the
financial condition of Company with Company's independent public accountants and
agrees that such discussion or communication shall be without liability to
either Newco or Company's independent public accountants.
14
<PAGE>
7.2 Inspection. Newco, or any person designated from time to time by
----------
Newco, shall have the right, from time to time hereafter, to call at Company's
or its Subsidiaries' place or places of business on reasonable notice during
ordinary business hours, and, without hindrance or delay, (a) to inspect, audit,
check, and make copies of and extracts from Company's and its Subsidiaries'
books, records, journals, orders, receipts, and any correspondence and other
data relating to the business of Company or its Subsidiaries or to any
transactions between the parties hereto, and (b) to discuss the affairs,
finances, and business of Company and its Subsidiaries with the executive
officers of Company and its Subsidiaries.
7.3 Conduct of Business.
-------------------
(a) Company shall, and shall cause each Subsidiary to (i) maintain its
existence (other than in connection with a liquidation of a Subsidiary permitted
under Section 8.6(d) hereof) and qualification to do business in good standing
in each jurisdiction where the failure to be so qualified would have a material
adverse effect on the financial condition of Company or its Subsidiaries, (ii)
maintain in full force and effect all material licenses, bonds, franchises,
leases, patents, contracts, and other rights necessary to the conduct of its
business, and (iii) comply with all applicable laws and regulations of any
federal, state, or local governmental authority, including those relating to
environmental matters, labor and employment laws and employee benefit matters.
(b) Company shall, and shall cause its Subsidiaries to, duly pay and
discharge (i) all lawful claims, whether for labor, materials, supplies,
services, or anything else, which might or could, if unpaid, become a lien or
charge upon its property or assets, unless and to the extent only that the
validity thereof is being contested in good faith and by such appropriate
proceedings, (ii) all of its trade bills when due in accordance with customary
practice, and (iii) all taxes, unless and to the extent that the validity
thereof is being contested by Company in good faith and by appropriate
proceedings.
(c) Company shall, and shall cause each Subsidiary to, conduct its
business and operations in a manner consistent with that of the Company
Business.
7.4 Insurance.
---------
(a) Company shall keep and maintain, and shall cause its Subsidiaries
to keep and maintain, at their sole cost and expense, (i) insurance on their
assets for at least 80% of the full replacement value (or the full insurable
value) thereof against loss or damage by fire, theft, explosion, and all other
hazards and risks ordinarily insured against by other owners or users of such
15
<PAGE>
properties in similar businesses similarly situated; and (ii) public liability
insurance relating to Company's and its Subsidiaries' ownership and use of their
assets.
(b) All such policies of insurance shall be in such form and in such
amounts as is customary in the case of other owners or users of like properties
in similar businesses, with insurers as shall be reasonably satisfactory to
Newco, provided that Newco agrees that the current insurance maintained by the
Company on the date hereof is satisfactory. Upon demand, Company shall deliver
to Newco the original (or certified) copy of each policy of insurance, and
evidence of payment of all premiums for each such policy. Such policies of
insurance (except those of public liability) shall contain an endorsement in
form and substance acceptable to Newco, showing Newco as an additional insured.
Such endorsement, or an independent instrument furnished to Newco, shall provide
that all insurance companies will give Newco at least 30 days prior written
notice before any such policy or policies of insurance shall be altered or
canceled. In the event Company or any Subsidiary at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required above
or to pay any premium in whole or in part relating thereto, then Newco, without
waiving or releasing any Development Default or Event of Default hereunder, may
at any time or times thereafter (but shall be under no obligation to do so)
obtain and maintain such policies of insurance and pay such premium and take any
other action with respect thereto which Newco deems advisable. All sums so
disbursed by Newco, including reasonable attorneys' fees, court costs, expenses,
and other charges relating thereto, shall be part of Company's obligations
hereunder, payable by Company to Newco on demand.
7.5 Notice of Suit or Adverse Change in Business. Company shall give
--------------------------------------------
written notice to Newco (a) as soon as possible, and in any event within five
business days after Company receives actual notice (written or oral) of any
material proceeding(s) being instituted or threatened to be instituted by or
against Company or any Subsidiary in any federal, state, or local court or
before any commission or other regulatory body (federal, state, or local), and
(b) as soon as possible, and in any event within five business days after
Company learns of any Material Adverse Effect.
7.6 Use of Proceeds. Except as otherwise authorized in writing by Newco,
---------------
Company shall use the proceeds of the Loans solely for the purposes set forth in
Article I and Article II hereof. Company will not, directly or indirectly, use
any part of such proceeds for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any person for the purpose of
purchasing or carrying any such margin stock.
7.7 [Intentionally Omitted.].
---------------------
7.8 [Intentionally Omitted.]
---------------------
16
<PAGE>
7.9 Company Subsidiaries. Each corporation or other entity becoming a
--------------------
Subsidiary of Company after the date hereof will be duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
organization and will be duly qualified to do business in each additional
jurisdiction where the failure to be so qualified would have a material adverse
effect on such Subsidiary. Each Subsidiary of Company will have all requisite
power to own or lease the properties used in its business and to carry on its
business as now being conducted and as proposed to be conducted. All
outstanding shares of capital stock or other units of ownership interest of each
class of each Subsidiary of Company will be validly issued and will be fully
paid and nonassessable and will be owned, beneficially and of record, by Company
or another Subsidiary of Company free and clear of any liens, except for the
pledge of such shares to the Agent.
7.10 Place of Business. Company will provide Newco with 60 days' prior
-----------------
written notice of any proposed change in the location of its chief executive
office. Company shall not change its name without 30 days prior written notice
to Newco.
7.11 Location of Inventory, Fixtures, Machinery, and Equipment.
---------------------------------------------------------
(a) All Collateral consisting of inventory, fixtures, machinery, and
equipment, shall at all times be located at the following locations: 1180 Upper
Hembree Road, Roswell, Georgia; 1075 Northfield Way, Roswell, Georgia; 2025
Satellite Pointe, Duluth, Georgia; 1875 Peachtree Street, Atlanta, Georgia; 3804
Roswell Road, N.E., Atlanta, Georgia; 70 Powers Ferry Road, Marietta, Georgia
and 1780 Nolan Court, Morrow, Georgia, and at no other locations without at
least thirty 30 days notice.
(b) If the Collateral described in clause (a) is at any time kept at
leased locations, at Newco's request, Company shall use its best reasonable
efforts to obtain appropriate landlord lien waivers or subordination
satisfactory to Newco, unless such has been waived in writing by Newco for a
particular instance.
(c) If the Collateral described in clause (a) is at any time
warehoused, Company shall, at Newco's request, send appropriate warehousemen's
notices, each satisfactory to Newco, unless such has been waived by Newco for
the particular instance.
7.12 HSR Act Compliance. In the event Newco determines that any filing is
------------------
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") in connection with any exercise of the Option pursuant
to Section 3.9 hereof, Company agrees to
17
<PAGE>
prepare and file with the Federal Trade Commission and the United States
Department of Justice within 15 business days from the date of notice from Newco
any notification required to be filed under the HSR Act or any rules or
regulations promulgated thereunder. Newco shall pay any filing fees required
under the HSR Act in connection with such filing. Any information about Company
or its Subsidiaries contained in such filing shall be true and accurate in all
material respects and responsive to the requirements of the HSR Act and any such
rules and regulations. Each of Company and Newco shall make available to the
other party such information as may be required for the preparation of any such
notification or related reports.
7.13 Newco Board Observer. (a) During the period commencing on the date
--------------------
hereof and ending on the fifth anniversary of the Draw Loan Termination Date,
Newco shall have the right to have a representative (the "Newco Observer")
attend meetings of the Company's Board of Directors, or any committee thereof,
and the Company shall permit the Newco Observer to attend all such meetings as
an observer, subject to reasonable limitations on such Observer to permit
maintenance of attorney-client privilege. The Newco Observer shall not have the
right to vote on any matter presented to the Board or any committee thereof.
The Company shall give the Newco Observer such notice of each meeting of the
Board of Directors or any committee thereof and all written materials and other
information given to the Company's directors and committee members in the same
manner and at the same time such notices, materials and other information are
given to the directors and committee members. If the Board of Directors or any
committee thereof proposes to take any action by written consent in lieu of a
meeting, the Company shall give written notice thereof to the Newco Observer
prior to the effective date of such consent describing the nature and substance
of such action.
(b) Newco shall cause the Newco Observer to keep confidential all
confidential information provided to it in its capacity as an observer pursuant
to this Section 7.13; provided, however, that the Newco Observer may disclose
such confidential information to Newco. Newco shall also be bound by this
Section 7.13 confidentiality obligation, except that Newco may disclose such
confidential information to its directors, officers, employees, consultants,
advisors and professional representatives who need to know such information so
long as prior to disclosing such confidential information to any such person,
Newco shall inform such person of the confidential nature of such information
and of Newco's obligations under this Section 7.13 and direct such person to
treat such information confidentially, provided that in the case of advisors or
consultants, such persons shall execute a confidentiality agreement reasonably
acceptable to the Company. The confidentiality obligations contained in this
Section 7.13 shall not apply to any information which (i) is or becomes
generally available to and known by the public (other than as a result of a
disclosure by Newco or the Newco Observer) or (ii) is or becomes available to
Newco or the Newco Observer on a non-confidential basis from a source other than
the Company.
18
<PAGE>
ARTICLE VIII
NEGATIVE COVENANTS
------------------
Company covenants and agrees that, subject to the provision of Section
8.12, so long as this Agreement remains in effect (unless Newco shall give its
prior written consent thereto):
8.1 Guarantees; etc. Company shall not, and shall not permit any
----------------
Subsidiary to, guarantee, endorse or otherwise in any way become or be
responsible for obligations of any other person, whether by agreement to
purchase the indebtedness of any other person or through the purchase of goods,
supplies, or services, or by agreement to maintain net worth, working capital,
or other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance, or loan for the purpose of paying or discharging
any indebtedness or obligation of such other person or otherwise, except
endorsements of negotiable instruments for collection in the ordinary course of
business and except for guarantees of indebtedness permitted by Section 8.5 and
of non-material loans made by third parties to any employee.
8.2 Disposal of Property. Company shall not, and shall not permit any
--------------------
Subsidiary to, sell, lease, transfer, or otherwise dispose of any of its
properties, assets, and rights (or agree to sell, lease, transfer, or otherwise
dispose of any of its properties, assets, and rights) (including the Collateral)
to any party except in the ordinary course of business (including the
disposition of obsolete equipment), except for sales of equipment stored at the
Clayton Property and sales not in excess of $100,000, and provided, further,
that Newco shall not be entitled unreasonably to withhold consent hereunder.
8.3 Compensation to Shareholders and Others. Other than reasonable
---------------------------------------
salaries and other normal benefits (including options pursuant to Company's
stock option plans, relocation loans and other loans to employees), Company
shall not make any loans to, or pay any compensation, bonuses, fees, options, or
other amounts to any shareholder or to any of the affiliates or immediate family
members of any shareholder except to Company's Board of Directors (other than
Harry Blazer). Company shall not, without the prior written consent of Newco,
amend or modify any employment arrangement or agreement with any equity holder
or any affiliate or immediate family member of any equity holder previously
approved by Newco.
8.4 Distributions and Stock Redemptions. Company shall not, directly or
-----------------------------------
indirectly, (i) redeem, purchase, or otherwise retire any of its shares of
capital stock, or (ii) pay any dividends or make any distributions (in cash or
securities) with respect to shares of its capital stock in any fiscal year,
other than pro rata stock dividends.
19
<PAGE>
8.5 Additional Indebtedness; Financial Covenants. (a) Except for trade
--------------------------------------------
payables and real estate and equipment leases that are classified as operating
leases for financial reporting purposes, in each case entered into in the
ordinary course of business, Company shall not, and shall not permit any
Subsidiary to, incur after the date hereof indebtedness other than (i)
indebtedness (which may be increased to $13,500,000) under the Bank Credit
Agreement, (ii) indebtedness under the Nationwide Debt Agreement, and (iii)
refinancings and renewals of indebtedness existing on the date hereof.
(b) The Company shall not agree to modify the financial covenants
under the Bank Credit Agreement, or governing indebtedness refinancing the Bank
Credit Agreement in any manner that would make such covenants more restrictive
from the Company's point of view than such covenants as in effect on the date
hereof, after giving effect to the ninth amendment thereto, provided, however
that in the event the Company is unable to consummate a refinancing of the Bank
Credit Agreement on such terms, Newco will not unreasonably withhold its consent
hereunder. For purposes of the foregoing sentence, Newco agrees that in
connection with any such refinancing on or after the third anniversary hereof,
(i) such consent will be provided upon the Company demonstrating that it has
used its reasonable best efforts to refinance such indebtedness so as to comply
with requirement under this Section 8.5(b) but was unable to do so, and (ii) any
subsequent intercreditor agreement entered into between Newco and the new senior
lender of the Company resulting from such refinancing as contemplated by Section
20 of that certain Intercreditor Agreement dated as of the date hereof between
Newco and the Agent (the "Intercreditor Agreement") will include a modified
version of clauses (ii), (iii) and (iv) of Section 13(b) of the Intercreditor
Agreement to take into account the changes in such financial covenants required
by the senior lender in such refinancing.
8.6 Mergers, Consolidations, Acquisitions, etc. Company shall not, and
------------------------------------------
shall not permit any Subsidiary to (a) be a party to any consolidation,
reorganization, or merger; (b) effect any change in its capital structure or in
any of its business objectives, purposes, and operation in a manner that would
materially adversely affect Newco; (c) acquire any material amount of capital in
or equity ownership of another corporation, partnership, limited liability
company or other business organization; (d) liquidate or dissolve or take any
action with a view toward liquidation or dissolution other than a liquidation of
a Subsidiary into the Company or another Subsidiary.
8.7 Articles of Incorporation and Bylaws. Company shall not make any
------------------------------------
changes in or amendments to its articles of incorporation and bylaws as they are
in effect as of the date hereof if such changes would materially adversely
affect Newco or its rights hereunder.
20
<PAGE>
8.8 Liens. Company shall not, and shall not permit any Subsidiary to,
-----
create, incur, or suffer to exist any lien on any of the assets, rights,
revenues or property, real, personal, or mixed, tangible or intangible, whether
now owned or hereafter acquired, of Company or any Subsidiary, other than
Permitted Liens.
8.9 Transactions with Affiliates. Company shall not, and shall not permit
----------------------------
any Subsidiary to, become a party to, or become liable in respect of, any
material contract or undertaking with any Affiliate (as defined in Section 11.2
hereof) except in the ordinary course of business and on terms not less
favorable to Company or such Subsidiary than those which could be obtained if
such contract or undertaking was an arms length transaction with a person other
than an affiliate.
8.10 Subsidiaries. Company shall not, and shall not permit any Subsidiary
------------
to, create or otherwise make any material investment in any corporation,
partnership, or other entity outside of the ordinary course of business, unless
Company or such Subsidiary owns directly 100% of the issued and outstanding
equity interests therein (such 100% owned entity to be referred to herein as a
"Subsidiary").
8.11 Issuance of Senior Securities. Company shall not issue any preferred
-----------------------------
stock senior or pari passu to its Series B Preferred Stock.
8.12 Limitation on Negative Covenants. To the extent any of the covenants
--------------------------------
in Sections 8.1 through 8.6, 8.8, 8.9 and 8.10 above are more restrictive than
corresponding covenants in the Bank Credit Agreement, then the Company shall not
be deemed to be in breach of the foregoing covenants if it is not in breach of
such corresponding covenants in the Bank Credit Agreement.
ARTICLE IX
CONDITIONS OF CLOSING
---------------------
Newco's obligations hereunder shall be subject to (a) the performance by
Company prior to or on the Closing Date of all of its covenants theretofore to
be performed under this Agreement, (b) the accuracy of Company's representations
and warranties contained in this Agreement on the Closing Date, and (c) the
satisfaction (unless expressly waived by Newco), prior to or on the Closing
Date, of the following further conditions:
21
<PAGE>
9.1 Opinion of Counsel. Newco shall have received on the Closing Date
------------------
from Alston & Bird an opinion, dated the Closing Date, in the form attached
hereto as Exhibit D with all blanks appropriately completed.
9.2 Proceedings and Documents. All proceedings to be taken in connection
-------------------------
with the transaction contemplated by this Agreement and all documents incident
to such transaction shall be satisfactory in form and substance to Newco and its
counsel, and Newco shall have received all documents or other evidence which it
and its counsel may reasonably have requested in connection with such
transaction, including copies of records of all proceedings in connection with
such transaction and compliance with the conditions set forth in this Article
IX, in form and substance satisfactory to Newco and its counsel.
9.3 Executed Documents. Company and its Subsidiaries shall have each duly
------------------
executed the following documents to which they are parties, and shall have
delivered to Newco the following:
(a) this Agreement;
(b) the Notes;
(c) the Subsidiary Security Agreement and Subsidiary Guaranty, where
applicable;
(d) Collateral Assignments of Tenant's Interest in Lease for each
lease of real property to which Company is a party; and
(e) such financing statements or other documents for filing with
public officials with respect to the Security Instruments as Newco may
reasonably request.
9.4 No Defaults. There shall exist no Event of Default or Default.
-----------
9.5 Additional Deliveries. Newco shall have received, in form and
---------------------
substance satisfactory to it, copies of the following documents:
22
<PAGE>
(a) Company's articles of incorporation, certified as true and correct
by the Secretary of State of Georgia, dated within ten days prior to the Closing
Date, and certified as true and correct as of the Closing Date by a duly
authorized officer of the Company;
(b) the Company's bylaws, as amended, certified as true and correct as
of the Closing Date by the Secretary or Assistant Secretary of the manager of
the Company;
(c) certificate of good standing of the Company from the Secretary of
State of Georgia dated within ten days prior to the Closing Date; and
(d) evidence satisfactory in form and substance to Newco of all
required action taken by Company to authorize, among other things, the
execution, delivery, and performance by Company of this Agreement, the Notes,
and the Security Instruments and the consummation of the transactions
contemplated hereby, certified as true and correct as of the Closing Date by a
duly authorized officer of the manager of Company.
9.6 Opinion of Auditors. Newco shall have received on the Closing Date
-------------------
from Newco's independent public accountants an opinion, dated the Closing Date,
in form and substance satisfactory to Newco, to the effect that the Notes and
the obligations incurred hereunder are deemed to be debt, and not equity, in
accordance with generally accepted accounting principles.
9.7 Compliance with Newco Credit Agreements. Newco shall (a) determine in
---------------------------------------
good faith that this Agreement complies with applicable restrictions or
limitations under any lending arrangements or credit agreements to which Newco
is a party, (b) obtain a written waiver of noncompliance of the transactions
contemplated hereby with such agreements, or (c) deliver to its lender or the
Agent from Company such pledges, collateral, and other documentation as may be
required to evidence compliance with such lending arrangements or credit
agreements of the transactions contemplated hereby.
ARTICLE X
DEFAULT, RIGHTS AND REMEDIES OF NEWCO
-------------------------------------
10.1 Default. The occurrence of any of the following events or acts
-------
shall constitute a default under the Development Loan ("Development Default"):
23
<PAGE>
(a) default in the payment when due of any portion of the principal on
the Development Note and the continuance of such default for a period of five
days;
(b) default in the payment when due of any portion of the interest on
the outstanding principal of the Development Note and the continuance of such
default for a period of 10 days;
(c) any representation or warranty now or hereafter made in this
Agreement, the Subsidiary Security Agreement, any other Security Instrument, or
any certificate hereunder or thereunder shall not be true, or any certificate,
statement, report, financial data, or notice furnished at any time by Company to
Newco shall be materially inaccurate;
(d) any breach of, or failure to perform or observe, any covenant,
condition, or agreement contained in the Subsidiary Security Agreement or in any
other Security Instrument, which in each case shall continue unremedied for a
period of 10 calendar days following written notice thereof from Newco;
(e) the breach of, or failure to perform or observe, any covenant,
condition, or agreement contained in Sections 7.6, 8.1, 8.2, 8.4, 8.5, 8.6, 8.7,
8.8, 8.10 or 8.11 of this Agreement that is not cured within thirty (30) days
after written notice of such breach is given by Newco to the Company.
(f) any breach of, or failure to perform or observe, any other
covenant, condition, or agreement contained in this Agreement or the Development
Note which shall continue unremedied for a period of 30 calendar days following
written notice thereof from Newco;
(g) Company or any Subsidiary shall (i) generally not, or shall be
unable to, or shall admit in writing its inability to pay its debts as such
debts become due, (ii) make an assignment for the benefit of creditors, petition
or apply to any tribunal for the appointment of a custodian, receiver, or
trustee for it or a substantial part of its assets, (iii) commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, (iv) have any such petition or application filed or
any such proceeding commenced against it in which an order for relief is entered
or adjudication or appointment is made and which remains undismissed for a
period of 60 days or more, (v) by any act or omission, indicate its consent to,
approval of, or knowing acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties, or (vi) suffer any
such custodianship, receivership, or trusteeship to continue undischarged for a
period of 60 days or more;
24
<PAGE>
(h) any material breach of, or failure to perform or observe, any
material covenant, condition or agreement contained in the license agreement
between HFMI Trust and the Company of even date herewith, the administration and
servicing agreement among HFMI Trust, Newco and the Company of even date
herewith, the transfer agreement among HFMI Trust, Newco and the Company of even
date herewith or the consulting services agreement of even date herewith between
the Company and Newco, which in each case shall continue unremedied for a period
of 30 calendar days following written notice thereof from Newco;
(i) dissolution or liquidation of the Company;
(j) there occurs an event which results in a Material Adverse Effect
and such Material Adverse Effect shall not have been eliminated within sixty
(60) days of such event, provided, however, that changes resulting from the
activities of Newco and the Company under the consulting agreement of even date
herewith between Newco and the Company shall not be taken into account for this
purpose.
(k) Company or any Subsidiary shall (a) fail to pay any indebtedness
for borrowed money in excess of $100,000 (other than the Notes) of Company or
such Subsidiary, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) and
the effect of such failure is to accelerate, after the giving of notice, the
maturity of such indebtedness, or (b) fail to perform or observe any term,
covenant, or condition on its part to be performed or observed under any
agreement or instrument relating to any such indebtedness, when required to be
performed or observed, if the effect of such failure to perform or observe is to
accelerate, after the giving of notice, the maturity of such indebtedness, or
(c) default in the performance or observance of any obligations under leases of
real property if the effect of such default is to cause the termination of such
lease and any applicable cure period therein has expired;
(l) one or more final judgments, decrees or orders for the payment of
money in excess of $100,000 in the aggregate and not otherwise fully covered by
insurance shall be rendered against Company or any of its Subsidiaries;
(m) the Subsidiary Security Agreement, any other Security Instrument,
or the security interests created under this Agreement shall be terminated,
invalidated, or set aside or be declared ineffective or inoperative or in any
way cease to give or provide to Newco the benefits purported to be created
thereby; or
25
<PAGE>
(n) there occurs a Change in Control of the Company. For this purpose
a Change in Control of the Company shall occur, except in each case for any such
occurrence resulting from the death or disability of Harry A. Blazer, if: (i)
any individual, corporation, partnership, joint venture, association, trust,
unincorporated organization or other entity (each a "Person") or "group" (within
the meaning of Section 13(a)(3) of the Securities Exchange Act of 1934, as
amended), other than Harry A. Blazer and Affiliates of Harry A. Blazer, at any
time (a) acquires or becomes entitled to acquire or has or becomes entitled to
have beneficial ownership of securities (including options, warrants, rights and
convertible and exchangeable securities) having a majority of the voting power
of the capital stock of the Company (assuming exercise or conversion solely of
securities held by such Persons or group), or (b) is or becomes entitled to
appoint a majority of the directors of the Company, or (c) enters into any
binding arrangement, agreement or proposal to do any of the foregoing; or (ii)
Harry A. Blazer or affiliates of Harry A. Blazer, at any time, cease to be
entitled (a) to beneficial ownership of securities having a majority of the
voting power of the capital stock of the Company, or (b) to appoint a majority
of the directors of the Company; or (iii) a majority of the directors of the
Company at the date hereof are removed or replaced without the approval of a
majority of the directors of the Company.
Notwithstanding anything contained in this Agreement to the contrary,
to the extent any of the Non Monetary Development Defaults or Events of Default
herein are more restrictive than corresponding events of default in the
Company's Bank Credit Agreement, then the Company shall not be deemed to be in
default hereunder if it is not in default of such corresponding defaults under
the Bank Credit Agreement. As used herein, the term "Non Monetary Development
Defaults or Events of Default" means any of the Development Defaults or Events
of Default hereunder other than the defaults described in Section 10.1(a) and
(b).
10.2 Default; Remedies.
-----------------
(a) In the event a Development Default shall exist or occur Newco may:
(i) terminate its obligations under this Agreement in
respect of the Development Loan and cease to make any further advances under
Section 1.1 and Section 2.1, and shall have the right to declare the Development
Note due and payable in full, without demand, presentment, or notice of any
kind;
(ii) in its sole and absolute discretion, exercise any one
or more of the rights and remedies accruing to a secured party under the Uniform
Commercial Code in respect of the Development Note with respect to the
Collateral and any other applicable law upon default by a debtor;
26
<PAGE>
(iii) exercise its rights under the other Security
Instruments in respect of the Development Loan;
(iv) exercise all or a portion of the Option;
provided, however, that in the case of any event or condition described in
Section 10.1(g) with respect to Company or any Subsidiary, Newco's obligations
under this Agreement shall automatically terminate forthwith and all amounts
owed by Company hereunder and under the Development Note shall automatically
become immediately due and payable without notice, demand, presentment, protest,
diligence, notice of dishonor, or other formality, all of which are hereby
expressly waived.
(b) In connection with the exercise of Newco's rights and remedies
provided in Section 10.2(a)(ii), Company hereby agrees to assemble the
Collateral and make it available to Newco at a place to be designated by Newco
which is reasonably convenient to both parties, authorizes Newco to take
possession of the Collateral with or without demand and with or without process
of law and to sell and dispose of the same at public or private sale and to
apply the proceeds of such sale to the costs and expenses thereof (including
reasonable attorneys' fees and disbursements actually incurred by Newco) and
then to the payment and satisfaction of the Development Loans. Any requirement
of reasonable notice shall be met if Newco sends such notice to Company, by
registered or certified mail, at least ten days prior to the date of sale,
disposition, or other event giving rise to a required notice. Newco may be the
purchaser at any such sale. Company expressly authorizes such sale or sales of
the Collateral in advance of and to the exclusion of any sale or sales of or
other realization upon any other collateral securing the Development Loans.
Newco shall have no obligation to preserve rights against prior parties. Company
hereby waives as to Newco any right of subrogation or marshaling of such
Collateral and any other collateral for the Development Loans. To this end,
Company hereby expressly agrees that any such collateral or other security of
Company or any other party which Newco may hold, or which may come to any of
them or any of their possession, may be dealt with in all respects and
particulars as though this Agreement were not in existence. The parties hereto
further agree that public sale of the Collateral by auction conducted in any
county in which any Collateral is located or in which Newco or Company does
business after advertisement of the time and place thereof shall, among other
manners of public and private sale, be deemed to be a commercially reasonable
disposition of the Collateral. Company shall be liable for any deficiency
remaining after disposition of the Collateral. Newco agrees and acknowledges
that there are different defaults for the Refinancing Loan and the Development
Loan and that it is possible for one of the loans to be in default while the
other is not. Consequently, the rights and remedies of Newco hereunder with
respect to the Collateral are limited to the amount of the obligations that are
the subject of the default.
27
<PAGE>
(c) In the event of a Refinancing Default (as hereinafter defined),
and only in such event, Newco may declare the Refinancing Loan due and payable
or exercise rights equivalent to those in Section 10.2(a)(i), (ii) or (iii). For
purposes of this Agreement, a "Refinancing Default" shall mean:
(i) default in the payment when due of any portion of the
principal or interest due under the Refinancing Note and the continuance of such
default for a period of 30 days after written notice of such nonpayment is given
by Newco to the Company;
(ii) the breach of, or failure to perform or observe, any
covenant, condition or agreement contained in Sections 8.4, 8.6(a), 8.7, 8.9 or
8.11 that is not cured within 30 days after written notice of such breach is
given by Newco to the Company;
(iii) the breach of, or failure to perform or observe, any
covenant, condition or agreement contained in Section 8.5(a) that is not cured
within 60 days after written notice of such breach is given by Newco to the
Company;
(iv) the occurrence of a Change in Control of the Company,
as defined in 10.1(n), that is not cured within 90 days after written notice
thereof is given by Newco to the Company; or
(v) Company or any Subsidiary shall (i) generally not, or
shall be unable to, or shall admit in writing its inability to pay its debts as
such debts become due, (ii) make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment of a custodian, receiver,
or trustee for it or a substantial part of its assets, (iii) commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, (iv) have any petition or application filed or any
such proceeding commenced against it in which an order for relief is entered or
adjudication or appointment is made and which remains undismissed for a period
of 60 days or more, (v) by any act or omission, indicate its consent to,
approval of, or knowing acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties, or (vi) suffer any
such custodianship, receivership, or trusteeship to continue undischarged for a
period of 60 days or more.
For purposes of the foregoing, the Company shall be deemed to have
cured the Refinancing Default referred to in clause (iii) above if the
prohibited indebtedness is repaid or
28
<PAGE>
otherwise satisfied within the 60-day period and the Company shall be deemed to
have cured the Refinancing Default referred to in clause (iv) above if Harry A.
Blazer or any Affiliate of Harry A. Blazer acquires, within the 90-day period
referred to therein, a sufficient number of shares of capital stock of the
Company such that Harry A. Blazer and his Affiliates have beneficial ownership
of securities having a majority of the voting power of the capital stock of the
Company.
(d) All of Newco's rights and remedies under this Agreement are
cumulative and nonexclusive. Any conversion of, or exercise of the Option with
respect to, less than all of the principal balance outstanding under the Notes
shall not affect Newco's rights and remedies with respect to any portion of a
Note not so converted or exercised. In addition, the parties hereto acknowledge
that irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
10.3 No Waiver. Newco's failure, at any time or times hereafter, to
---------
require Company's strict compliance with or performance of any provision of this
Agreement shall not waive, affect, or diminish any right of Newco thereafter to
demand such strict compliance or performance therewith. Any suspension or
waiver by Newco of a Default or an Event of Default by Newco under this
Agreement or the Note shall not suspend, waive, or affect any other Default or
Event of Default by Company under this Agreement or the Notes, whether the same
is prior or subsequent thereto and whether of the same or of a different kind or
character. None of the undertakings, agreements, warranties, covenants, and
representations of Company contained in this Agreement or the Notes and no
Default or Event of Default by Company under this Agreement or the Notes shall
be deemed to have been suspended or waived by Newco unless such suspension or
waiver is in writing signed by an officer of Newco.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 No Oral Change. This Agreement may not be changed orally, but only
--------------
by an agreement in writing and signed by the party against whom enforcement of
any waiver, change, modification, or discharge is sought.
11.2 Assignment. Company may not assign any of its rights or delegate any
----------
of its obligations under this Agreement without Newco's written consent, which
consent may be withheld
29
<PAGE>
in Newco's sole discretion. Newco may assign any of its rights or delegate any
of its obligations under this Agreement (including assignment of this Agreement,
the Notes and the Security Instruments), (a) without notice to Company, (i) to
any Affiliate of Newco (except Company) or (ii) in connection with any pledge of
its assets under Newco's credit agreements and (b) with notice, but without any
requirement of consent or approval, to any other person entity (except Company),
provided, however, that in no event shall Newco assign its rights to the Loans
unless (A) such assignee is (i) a company whose securities are publicly traded,
or (ii) a person or private entity, if such person or the controlling holders of
such entity are of good character in Newco's reasonable judgment, and (B) such
transferee has the financial resources to discharge Newco's obligations under
the Agreement. Any such assignment shall vest in the assignee all of the
benefits under the documents so assigned. For purposes of this Agreement, the
term "Affiliate" of a specified person shall mean any person or entity which
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
11.3 Costs and Attorneys' Fees.
-------------------------
(a) Except as provided in Section 4.3 hereof and subsection (b) of
this Section 11.3, each of the parties hereto shall pay its own expenses
(including accounting and attorney's fees) incident to the negotiation and
execution of this Agreement and to the consummation of the transactions
contemplated hereby.
(b) The party to any action hereunder who does not prevail shall pay
to the prevailing party the court costs and reasonable attorneys' fees and other
expenses (including, but not limited to, fees and expenses of expert witnesses
or consulting experts) incurred directly or indirectly by the prevailing party
in connection with its prosecution or defense of the action, as the case may be.
11.4 Communications and Notices. All communications and notices provided
--------------------------
for in this Agreement or under the Note shall be in writing and shall be deemed
to have been duly given if delivered personally to the party to whose attention
the notice is directed or sent by overnight express, facsimile transmission,
express mail delivery service, or registered or certified mail, return receipt
requested, postage prepaid, and properly addressed as follows:
If to Company:
1180 Upper Hembree
Roswell, Georgia 30076
Attention: Harry A. Blazer
Facsimile: (770) 664-4920
30
<PAGE>
with a copy to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: John L. Latham
Facsimile: (404) 881-7777
If to Newco:
14130 Denver West Parkway
Golden, Colorado 80401
Attention: Saad J. Nadhir
Facsimile: (303) 216-5550
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given when so delivered. Any notice delivered by facsimile transmission shall
be deemed to have been given on the earlier of the date it is actually received
or one day after such transmission. Any notice delivered by overnight express
courier will be deemed to have been given on the next succeeding business day
after the day it is sent to the intended recipient at the address set forth
above, and any notice delivered by registered or certified mail or express mail
delivery service shall be deemed to have been duly given on the earlier of the
date it is actually received or three business days after it is sent to the
intended recipient at the address set forth above.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
-------------
AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS
THEREOF.
11.6 Headings. The headings of the sections of this Agreement are inserted
--------
for convenience only and shall not be deemed to constitute a part of this
Agreement.
11.7 Severability. If any provision of this Agreement or the application
------------
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby, and the provisions of
this Agreement shall be severable in any such instance.
31
<PAGE>
11.8 Avoidance. To the extent that Newco receives any payment on account
---------
of Company's obligations hereunder, and any such payment(s) and/or proceeds or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, subordinated, and/or required to be repaid to a
trustee, receiver, or any other party under any bankruptcy law, state or federal
law, common law, or equitable cause, then, to the extent of such payment(s) or
proceeds received, Company's obligations hereunder, or part thereof intended to
be satisfied, shall be revived and continue in full force and effect, as if such
payment(s) and/or proceeds had not been received by Newco.
11.9 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, but all of which together shall constitute
but one and the same instrument.
11.10 Entire Agreement. This Agreement, the Notes, the Security
----------------
Instruments and the exhibits to each of the foregoing contain the entire
agreement of the parties hereto with respect to the transactions contemplated
herein, and collectively supersede all prior understandings and agreements of
the parties with respect to the subject matter hereof.
11.11 General Indemnity. In addition to the payments pursuant to Section
-----------------
11.3, Company agrees to indemnify, pay, and hold Newco and any holder of the
Notes, and the officers, directors, employees, agents, and Affiliates of Newco
and any such holder (collectively, the "Indemnitees"), harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses, and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative, or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of the indebtedness created by this Agreement,
the Notes, the Subsidiary Security Agreement, the Security Instruments and the
exhibits or any other agreements or documents executed and delivered by Company
in connection therewith, including without limitation any damage to public or
worker health and safety or the environment, Newco's agreement to make the Loans
hereunder, or the use or intended use of the proceeds of the Loans (the
"indemnified liabilities"); provided that Company shall have no obligation to an
Indemnitee hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of such Indemnitee. To the extent that
the undertaking to indemnify, pay, and hold harmless set forth in the preceding
sentence may be unenforceable because it violates any law or public policy,
Company shall contribute the maximum portion that it is permitted to pay under
applicable law to the payment and satisfaction of all indemnified liabilities
incurred by the Indemnitees or any of them. The provisions of the undertakings
and indemnification set out in this Section 11.11 shall survive satisfaction and
payment of Company's obligations hereunder and termination of this Agreement.
32
<PAGE>
11.12 Limitation on Damages. Notwithstanding anything to the contrary
---------------------
herein no party hereto shall be liable for consequential, indirect, incidental,
special, speculative, or punitive damages (including, but not limited to, loss
of revenue or profit) whether such claim alleges breach of contract, tortious
conduct including, but not limited to, negligence, or any other theory.
11.13 Submission to Jurisdiction. Company agrees that any legal action or
--------------------------
proceeding with respect to this Agreement, the Notes, the Subsidiary Security
Agreement or any Security Instrument or the transactions contemplated hereby may
be brought in any court of the State of Georgia, or in any court of the United
States of America sitting in Georgia, and Company hereby submits to and accepts
generally and unconditionally the jurisdiction of those courts with respect to
their respective person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery to
Company or by the mailing thereof by registered or certified mail, postage
prepaid to Company at the address for Company set forth in Section 11.4. Nothing
in this paragraph shall affect the right of Newco to serve process in any other
manner permitted by law or limit the rights of Newco to bring any such action or
proceeding against Company or property in the courts of any other jurisdiction.
Company hereby irrevocably waives any objection to the laying of venue of any
such suit or proceeding in the above described courts.
11.14 Waiver of Jury Trial. No party to this instrument, which includes
--------------------
any assignee, successor, heir or personal representative of a party, shall seek
a jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, the Notes, the
Subsidiary Security Agreement, any Security Instrument, any related instrument,
or the dealings or the relationship between the parties. No party will seek to
consolidate any such action, in which a jury has been waived, with any other
action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 11.14 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR NEWCO IN ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, each of the parties has caused this Secured Loan
Agreement to be duly executed in its behalf as of the day and year first written
above.
HFMI ACQUISITION CORPORATION
By: /s/ Saad J. Nadhir
---------------------------------
Name: Saad J. Nadhir
Title: Chief Executive Officer
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
---------------------------------
Name: Harry A. Blazer
Title: President
33
<PAGE>
REFINANCING NOTE
----------------
$12,000,000 Atlanta, Georgia
As of January 31, 1997
FOR VALUE RECEIVED, Harry's Farmers Market, Inc., a Georgia
corporation (the "Company"), promises to pay to the order of HFMI Acquisition
Corporation, a Delaware corporation ( "Newco"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Newco may from time to time designate
in writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of twelve million dollars ($12,000,000) and
any interest thereon, or, if less, the aggregate unpaid amount of the Loans made
pursuant to Section 1.1 of the Loan Agreement and any interest thereon.
This Note evidences the Refinancing Loan made under, and is referred
to in and is executed and delivered pursuant to, a Secured Loan Agreement dated
of even date herewith between the Company and Newco (the "Loan Agreement"), to
which reference is hereby made for a statement of the terms and conditions under
which this Note may be repaid and accelerated and for a description of the
collateral and security securing this Note. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Refinancing Loan, for the period commencing on the date the
Refinancing Loan is made until the Refinancing Loan is paid in full, (i) during
the period commencing on the date the Refinancing Loan is made until the Draw
Loan Termination Date, at a per annum rate of 5%, and (ii) thereafter at a per
annum rate equal to the rate designated and announced by B of A or its
successors in interest from time to time as its "reference rate" in effect at
its principal office in Chicago, Illinois, plus 1%. The interest rate shall be
adjusted, from time to time, on the same day on which B of A adjusts its
"reference rate." Interest on the outstanding principal amount of the
Refinancing Loan shall be payable in arrears on the dates set forth herein and
at maturity (whether at stated maturity, by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
1
<PAGE>
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
Except as otherwise provided in the Loan Agreement, if not earlier
paid, or if not accelerated for payment, the outstanding principal amount of the
Refinancing Loan shall, at the close of business on the Draw Loan Termination
Date, thereafter become an amortized term loan payable as follows: the principal
balance of the Refinancing Loan shall be payable to Newco in 20 substantially
equal quarterly installments of principal (the amount of which periodic
installments of principal shall be determined at the close of business on the
Draw Loan Termination Date based on a schedule amortizing such outstanding
principal balance of the Refinancing Loan as of such date in 40 substantially
equal quarterly installments of principal), plus accrued but unpaid interest, on
the first day of each of Newco's 20 consecutive fiscal quarters, commencing on
the first day of the first quarter commencing after the Draw Loan Termination
Date and continuing until the first day of the first quarter commencing after
the fifth anniversary of the Draw Loan Termination Date, when the entire
remaining principal balance of the Refinancing Loan and all interest accrued
thereon shall be due and payable.
This Note may be prepaid at any time without payment of penalty or
premium. All payments made hereunder shall be applied first to interest and then
to outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Georgia, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Company and any endorser or
guarantor.
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO CERTAIN
INDEBTEDNESS OF THE COMPANY PURSUANT TO AN INTERCREDITOR AGREEMENT DATED JANUARY
31, 1997, BETWEEN CREDITANSTALT-BANKVEREIN, AS AGENT, AND NEWCO, AS SUCH
2
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AGREEMENT IS AMENDED FROM TIME TO TIME WITH THE APPROVAL OF NEWCO.
ARTICLE I
Refinancing Default, Rights and Remedies of Holder
--------------------------------------------------
1.1 The occurrence of a Refinancing Default shall be a default under
this Note. Upon any default under this Note, the holder of this Note may
declare this Note due and payable in full and exercise such other rights and
remedies as are available to the holder under the Loan Agreement or applicable
law.
1.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs actually
incurred in collecting or attempting to collect or securing or attempting to
secure this Note or enforcing the holder's rights with respect to the
Collateral, to the extent allowed by the laws of the State of Georgia or any
state in which any Collateral is situated.
ARTICLE II
Miscellaneous
-------------
2.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF GEORGIA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
2.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems
3
<PAGE>
it necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
2.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither Newco nor any holder hereof shall in any
event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Newco or any holder hereof shall be paid, as
interest, a sum greater than the maximum amount permitted by applicable law to
be charged to the person primarily obligated to pay this Note at the time in
question. If any construction of this Note or the Loan Agreement, or any and all
other papers, agreements or commitments, indicate a different right given to
Newco or any holder hereof to ask for, demand, or receive any larger sum as
interest, such is a mistake in calculation or wording which this clause shall
override and control, it being the intention of the parties that this Note, the
Loan Agreement, and all other documents executed or delivered in connection
herewith shall in all ways comply with applicable law and proper adjustments
shall automatically be made accordingly. In the event that Newco or any holder
hereof ever receives, collects, or applies as interest, any sum in excess of
the maximum amount permitted by applicable law, if any, such excess amount shall
be applied to the reduction of the unpaid principal balance of this Note, and if
this Note is paid in full, any remaining excess shall be paid to the Company. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum amount permitted by applicable law, if any, the
Company and any holder hereof shall, to the maximum extent permitted under
applicable law: (a) characterize any non-principal payment as an expense or fee
rather than as interest, and (b) "spread" the total amount of interest
throughout the entire term of this Note.
IN WITNESS WHEREOF, the Company has caused this Refinancing Note to be
executed in its corporate name by the undersigned officer, thereunto duly
authorized.
HARRY'S FARMERS MARKET, INC.
By:/s/ Harry A. Blazer
-------------------------------
Title: President
---------------------------
4
<PAGE>
DEVELOPMENT NOTE
----------------
$8,000,000 Atlanta, Georgia
As of January 31, 1997
FOR VALUE RECEIVED, Harry's Farmers Market, Inc., a Georgia
corporation (the "Company"), promises to pay to the order of HFMI Acqusition
Corporation, a Delaware corporation ("Newco"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Newco may from time to time designate
in writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of eight million dollars ($8,000,000) and any
interest thereon, or, if less, the aggregate unpaid amount of the Development
Loan made pursuant to Section 2.1 of the Loan Agreement and any interest
thereon.
This Note evidences the Development Loan made under, and is referred
to in and is executed and delivered pursuant to, a Secured Loan Agreement dated
of even date herewith between the Company and Newco (the "Loan Agreement"), to
which reference is hereby made for a statement of the terms and conditions under
which this Note may be repaid and accelerated and for a description of the
collateral and security securing this Note. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Development Loan, for the period commencing on the date the
Development Loan is made until the Development Loan is paid in full, (i) during
the period commencing on the date the Development Loan is made until the Draw
Loan Termination Date, at a per annum rate of 5%, and (ii) thereafter at a per
annum rate equal to the rate designated and announced by B of A or its
successors in interest from time to time as its "reference rate" in effect at
its principal office in Chicago, Illinois, plus 1%. The interest rate shall be
adjusted, from time to time, on the same day on which B of A adjusts its
"reference rate." Interest on the outstanding principal amount of the
Development Loan shall be payable in arrears on the dates set forth herein and
at maturity (whether at stated maturity, by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
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<PAGE>
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
Except as otherwise provided in the Loan Agreement, if not earlier
paid, or if not accelerated for payment, the outstanding principal amount of the
Refinancing Loan shall, at the close of business on the Draw Loan Termination
Date, thereafter become an amortized term loan payable as follows: the principal
balance of the Refinancing Loan shall be payable to Newco in 20 substantially
equal quarterly installments of principal (the amount of which periodic
installments of principal shall be determined at the close of business on the
Draw Loan Termination Date based on a schedule amortizing such outstanding
principal balance of the Refinancing Loan as of such date in 40 substantially
equal quarterly installments of principal), plus accrued but unpaid interest, on
the first day of each of Newco's 20 consecutive fiscal quarters, commencing on
the first day of the first quarter commencing after the Draw Loan Termination
Date and continuing until the first day of the first quarter commencing after
the fifth anniversary of the Draw Loan Termination Date, when the entire
remaining principal balance of the Refinancing Loan and all interest accrued
thereon shall be due and payable.
This Note may be prepaid at any time without payment of penalty or
premium. All payments made hereunder shall be applied first to interest and
then to outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Georgia, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Company and any endorser or
guarantor.
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO CERTAIN
INDEBTEDNESS OF THE COMPANY PURSUANT TO AN INTERCREDITOR AGREEMENT DATED JANUARY
31, 1997, BETWEEN CREDITANSTALT-BANKVEREIN, AS AGENT, AND NEWCO, AS SUCH
2
<PAGE>
AGREEMENT IS AMENDED FROM TIME TO TIME WITH THE APPROVAL OF NEWCO.
ARTICLE I
Advances
--------
1.1 Development Loan advances may be made from time to time by Newco
to the Company in the manner and on the terms and subject to the conditions set
forth in the Loan Agreement. Upon granting each loan advance (an "Advance"),
Newco shall record the making and amount of such advance on its books in a
separate loan account, and shall also record in the loan account all payments
made by the Company with respect to the Development Loan. The aggregate amount
of all Advances, less the amounts of payment of principal made by the Company,
shall be the principal amount outstanding under this Note. The loan account
shall be prima facie evidence of the unpaid amount of principal outstanding
under this Note; provided, however, that failure to maintain such account or
record any Advances therein shall not relieve the Company of its obligations to
repay the outstanding principal amount of the Development Loan, all accrued
interest thereon, and any amount payable with respect thereto in accordance with
the terms of this Note.
ARTICLE II
Development Default, Rights and Remedies of Holder
--------------------------------------------------
2.1 The occurrence of a Development Default shall be a default under
this Note. Upon any such default under this Note, the holder of this Note may
declare this Note due and payable in full and exercise such other rights and
remedies as are available to the holder under the Loan Agreement or applicable
law.
2.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs actually
incurred in collecting or attempting to collect or securing or attempting to
secure this Note or enforcing the holder's rights with respect to the
Collateral, to the extent allowed by the laws of the State of Georgia or any
state in which any Collateral is situated.
3
<PAGE>
ARTICLE III
Miscellaneous
-------------
3.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF GEORGIA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
3.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems it
necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
3.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither the Newco nor any holder hereof shall in
any event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Newco or any holder hereof shall be paid, as
interest, a sum greater than the maximum amount permitted by applicable law to
be charged to the person primarily obligated to pay this Note at the time in
question. If any construction of this Note or the Loan Agreement, or any and all
other papers, agreements or commitments, indicate a different right given to
Newco or any holder hereof to ask for, demand, or receive any larger sum as
interest, such is a mistake in calculation or wording which this clause shall
override and control, it being the intention of the parties that this Note, the
Loan Agreement, and all other documents executed or delivered in connection
herewith shall in all ways comply with applicable law and proper adjustments
shall automatically be made accordingly. In the event that Newco or any holder
hereof ever receives, collects, or applies as interest, any sum in excess of the
maximum amount permitted by applicable law, if any, such excess amount shall be
applied to the reduction of the unpaid principal balance of this Note, and if
this Note is paid in full, any remaining excess shall be paid to the Company. In
4
<PAGE>
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum amount permitted by applicable law, if any, the
Company and any holder hereof shall, to the maximum extent permitted under
applicable law: (a) characterize any non-principal payment as an expense or fee
rather than as interest, and (b) "spread" the total amount of interest
throughout the entire term of this Note.
IN WITNESS WHEREOF, the Company has caused this Development Note to be
executed in its corporate name by the undersigned officer, thereunto duly
authorized.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
---------------------------
President
5
<PAGE>
EXHIBIT B-1
FORM OF SUBSIDIARY GUARANTY
<PAGE>
GUARANTY
--------
THIS GUARANTY is made and entered into this ____ day of ______________,
1997 by ___________________________, a ___________________ corporation (the
"Guarantor"), in favor of HFMI Acquisition Corporation, a Delaware corporation
(hereinafter referred to as the "Lender"), as follows:
Section 1. Background Statement. Reference is made to the Secured Loan
Agreement, dated on or about the date hereof (the same as it may be amended,
modified or supplemented from time to time being referred to as the "Loan
Agreement"), between Harry's Farmers Market, Inc., a Georgia corporation (the
"Borrower"), and the Lender. Unless otherwise defined in this Guaranty, terms
used herein which are defined in the Loan Agreement shall have the same meaning
herein as therein ascribed to them. Pursuant to and subject to the terms and
conditions of the Loan Agreement, the Lender has agreed to loan certain funds to
the Borrower. The Guarantor is a wholly-owned subsidiary of the Borrower and
some of the proceeds of the Loans may be made available to the Guarantor from
time to time. The Guarantor will benefit from the making of the Loans under the
Loan Agreement as the continued success of the business operations of the
Guarantor are directly dependent upon the ability of the Borrower to obtain
adequate financing for its business operations and the expansion of such
operations and is therefore willing to execute this Guaranty.
Section 2. Guaranty.
(a) Guaranty. In consideration of the execution and delivery by the Lender
of the Loan Agreement and the making of Loans to the Borrower by the Lender
thereunder, the Guarantor, as primary obligor and not as surety merely, hereby
guarantees absolutely and unconditionally to the Lender the due and punctual
payment, when and as due (whether upon demand, at maturity, by reason of
acceleration or otherwise), and performance of all obligations of the Borrower
now or hereafter existing under the Loan Agreement and the Note, whether for
principal, interest, fees, expenses or otherwise and any and all other
indebtedness, obligations or liabilities of any kind of the Borrower to the
Lender, whether now existing or hereafter arising, direct or indirect, absolute
or contingent, joint or several, arising by operation of law or otherwise
(hereinafter referred to as the "Guaranteed Obligations"), and agrees to pay any
and all expenses (including, but not limited to, reasonable legal fees and
disbursements) which may be incurred by the Lender in enforcing its rights under
this Guaranty. The liability of the Guarantor under this Guaranty is primary,
unlimited and unconditional, and shall be enforceable before, concurrently or
after any claim or demand is made or suit is filed against the Borrower or any
other Obligor and before, concurrently or after any proceeding by the Lender
against any Collateral or other security for the Guaranteed Obligations and
shall be effective regardless of the solvency or insolvency of the Borrower or
any other Obligor at any time, the extension or modification of any of the
Guaranteed Obligations by operation of law or the subsequent reorganization,
merger or
-1-
<PAGE>
consolidation of the Borrower or any change in its composition, nature,
ownership, personnel or location, and this Guaranty shall be a continuing
guaranty of any and all notes given in extension or renewal of the Guaranteed
Obligations. The Guarantor acknowledges, agrees and confirms that this is a
guaranty of payment and not of collection only and that demand for payment may
be made hereunder on any number of occasions in the amount of all or any portion
of the Guaranteed Obligations then due and no single demand shall exhaust the
rights of the Lender hereunder.
(b) Payment by Guarantor. If the Borrower shall fail to pay, when due and
payable, any Guaranteed Obligation, the Guarantor will, without demand or
notice, immediately pay the same to the Lender. If any Guaranteed Obligation
would be subject to acceleration, but such acceleration is enjoined or stayed,
the Guarantor will to the extent permitted by applicable law, purchase such
Guaranteed Obligation for a price equal to the outstanding principal amount
thereof, plus such accrued interest and other amounts as would have been payable
had such Guaranteed Obligation been paid or prepaid at the time of such
purchase. All payments by the Guarantor under this Guaranty shall be made
without any setoff, counterclaim or deduction whatsoever, and in the same
currency and funds as are required to be paid by the Borrower.
(c) Waiver. The Guarantor waives without any requirement of any notice to
or further assent by the Guarantor, to the fullest extent permitted by
applicable law, (i) diligence, presentment, demand, protest and notice of any
kind whatsoever, (ii) any requirement that the Lender exhaust any right or take
any action against any obligor or other person or any of the collateral or other
security for the Guaranteed Obligations, (iii) the benefit of all principles or
provisions of applicable law which are or might be in conflict with the terms of
this Guaranty, including, without limitation, Section 10-7-24 of the Official
Code of Georgia Annotated, (iv) notice of acceptance hereof, (v) notice of
Default or Event of Default, (vi) notice of any and all favorable and
unfavorable information, financial or other, about the Borrower, any Obligor or
other Person, heretofore, now or hereafter learned or acquired by the Lender,
(vii) all other notice to which the Guarantor or any other obligor might
otherwise be entitled, (viii) all defenses, set-offs and counterclaims of any
kind whatsoever (but not the right to bring an independent action), (ix) notice
of the existence or creation of any Guaranteed Obligations, (x) notice of any
alteration, amendment, increase, extension or exchange of any of the Guaranteed
Obligations, (xi) notice of any amendments, modifications or supplements to the
Loan Agreement or any instrument, document or agreement issued or delivered
pursuant thereto, (xii) notice of any release of collateral or other security
for the Guaranteed Obligations or any compromise or settlement with respect
thereto, (xiii) all diligence in collection or protection of or realization upon
the Collateral or any of the Guaranteed Obligations, and (xiv) the right to
require the Lender to proceed against any obligor with respect to the Guaranteed
Obligations.
(d) Consents. The Guarantor consents without the requirement of any notice
to or further assent by the Guarantor, to the fullest extent permitted by
applicable law, that (i) the time of payment of any Guaranteed Obligation may be
extended, (ii) any provision of the Loan
-2-
<PAGE>
Agreement or any instrument, document or agreement issued or delivered pursuant
thereto may be amended, waived or modified, (iii) any obligor with respect to
the Guaranteed Obligations may be released from its obligations or other
obligors or guarantors substituted therefor or added, (iv) any collateral or
other property now or hereafter securing the Guaranteed Obligations may be
released, exchanged, substituted, compromised or subordinated in whole or in
part or any security may be added, and (v) the Lender may proceed against the
Guarantor or any other obligor without proceeding against any other obligor with
respect to the Guaranteed Obligations.
(e) Guarantor Bound. The Guarantor will remain bound under this Guaranty
notwithstanding any changes, extensions, exchanges, substitutions, releases,
compromises, subordinations, amendments, waivers or modifications or any other
circumstances, whether or not referred to in clauses (c) or (d) above, which
might otherwise constitute a legal or equitable discharge of a guaranty.
(f) Absolute Obligation. The obligations of the Guarantor hereunder are
irrespective of and shall not be dependent upon or affected by (i) the validity,
legality or enforceability of the Loan Agreement, the Note(s) or any instrument,
document or agreement issued or delivered pursuant thereto, (ii) the existence,
value or condition of any of the collateral or other security for the Guaranteed
Obligations, (iii) the validity, perfection or priority of the security interest
or lien in any of the collateral or other security, (iv) any action or failure
to take action by the Lender under, or with respect to, the Loan Agreement, the
Note(s), any instrument, document or agreement issued or delivered pursuant
thereto, any Guaranteed Obligation, any obligor or any of the collateral or
other security, (v) any other dealings among the Lender, the Borrower or any
other obligor, or (vi) any present or future law or order of any government
agency thereof purporting to reduce, amend or otherwise affect any obligations
of the Borrower or the Guarantor.
(g) Recovery of Payments. In the event that any or all of the amounts
guaranteed by the Guarantor are or were paid by the Borrower or any other
Obligor or are or were paid or reduced by application of the proceeds of any
Collateral, and all or any part of such payment is recovered from the Lender
under any applicable bankruptcy or insolvency law or otherwise, the liability of
the Guarantor under this Guaranty shall continue and remain in full force and
effect to the extent permitted by applicable law.
(h) Waiver of Reimbursement, Subrogation. The Guarantor hereby waives,
irrevocably and to the fullest extent permitted by applicable law, any and all
rights of subrogation, indemnification, reimbursement, contribution or similar
rights which the Guarantor may have against the Borrower or any other obligor or
any collateral for the Guaranteed Obligations, other security or otherwise. The
provisions of this subsection (h) shall survive the termination of this
Guaranty.
-3-
<PAGE>
(i) Binding Nature of Certain Adjudications. Upon written notice of the
institution by the Lender of any action or proceedings, legal or otherwise, for
the adjudication of any controversy with the Borrower, the Guarantor will be
conclusively bound by the adjudication in any such action or proceedings and by
a judgment, award or decree entered therein. The Guarantor waives the right to
assert in any action or proceeding brought by the Lender, upon the Loan
Agreement, the Note(s) or any instrument, document or agreement issued or
delivered pursuant thereto, any offsets or counterclaims which the Guarantor may
have with respect there to.
(j) Validity and Enforceability of Guaranty. The Guarantor will take all
action required so that the guaranty contained herein will at all times be a
binding obligation of the Guarantor enforceable in accordance with its terms.
Section 3. Representations and Warranties. The Guarantor represents and
warrants to the Lender as follows:
a. Organization; Power; Qualification. The Guarantor is a corporation, duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has the power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be conducted
and is duly qualified and authorized to do business in each jurisdiction in
which the character of its properties or the nature of its business requires
such qualification or authorization.
b. Authorization of Guaranty. The Guarantor has the right and power and has
taken all necessary action to authorize it to guarantee the Guaranteed
Obligations hereunder and to execute, deliver and perform this Guaranty in
accordance with its terms. This Guaranty has been duly executed and delivered by
the duly authorized officers of the Guarantor and is a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms.
c. Compliance of Guaranty With Laws, Etc. The execution, delivery and
performance of this Guaranty in accordance with its terms and the guaranty of
the Guaranteed Obligations hereunder do not and will not, by the passage of
time, the giving of notice or otherwise, (i) require any government approval or
violate any applicable law relating to the Guarantor or (ii) conflict with,
result in a breach of or constitute a default under the certificate of
incorporation or by-laws of the Guarantor.
d. Financial Interest. The Guarantor is a subsidiary of the Borrower and is
engaged in a related and mutually interdependent business with the Borrower and
will derive indirect financial and business advantages and benefits from the
Loans and other financial accommodations that the Lender may make to the
Borrower.
-4-
<PAGE>
Section 4. Litigation. THE GUARANTOR, AND THE LENDER BY ITS ACCEPTANCE
HEREOF, EACH HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDINGS OF ANY
KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST
THE GUARANTOR ARISING OUT OF THIS GUARANTY, OR BY REASON OF ANY OTHER CAUSE OR
DISPUTE WHATSOEVER BETWEEN THE GUARANTOR AND LENDER OF ANY KIND OR NATURE. THE
GUARANTOR, AND THE LENDER BY ITS ACCEPTANCE HEREOF, EACH HEREBY AGREES THAT THE
FEDERAL COURT OF THE NORTHERN DISTRICT OF GEORGIA OR, AT THE OPTION OF THE
LENDER, ANY COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL
HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE GUARANTOR AND LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS
GUARANTY, OR TO ANY MATTER ARISING THEREFROM. THE GUARANTOR EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED IN SUCH COURTS, HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREEING THAT SERVICE
OF SUCH SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE GUARANTOR AT THE ADDRESS OF THE
GUARANTOR SET FORTH HEREIN. SHOULD THE GUARANTOR FAIL TO APPEAR OR ANSWER ANY
SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY (30) DAYS AFTER
THE MAILING THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN ORDER AND OR JUDGMENT
MAY BE ENTERED AGAINST HIM AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT,
PROCESS OR PAPERS. THE NONEXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THE GUARANTY TO ENFORCE SAME IN ANY
APPRO PRIATE JURISDICTION.
Section 5. Titles and Captions. Titles and captions of Sections and
subsections in this Guaranty are for convenience only, and neither limit nor
amplify the provisions of this Guaranty.
Section 6. Severability of Provisions. Any provision of this Guaranty
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
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<PAGE>
Section 7. Governing Law. This Guaranty shall be construed in accordance
with and governed by the laws of the State of Georgia.
Section 8. Counterparts. This Guaranty may be executed in any number of
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns.
Section 9. Miscellaneous. This Guaranty and the other agreements
contemplated by this Guaranty supersede all prior negotiations, agreements and
understandings, and constitute the entire agreement between the parties with
respect to the subject matter thereof. All the provisions of this Guaranty shall
be binding upon the Guarantor and its successors and assigns, and Lender may
assign or transfer any of its rights under this Guaranty. Any term, covenant,
agreement or condition of this Guaranty may be amended or waived, and any
departure therefrom may be consented to, if, but only if, such amendment, waiver
or consent is in writing and is signed by an authorized officer of the Lender
and, in the case of any amendment, also by the Guarantor. Unless otherwise
specified in such waiver or consent, a waiver or consent given hereunder shall
be effective only in the instance and for the specific purpose for which given
and no waiver of any condition, or of the breach of any term, provision,
warranty, representation, agreement or covenant contained in this Guaranty,
whether by conduct or otherwise, in any one or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition or of the breach of any other term, provision,
warranty, representation, agreement or covenant contained in this Guaranty. The
failure of the Lender at any time or times to require performance of any
provisions of this Guaranty shall in no manner affect the right to enforce the
same. Whenever the context so requires, the singular number shall include the
plural and the plural shall include the singular, and the gender of any pronoun
shall include the other genders.
Section 10. Assignment by Lender. The Lender may, with five (5) days prior
written notice to the Guarantor, sell, assign or transfer any or all of the
Guaranteed Obligations and in such event each and every immediate and successive
assignee, transferee or holder of any of the Guaranteed Obligations shall have
the right to enforce this Guaranty, by suit or otherwise for the benefit of such
assignee, transferee or holder, as fully as if such assignee, transferee or
holder were herein by name specifically given such rights, power and benefits.
The Lender shall have unimpaired right prior and superior to that of any such
assignee, transferee or holder to enforce this Guaranty for the benefit of the
Lender as to such of the Guaranteed Obligations as are not sold, assigned or
transferred.
Section 11. Notices. All notices and other communications provided for
hereunder shall be in writing and given in accordance with the notice provisions
of the Loan Agreement and such provisions are hereby incorporated herein by this
reference as if fully set forth herein. The address of the Guarantor for such
purposes shall be as set forth on the signature page hereof, or such other
address notice of which is given in accordance with the provisions
-6-
<PAGE>
hereof and the address of the Lender shall be as provided from time to time
pursuant to the Loan Agreement. The Guarantor agrees that if any notification of
intended disposition of Collateral or other security for the Guaranteed
Obligations or of any other act by the Lender is required by law and a specific
time period is not stated therein, such notification given in accordance with
the provisions of this Section 11, at least seven (7) days prior to such
disposition or act shall be deemed reasonable and properly given.
Section 12. Limitation on Guarantor's Liability. Notwithstanding Section 2
hereof, the liability of the Guarantor hereunder with respect to the Guaranteed
Obligations, and the aggregate liability of the Guarantor hereunder with respect
to the Guaranteed Obligations, shall not in each case exceed at any time the
Maximum Amount (as hereinafter defined) less the sum of the amounts, if any,
collected by or on behalf of the Lender from the Guarantor pursuant to any other
agreement or instrument executed by the Guarantor pursuant to the or as
contemplated by the Loan Agreement. The "Maximum Amount" means the greater of:
(a) the proceeds of any Loan that are used to purchase assets for the Guarantor
or are otherwise made directly or indirectly available to the Guarantor through
intercompany loans, advances, capital contributions or otherwise or (b) the
lesser of (i) $20,000,000 or (ii) 95% of (A) the fair salable value of the
property of the Guarantor as of the date hereof minus (B) the total liabilities
of the Guarantor (including contingent liabilities, but excluding liabilities of
the Guarantor owing to shareholders, directors, officers and other direct or
indirect affiliates of the Guarantor or the Borrower and excluding liabilities
of the Guarantor to the Lender) as of the date hereof.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
by its duly authorized officer(s) as of the day and year first written above.
________________________________________, a
_________________ corporation
By:
----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Attest:
------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[CORPORATE SEAL]
-7-
<PAGE>
Address:
-----------------------------------
-----------------------------------
-8-
<PAGE>
EXHIBIT B-2
FORM OF SUBSIDIARY SECURITY AGREEMENT
<PAGE>
SUBSIDIARY SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of __________, 1997 (this "Security
Agreement"), is made by __________________________, a _______________
corporation (the "Subsidiary"), in favor of HFMI ACQUISITION CORPORATION, a
Delaware corporation ("Newco").
WITNESSETH:
WHEREAS, Harry's Farmers Market, Inc., a Georgia corporation company (the
"Company") has entered into a Secured Loan Agreement dated as of January 31,
1997 (the "Loan Agreement"; all capitalized terms not otherwise defined herein
shall have the meanings set forth in the Loan Agreement), with Newco pursuant to
which Newco has agreed on the terms and conditions therein, to make the Loans
(as defined in the Loan Agreement) to the Company; and
WHEREAS, the Subsidiary is a wholly-owned subsidiary of the Company;
WHEREAS, as a condition to Newco entering into the Loan Agreement, Newco
has required that the Subsidiary unconditionally guarantee all of the Company's
obligations under the Loan Agreement pursuant to that certain Subsidiary
Guaranty dated as of the date hereof made by the Subsidiary in favor of Newco
(the "Guaranty");
WHEREAS, the Subsidiary, the Company and the other Subsidiaries of the
Company, though separate legal entities, are mutually dependent on each other in
the conduct of their respective businesses as an integrated operation and have
determined it to be in their mutual best interests to obtain financing from
Newco through their collective efforts;
WHEREAS, the Subsidiary acknowledges that it will receive direct and
indirect benefits from Newco making such financial accommodations available to
the Company under the Loan Agreement;
<PAGE>
WHEREAS, as a further condition to the effectiveness of Newco's obligations
under the Loan Agreement, the Subsidiary has agreed, among other things, to
grant to Newco a security interest in and to the Collateral hereinafter
described;
NOW, THEREFORE, to secure all of the Subsidiary's obligations under the
Guaranty , including without limitation, all payment obligations thereunder (all
of the aforesaid indebtedness, obligations and liabilities of the Subsidiary
being herein called the "Secured Obligations", and all of the documents,
agreements and instruments between the Subsidiary and Newco evidencing or
securing the repayment of, or otherwise pertaining to the Secured Obligations
being herein collectively called the "Operative Documents"), for value received
and pursuant to the Loan Agreement, the Subsidiary hereby grants, assigns and
transfers to Newco a security interest in and to the following described
property whether now owned or existing or hereafter acquired or arising and
wherever located (all of which is herein collectively called the "Collateral"):
(a) all of the Subsidiary's real estate, accounts, equipment
(including, but not limited to machinery, furniture, fixtures, tools, and other
tangible property), inventory, leasehold improvements, contract rights
(including its rights as lessee under all leases of real property), general
intangibles, deposit accounts, tax refunds, chattel paper, instruments, notes,
letters of credit, documents, and documents of title;
(b) all insurance proceeds of or relating to any of the foregoing;
(c) all of the Subsidiary's books, records, and computer programs and
data relating to any of the foregoing; and
(d) all accessories and additions to, and substitutions for, and
replacements, products and proceeds of, any of the foregoing.
1. Representations, Warranties, Covenants and Agreements. The Subsidiary
further represents, warrants, covenants, and agrees with Newco as follows:
(a) Ownership of Collateral; Security Interest Priority At the time
any Collateral becomes subject to a security interest of Newco hereunder, unless
Newco shall otherwise consent, the Subsidiary shall be deemed to have
represented and warranted that (i) the Subsidiary is the lawful owner of such
Collateral and has the right and authority to subject the same to the security
interest of Newco; (ii) none of the Collateral is subject to any lien other than
Permitted Liens and there is
<PAGE>
no effective financing statement covering any of the Collateral on file in any
public office, other than those evidencing Permitted Liens. This Security
Agreement creates in favor of Newco a valid and perfected security interest in
the Collateral enforceable against the Subsidiary and all third parties and
securing the payment of the Secured Obligations and all filings and other
actions necessary or desirable to create, preserve or perfect such security
interests have been duly taken.
(b) Location of Offices, Records and Facilities. The Subsidiary's
chief executive office and chief place of business and the office where the
Subsidiary keeps its records concerning its accounts, contract rights, chattel
papers, instruments, general intangibles and other obligations arising out of or
in connection with the sale or lease of goods or the rendering of services or
otherwise ("Receivables"), and all originals of all leases and other chattel
paper which evidence Receivables, are located in the State of Georgia, County of
Fulton, at ____________________________. The Subsidiary will provide Newco with
prior written notice of any proposed change in the location of its chief
executive office and will not change the location of its chief executive office
without thirty (30) days' prior written notice to Newco. The federal tax
identification number of the Subsidiary is ___________. The name of the
Subsidiary is _____________________, and the Subsidiary operates under no other
names [except for "________________________"]. The Subsidiary shall not change
its name without thirty (30) days' prior written notice to Newco.
(c) Location of Inventory, Fixtures, Machinery and Equipment. All
Collateral consisting of inventory, fixtures, machinery or equipment is, and
will be, located in the locations set forth in Section 1(b). If the Collateral
described in this paragraph 1(c) is kept at leased locations or warehoused, the
Subsidiary will use its best efforts to obtain appropriate landlord's lien
waivers or appropriate warehousemen's notices have been sent, each satisfactory
to Newco, unless waived by Newco.
(d) Liens, Etc. The Subsidiary will keep the Collateral free at all
times from any and all liens, security interests or encumbrances other than
those described in paragraph 1(a)(ii) hereof and those consented to in writing
by Newco. Upon reasonable notice, Newco or its attorneys may at any and all
reasonable times inspect the Collateral and for such purpose may enter upon any
and all premises where the Collateral is or might be kept or located.
(e) Insurance. The Subsidiary shall keep the tangible Collateral
insured at all times against loss by theft, fire and other casualties and shall
otherwise comply with the insurance provisions set forth in Section 7.4 of the
Loan Agreement.
<PAGE>
(f) Taxes, Etc. The Subsidiary will pay promptly, and within the time
that they can be paid without interest or penalty, any taxes, assessments and
similar imposts and charges, not being contested in good faith, which are now or
hereafter may become a lien, charge or encumbrance upon any of the Collateral.
If the Subsidiary fails to pay any such taxes, assessments or other imposts or
charges in accordance with this Section, Newco shall have the option to do so
and the Subsidiary agrees to repay forthwith all amounts so expended by Newco
with interest at the default rate set forth in the Loan Agreement.
(g) Further Assurances. The Subsidiary will do all acts and things and
will execute all financing statements and writings requested by Newco to
establish, maintain and continue a perfected and valid security interest of
Newco in the Collateral, and will promptly on demand pay all reasonable costs
and expenses of filing and recording all instruments, including the costs of any
searches reasonably deemed necessary by Newco to establish and determine the
validity and the priority of Newco's security interests. A carbon, photographic
or other reproduction of this Security Agreement or any financing statement
covering the Collateral shall be sufficient as a financing statement.
(h) Maintenance of Tangible Collateral. The Subsidiary will cause the
tangible Collateral to be maintained and preserved in the same condition, repair
and working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual, and shall forthwith, or, in the case
of any loss or damage to any of the tangible Collateral as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements made in connection therewith which are
necessary or desirable to such end. The Subsidiary shall promptly furnish to
Newco a statement respecting any loss or damage to any of the tangible
Collateral.
(i) Maintenance of Intangible Collateral. The Subsidiary shall
preserve and maintain all rights of the Subsidiary and Newco in the intangible
Collateral, including without limitation the payment of all maintenance fees and
the taking of appropriate action at the Subsidiary's expense to halt the
infringement of any of the intangible Collateral (except where its failure to
maintain such Collateral could not reasonably be expected to result in a
material adverse change).
(j) Special Rights Regarding Accounts Receivable. Newco or any of its
agents may, at any time and from time to time during the continuation of a
Default in its sole discretion, verify directly with the Subsidiary's account
debtors the accounts pledged hereunder in any manner. During the continuation of
a Default, Newco or any of its agents may, at any time from time to time in its
sole discretion, notify the Subsidiary's account debtors of the security
interest of Newco in the Collateral and/or direct such account debtors that all
payments in connection with such obligations
<PAGE>
and the Collateral be made directly to Newco in Newco's name. During the
continuation of a Default, if Newco or any of its agents shall collect such
obligations directly from the Subsidiary's account debtors, Newco or any of its
agents shall have the right to resolve any disputes relating to returned goods
directly with the Subsidiary's account debtors in such manner and on such terms
as Newco or any of its agents shall deem appropriate. During the continuation
of a Default, the Subsidiary directs and authorizes any and all of its present
and future account debtors to comply with requests for information from Newco,
Newco's designees and agents and/or auditors, relating to any and all business
transactions between the Subsidiary and the Subsidiary's account debtors.
During the continuation of a Default, the Subsidiary further directs and
authorizes all of its account debtors upon receiving a notice or request sent by
Newco or Newco's agents or designees to pay directly to Newco any and all sums
of money or proceeds now or hereafter owing by the Subsidiary's account debtors
to the Subsidiary, and any such payment shall act as a discharge of any debt of
such account debtor to the Subsidiary in the same manner as if such payment had
been made directly to the Subsidiary. The Subsidiary agrees to take any and all
action as Newco may request to assist Newco in exercising the rights described
in this Section.
2. Events of Default. The occurrence of any Event of Default specified
in the Loan Agreement shall be deemed an event of default under this Security
Agreement.
3. Remedies. (a) Subject to subsection (b) below, upon the occurrence
of any such Event of Default, Newco shall have and may exercise any one or more
of the rights and remedies provided to it under this Security Agreement or any
of the other Operative Documents or provided by law, including but not limited
to all of the rights and remedies of a secured party under the Uniform
Commercial Code, and the Subsidiary hereby agrees to assemble the Collateral and
make it available to Newco at a place to be designated by Newco which is
reasonably convenient to both parties, authorizes Newco to take possession of
the Collateral with or without demand and with or without process of law and to
sell and dispose of the same at public or private sale and to apply the proceeds
of such sale to the costs and expenses thereof (including reasonable attorneys'
fees and disbursements, incurred by Newco) and then to the payment of the
indebtedness and satisfaction of other Secured Obligations. Any requirement of
reasonable notice shall be met if Newco sends such notice to the Subsidiary, by
registered or certified mail, at least ten (10) days prior to the date of sale,
disposition or other event giving rise to a required notice. Newco may be the
purchaser at any such sale. The Subsidiary expressly authorizes such sale or
sales of the Collateral in advance of and to the exclusion of any sale or sales
of or other realization upon any other collateral securing the Secured
Obligations. Newco shall have no obligation to preserve rights against prior
parties. The Subsidiary hereby waives as to Newco any right of subrogation or
marshaling of such Collateral and any other collateral for the Secured
Obligations. To this end, the Subsidiary hereby expressly agrees that any such
collateral or other security of the Subsidiary or any other party which Newco
may hold,
<PAGE>
or which may come to any of them or any of their possession, may be dealt with
in all respects and particulars as though this Security Agreement were not in
existence. The parties hereto further agree that public sale of the Collateral
by auction conducted in any county in which any Collateral is located or in
which Newco or the Subsidiary does business after advertisement of the time and
place thereof shall, among other manners of public and private sale, be deemed
to be a commercially reasonable disposition of the Collateral. The Subsidiary
shall be liable for any deficiency remaining after disposition of the
Collateral.
(b) By its acceptance hereof, Newco agrees and acknowledges that there
are different defaults for the Refinancing Loan and the Development Loans and
that it is possible for one of the loans to be in default while the other is
not. Consequently, the rights and remedies of Newco hereunder with respect to
the Collateral are limited to the amount of the obligations that are the subject
of the default.
4. Remedies Cumulative. No right or remedy conferred upon or reserved to
Newco under any Operative Document is intended to be exclusive of any other
right or remedy, and every right and remedy shall be cumulative in addition to
every other right or remedy given hereunder or now or hereafter existing under
any applicable law. Every right and remedy of Newco under any Operative
Document or under applicable law may be exercised from time to time and as is
often as may be deemed expedient by Newco. To the extent that it lawfully may,
the Subsidiary agrees that it will not at any time insist upon, plead, or in any
manner whatever claim or take any benefit or advantage of any applicable present
or future stay, extension or moratorium law, which may effect observance or
performance of any provisions of any Operative Document; nor will it claim, take
or insist upon any benefit or advantage of any present or future law providing
for the valuation or appraisal of any security for its obligations under any
Operative Document prior to any sale or sales thereof which may be made under or
by virtue of any instrument governing the same; nor will it, after any such sale
or sales, claim or exercise any right, under any applicable law to redeem any
portion of such security so sold.
5. Conduct No Waiver. No waiver of default shall be effective unless in
writing executed by Newco and waiver of any default or forbearance on the part
of Newco in enforcing any of its rights under this Security Agreement shall not
operate as a waiver of any other default or of the same default on a future
occasion or of such right.
6. Governing Law; Definitions. This Security Agreement is a contract
made under, and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with, the laws of the State of Georgia
applicable to contracts made and to be performed entirely within such State.
Terms used but not defined herein shall have the respective meaning ascribed
thereto in the Loan Agreement. Unless otherwise defined herein or in the Loan
Agreement, terms used in Article 9 of the Uniform Commercial Code in the State
of Georgia are used herein as therein
<PAGE>
defined on the date hereof. The headings of the various subdivisions hereof are
for convenience of reference only and shall in no way modify any of the terms or
provisions hereof.
7. Notices. All notices, demands, requests, consents and other
communications hereunder shall be delivered and shall be effective in the manner
specified in Section 9.4 of the Loan Agreement.
8. Rights Not Construed as Duties. Newco neither assumes nor shall it
have any duty of performance or other responsibility under any contracts in
which Newco has or obtains a security interest hereunder. If the Subsidiary
fails to perform any agreement contained herein, Newco may but is in no way
obligated to itself perform, or cause performance of, such agreement, and the
expenses of Newco incurred in connection therewith shall be payable by the
Subsidiary under paragraph 11.
9. Amendments. None of the terms and provisions of this Security
Agreement may be modified or amended in any way except by an instrument in
writing executed by each of the parties hereto.
10. Severability. If any one or more provisions of this Security
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected, impaired or prejudiced thereby.
11. Expenses. The Subsidiary agrees to indemnify Newco from and against
any and all claims, losses and liabilities growing out of or resulting from this
Security Agreement (including, without limitation, enforcement of this Security
Agreement), except claims, losses or liabilities resulting from Newco's gross
negligence or willful misconduct.
12. Successors and Assigns; Termination. This Security Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until full payment and performance of the Secured
Obligations (b) be binding upon the Subsidiary, its successors and assigns and
(c) inure, together with the rights and remedies of Newco hereunder, to the
benefit of Newco and its successors, transferees and assigns as permitted under
Section 11.2 of the Loan Agreement. Upon the full payment and performance of
the Secured Obligations the
<PAGE>
security interests granted hereby shall terminate and all rights to the
Collateral shall revert to the Subsidiary. Upon any such termination, Newco
will, at the Subsidiary's expense, execute and deliver to the Subsidiary such
documents as the Subsidiary shall reasonably request to evidence such
termination.
13. Subordination. THIS AGREEMENT, THE LIENS AND SECURITY INTERESTS
GRANTED HEREBY AND THE RIGHTS AND REMEDIES OF NEWCO HEREUNDER HAVE BEEN
SUBORDINATED PURSUANT TO, AND ARE SUBJECT TO THE TERMS AND CONDITIONS OF, THAT
CERTAIN INTERCREDITOR AGREEMENT DATED AS OF THE DATE HEREOF BETWEEN NEWCO AND
THE AGENT, AS SUCH AGREEMENT IS AMENDED FROM TIME TO TIME WITH THE APPROVAL OF
NEWCO.
14. Submission to Jurisdiction. The Subsidiary agrees that any legal
action or proceeding with respect to this Security Agreement or the transactions
contemplated hereby may be brought in any court of the State of Georgia, or in
any court of the United States of America sitting in Georgia, and the Subsidiary
hereby submits to and accepts generally and unconditionally the jurisdiction of
those courts with respect to their respective person and property, and
irrevocably consents to the service of process in connection with any such
action or proceeding by personal delivery to the Subsidiary or by the mailing
thereof by registered or certified mail, postage prepaid addressed to the
Subsidiary at the address for notices as provided in Section 7 hereof. Nothing
in this paragraph shall affect the right of Newco to serve process in any other
manner permitted by law or limit the right of Newco to bring any such action or
proceeding against the Subsidiary or property in the courts of any other
jurisdiction. The Subsidiary hereby irrevocably waives any objection to the
laying of venue of any such suit or proceeding in the above described courts.
15. Waiver of Jury Trial. No party to this instrument, which includes any
assignee, successor, heir or personal representative of a party, shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. If the subject matter
of any such litigation is one in which the waiver of a jury trial is prohibited,
if at all, under the controlling law of the applicable jurisdiction, by
constitutional or statutory provision, no party hereto will present as a defense
or counterclaim in such litigation any claim which would reduce or offset any
amount or right claimed under the provisions of this Agreement. No party will
seek to consolidate any such action, in which a jury has been waived, with any
other action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 15 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER
<PAGE>
PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR NEWCO IN ENTERING INTO
THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the Subsidiary has caused this Security Agreement to be
duly executed as of the day and year first set forth above.
[NAME OF SUBSIDIARY]
By:
-----------------------------------------
Its:
-----------------------------------------
<PAGE>
EXHIBIT 10.3
============================
ACQUISITION AGREEMENT
between
HARRY'S FARMERS MARKET, INC.
AND
HFMI ACQUISITION CORPORATION
Dated January 31, 1997
============================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I
CERTAIN DEFINITIONS................................................. 2
Section 1.1. Definitions....................................... 2
ARTICLE II
SALE OF WORLDWIDE ASSETS............................................. 7
Section 2.1. Sale of Worldwide Assets to Newco.................. 7
Section 2.2. Consideration...................................... 7
Section 2.3. Trust A............................................ 10
Section 2.4. Transfer Treatment................................. 10
ARTICLE III
CLOSINGS AND DELIVERIES.............................................. 10
Section 3.1. Closing............................................ 10
Section 3.2. Actions by HFMI at the Closing..................... 10
Section 3.3. Actions by Newco at the Closing.................... 12
ARTICLE IV
RELATED MATTERS...................................................... 13
Section 4.1. Related Agreements................................. 13
Section 4.2. Actions by HFMI prior to Closing................... 13
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HMFI............................... 14
Section 5A.1. Corporate Organization............ 14
Section 5A.2. Authority; Authorization and
Validity of Agreement............ 14
Section 5A.3. No Conflict or Violation.......... 15
Section 5A.4. Consents and Approvals............ 16
Section 5A.5. No Material Adverse Change........ 16
Section 5A.6. Intellectual Property............. 16
Section 5A.7. Compliance with Law............... 18
Section 5A.8. Litigation........................ 18
Section 5A.9. Investment Purpose; Legend........ 19
Section 5A.10. Disclosure........................ 19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 5A.11. Brokers........................... 19
Section 5A.12. Prevention or Delay of the
Contemplated Transactions........ 20
Section 5B.1. Authorization..................... 20
Section 5B.2. No Violation...................... 20
Section 5B.3. Litigation........................ 21
Section 5B.4. Consents.......................... 21
Section 5B.5. Title............................. 21
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NEWCO.............................. 22
Section 6.1. Corporate Organization............................. 22
Section 6.2. Authority; Authorization and Validity of
Agreements........................................ 22
Section 6.3. No Conflict or Violation........................... 23
Section 6.4. Consent and Approvals.............................. 23
Section 6.5. Capital Stock and Related Matters.................. 24
Section 6.6. Authorization and Validity of the Shares of
Newco Common Stock................................ 24
Section 6.7. Operations of Newco................................ 25
Section 6.8. Disclosure......................................... 25
Section 6.9. Brokers............................................ 25
Section 6.10. Prevention or Delay of the Contemplated
Transactions...................................... 25
ARTICLE VII
OTHER AGREEMENTS AND COVENANTS OF THE PARTIES........................ 25
Section 7.1. Certain Actions.................................... 25
Section 7.2. Reasonable Best Efforts............................ 26
Section 7.3. Further Assurances................................. 27
Section 7.4. Public Announcements............................... 27
Section 7.5. Notification of Certain Matters.................... 27
Section 7.6. Obligations of Newco............................... 28
Section 7.7. HFMI Board Observer................................ 28
Section 7.8. Acquisition Agreement.............................. 30
Section 7.9. Utilization of Intellectual Property............... 30
Section 7.10. HFMI Refinancing................................... 30
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF NEWCO AND HFMI...................... 31
Section 8.1. Mutual Conditions.................................. 31
Section 8.2. Conditions to the Obligations of Newco............. 32
Section 8.3. Conditions to the Obligations of HFMI.............. 33
Section 8.4. Certificate of Newco............................... 34
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE IX
TERMINATION; FEES AND EXPENSES....................................... 34
Section 9.1. Termination........................................ 34
ARTICLE X
SURVIVAL AND INDEMNIFICATION......................................... 37
Section 10.1. Survival of Representations and Agreements......... 37
Section 10.2. Statements as Representations...................... 37
Section 10.3. Indemnification by HFMI............................ 37
Section 10.4. Indemnification by Newco........................... 39
Section 10.5. Conditions of Indemnification...................... 39
Section 10.6. Limitation on Indemnification...................... 41
ARTICLE XI
MISCELLANEOUS 42
Section 11.1. Fees and Expenses.................................. 42
Section 11.2. Headings........................................... 42
Section 11.3. Notices............................................ 42
Section 11.4. Assignment......................................... 43
Section 11.5. Complete Agreement................................. 43
Section 11.6. Severability....................................... 44
Section 11.7. Amendments; Waivers................................ 44
Section 11.8. Parties in Interest................................ 44
Section 11.9. Counterparts....................................... 44
Section 11.10. Specific Performance............................... 45
Section 11.11. Interpretation..................................... 45
Section 11.12. Brokers, Finders................................... 45
Section 11.13. Governing Law...................................... 46
SECTION 11.14. Jurisdiction and Waiver............................ 46
</TABLE>
iii
<PAGE>
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated January 31, 1997 (the "Agreement"), by and
among HARRY'S FARMERS MARKET, INC., a Georgia corporation ("HFMI"),and HFMI
ACQUISITION CORPORATION, a Delaware corporation ("Newco").
R E C I T A L S
(a) Pursuant to a Trust Agreement dated as of the date hereof (the "Trust
Agreement") between HFMI and Wilmington Trust Company, a Delaware banking
corporation, as Trustee, (the "Trustee") HFMI has established the HFMI Trust
pursuant to the Delaware Business Trust Act, as amended.
(b) Pursuant to the Transfer Agreement dated as of the date hereof (the
"Transfer Agreement") between and among HFMI, the Trust and Newco, and the
Assignment of Intellectual Property, dated as of the date hereof and attached as
Exhibit A to the Transfer Agreement (the "Assignment of Intellectual Property"),
HFMI will transfer, assign and contribute to the Trust on the date hereof, and
from time to time hereafter, all of its right, title and interest worldwide in
and to the Intellectual Property (as defined in the Trust Agreement).
(c) Pursuant to the Trust Agreement, the HFMI Trust shall issue to HFMI
on the date hereof the Worldwide Class Owner Certificate (as defined in the
Trust Agreement) representing the Worldwide Class Intellectual Property (as
defined in the Trust Agreement) and the Georgia Class Owner Certificate (as
defined in the Trust
<PAGE>
2
Agreement) representing the Georgia Class Intellectual Property (as defined in
the Trust Agreement), together with Newco License and the HFMI License.
(d) HFMI has agreed to transfer to Newco the Worldwide Class Owner
Certificate, together with the Newco License.
(e) Pursuant to an Administration and Servicing Agreement dated as of the
date hereof (the "Administration and Servicing Agreement") between and among the
Trust, Newco and HFMI, Newco has agreed to perform certain services for and on
behalf of the Trust with respect to certain matters involving the Intellectual
Property.
(f) Newco and HFMI wish to provide for certain other agreements which are
related to the foregoing transactions.
NOW, THEREFORE, in consideration of the foregoing and the respective
agreements of the parties contained herein, intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
Section 1.1. Definitions. As used in this Agreement, each of the
following terms shall have the following meaning:
"Administration and Servicing Agreement" shall have the meaning set forth
in recital (e).
<PAGE>
3
"Affiliate" shall mean, with respect to a specified person, a person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by or is under common control with, the person specified.
"Assignment of Intellectual Property " shall have the meaning set forth
in recital (b) of this Agreement.
"Business" shall mean all of the business activities of HFMI and its
Affiliates.
"Cash Consideration" shall have the meaning set forth in Section 2.2 of
this Agreement.
"Closing" shall mean the closing of the transactions contemplated by
Article III hereof.
"Closing Date" shall mean the date referred to in Section 3.1 hereof.
"Code" has the meaning given in Section 2.4.
"Consideration" shall have the meaning assigned to such term in Section
2.2.
"Disclosure Schedule" shall mean the document delivered by HFMI to Newco
simultaneously with the execution of this Agreement containing the information
required to be included therein pursuant to this Agreement.
"Georgia Class Owner Certificate" shall have the meaning assigned to such
term in the Trust Agreement.
"Georgia Class Interests" shall have the meaning assigned to such term in
the Trust Agreement.
<PAGE>
4
"Georgia Class Intellectual Property" shall have the meaning assigned
such term in the Trust Agreement.
"Governmental Body" shall mean any agency, division or subdivision of the
government of the United States or of any state, city, territory, municipality,
county or town thereof, or of any foreign jurisdiction.
"HFMI License" shall have the meaning assigned to such term in the Trust
Agreement.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Intellectual Property" shall have the meaning assigned to such term in
the Trust Agreement.
"Lien" shall mean any mortgage, pledge, security interest, lien
(statutory or other) or conditional sale agreement or other encumbrance.
"Material Adverse Effect" has the meaning set forth in Section 5A.6 of
this Agreement.
"Newco Common Stock" shall mean shares of Common Stock, par value $0.01
share, of Newco.
"Newco License" shall have the meaning assigned to such term in the Trust
Agreement.
"Operating Materials" shall mean true and complete copies of all of the
documents, computerized records and other materials of or relating to the
Intellectual Property which are necessary for Newco (or its Affiliates) to make
worldwide use of
<PAGE>
5
the Worldwide Class Intellectual Property in the operation of a business
substantially similar to the Business, including, without limitation, sales,
advertising, marketing and promotional literature and other sales-related
material, sourcing, production and manufacturing documents and records, supplier
lists, recipes, specifications, bills of material and prototypes.
"Owner Certificates" shall have the meaning assigned to such term in the
Trust Agreement.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
"Related Agreements" shall mean the Trust Agreement, the Transfer
Agreement, the Administration and Servicing Agreement, the Newco License and the
HFMI License.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share Consideration" shall have the meaning set forth in Section 2.2.
"Taxes" shall mean all taxes, charges, fees, levies, imposts, duties or
other assessments of any nature whatsoever imposed by or payable to any federal,
state, local, or foreign taxing authority, including, without limitation, any
gross income, net income, franchise, profits, gross receipts, estimated, ad
valorem, value added, sales, use, service, customs, real or personal property,
capital stock, license, payroll, withholding, employment, social security,
workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premium,
<PAGE>
6
windfall profits, occupancy, transfer and gains taxes, together with all
interest, penalties and additions imposed with respect to such amounts.
"Transaction Agreement" shall have the meaning set forth in Section 6.7
of this Agreement.
"Transfer Agreement" shall have the meaning set forth in recital (b) of
this Agreement.
"Trust" shall mean the trust established under the Trust Agreement
pursuant to the Delaware Business Trust Act.
"Trust Agreement" shall have the meaning set forth in recital (a) of this
Agreement.
"Trustee" shall mean Wilmington Trust Company, as trustee under the
Trust.
"Worldwide Assets" has the meaning set forth in Section 2.1 of this
Agreement.
"Worldwide Class Owner Certificate" shall have the meaning assigned to
such term in the Trust Agreement.
"Worldwide Class Intellectual Property" shall have the meaning assigned
to such term in the Trust Agreement.
"Worldwide Class Interests" shall have the meaning assigned to such term
in the Trust Agreement.
"Worldwide Series Estate" shall have the meaning assigned to such term in
the Trust Agreement.
<PAGE>
7
ARTICLE II
SALE OF WORLDWIDE ASSETS
------------------------
Section 2.1. Sale of Worldwide Assets to Newco. Subject to the terms and
upon the conditions of this Agreement and in reliance upon the representations,
warranties and agreements of Newco contained herein, at the Closing, following
the execution and delivery of the Related Agreements, as provided in Section
4.1, and the completion by HFMI of the actions to be taken by HFMI under Section
4.2, HFMI will cause to be issued, sold and delivered to Newco, and Newco will
acquire all right, title and interest in and to the Worldwide Class Owner
Certificate, representing the Worldwide Series Estate, the Worldwide Class
Interests and the Worldwide Class Intellectual Property (the "Worldwide
Assets"), free and clear of any Lien.
Section 2.2. Consideration. Subject to the terms and upon the conditions
of this Agreement, in reliance on the representations, warranties and agreements
of HFMI contained herein, and as the full purchase price and consideration for
the Worldwide Assets, Newco (i) will pay to HFMI cash consideration of One
Million Five Hundred Thousand dollars (the "Cash Considerations") as provided in
clause (a) below, and (ii) will issue to HFMI that number of shares of Newco
Common Stock (the "Share Consideration" and, together with the Cash
Consideration, the "Consideration") as provided in clauses (b) and (c) below.
<PAGE>
8
(a) At the Closing, Newco will pay the Cash Consideration to HFMI by,
either wire transfer or bank check at the direction of HFMI, made payable to
HFMI or at HFMI's order.
(b) At the Closing, Newco will issue to HFMI 712.3746 shares of Newco
Common Stock, which will as of the Closing constitute two and one-half percent
(2-1/2%) of the Newco Common Stock on a fully diluted basis, taking into account
(i) all shares of outstanding Newco Common Stock and (ii) all shares of Newco
Common Stock issuable upon the exchange or conversion of outstanding debt, stock
or other securities of Newco ("Convertible Instruments") and (iii) all shares of
Newco Common Stock issuable upon the exercise of outstanding options (other than
unvested employee options), warrants or similar rights to acquire Newco Common
Stock ("Options") (a "Fully Diluted Basis").
(c) Upon the issuance by Newco, after the Closing, of any shares of Newco
Common Stock (other than pursuant to Convertible Instruments or Options
outstanding as of the Closing) or any Convertible Instrument or Option, Newco
will issue to HFMI an additional number of shares of Newco Common Stock such
that the aggregate number of shares of Newco Common Stock issued to HFMI under
clause (a) and (b) of this Section 2.2 (including such additional shares) will
constitute two and one-half percent (2-1/2%) of the Newco Common Stock on a
Fully Diluted Basis; provided, however, that the obligation of Newco to issue
such additional shares of Newco Common Stock shall not apply to (i) the first
issuance (the "Threshold Issuance") of Newco Common Stock for cash in an amount
in excess of $1,000,000 at
<PAGE>
9
Transaction Price (as defined below) per share of Newco Common Stock which,
when multiplied by the number of shares of Newco Common Stock immediately prior
to the Threshold Issuance on a Fully Diluted Basis, shall equal or exceed
$100,000,000, and (ii) any issuance of Newco Common Stock, Convertible
Instrument or Option made on or after the date of the Threshold Issuance. The
"Transaction Price" of an issuance of Newco Common Stock shall mean the cash
price per share of Newco Common Stock received by Newco for such issuance;
provided that, if persons other than affiliates of Newco are not purchasing at
least $1,000,000 of Newco Common Stock for cash, the Transaction Price shall be
(i) the cash price per share of Newco Common Stock received by Newco for such
issuance only if such price shall equal or exceed the fair market value of the
Newco Common Stock as reflected in a contemporaneous valuation analysis provided
to HFMI by Newco and HFMI shall not have objected to such valuation analysis
within ten business days after its receipt of such analysis or (ii) the fair
market value of the Newco Common Stock as determined by a nationally recognized,
independent valuation firm (which shall include professionals employed by a "Big
6" accounting firm) retained by Newco for the purpose of performing such
valuation which valuation shall be conclusive absent manifest error.
(d) Upon the granting by Newco to either Saad J. Nadhir or Scott A. Beck
of any antidilution rights with respect to the issuance of additional Newco
Common Stock, Newco will grant to HFMI comparable antidilution rights.
(e) At the Closing, Newco will enter into a registration rights agreement
with HFMI in the form set forth as Exhibit A.
<PAGE>
10
Section 2.3. Trust Agreement Counterpart. Subject to the terms and upon
the conditions of this Agreement and in reliance upon the representations,
warranties and agreements of HFMI contained herein, at the Closing, Newco shall
execute and deliver to the Trustee (and HFMI shall acknowledge) a counterpart of
the Trust Agreement relating to Newco's ownership upon and following the
Closing, of the Worldwide Class Owner Certificate and the rights thereunder.
Section 2.4. Transfer Treatment. It is intended that the transfer of the
Worldwide Assets to Newco in exchange for the Consideration be treated as a tax-
free exchange under Section 351 of the U.S. Internal Revenue Code of 1986, as
amended (the "Code") or any similar provision as may apply for state and local
purposes. HFMI and Newco hereby agree not to take a position inconsistent with
such treatment under Section 351, including any position on any tax return or in
any tax examination.
ARTICLE III
CLOSINGS AND DELIVERIES
-----------------------
Section 3.1. Closing. The closing of the transaction contemplated by this
Agreement (the "Closing") shall take place on January 31, 1997, at 10:00 a.m.
(Atlanta time), at the offices of Sutherland, Asbill & Brennan, L.L.P., 999
Peachtree Street, N.E., Atlanta, Georgia 30309-3996, unless another time or
place is agreed to by the parties.
Section 3.2. Actions by HFMI at the Closing. At the Closing, HFMI is (i)
entering into the Related Agreements to which it is a party and has not
previously
<PAGE>
11
entered into, executed and delivered and (ii) delivering or causing to be
delivered to Newco, unless previously delivered, the following:
(a) the Worldwide Class Owner Certificate;
(b) the Newco License, and any and all instruments or documents
required under applicable law to be executed by HFMI transferring all of HFMI's
right, title and interest in and to the Newco License to Newco;
(c) certified copies of resolutions duly adopted by HFMI's Board of
Directors, authorizing and approving the execution, delivery and performance of
this Agreement, the Related Agreements to which HFMI is a party and each other
agreement or instrument required to be executed and delivered by HFMI pursuant
to this Agreement;
(d) the opinion of outside counsel to HFMI, dated the Closing Date,
in the form set forth on Schedule I hereto;
(e) certificates, in form and substance satisfactory to counsel to
Newco, from the Secretary of State of the State of Georgia, evidencing the
existence of HFMI and its good standing as a corporation organized under the
laws of the State of Georgia;
(f) all certificates of the Chief Executive Officer of HFMI,
executed on behalf of HFMI, identified in Section 8.2; and
(g) all other documents, instruments and other items reasonably
requested by Newco to be delivered by HFMI at the Closing in connection with the
transactions contemplated hereby.
<PAGE>
12
Furthermore, HFMI shall deliver to Newco, at the Closing or at such
other reasonable times and places as Newco shall request, any or all of the
Operating Materials.
Section 3.3. Actions by Newco at the Closing. At the Closing, Newco is
(i) entering into the Related Agreements to which it is a party and has not
previously entered into, executed and delivered and (ii) delivering or causing
to be delivered to HFMI, unless previously delivered, the following:
(a) the Cash Consideration by wire transfer or bank check and the
Share Consideration, by delivery to HFMI of a stock certificate or stock
certificates for the number of shares of Newco Common Stock representing the
Consideration, registered in the name of HFMI;
(b) certified copies of resolutions duly adopted by the Board of
Directors of Newco authorizing and approving the execution, delivery and
performance of this Agreement, the Related Agreements to which Newco is a party
and each other agreement required to be executed and delivered by Newco pursuant
to this Agreement;
(c) certificates, in form and substance satisfactory to counsel to
HFMI, from the Secretary of State of the State of Delaware, evidencing the
existence of Newco and its good standing as a corporation organized under the
laws of the State of Delaware;
(d) all certificates of the Chief Executive Officer of Newco,
executed on behalf of Newco, identified in Section 8.3; and
<PAGE>
13
(e) all other documents, instruments and other items reasonably
requested by HFMI to be delivered by Newco at the Closing in connection with the
transactions contemplated hereby.
ARTICLE IV
RELATED MATTERS
---------------
Section 4.1. Related Agreements. At the Closing, the parties hereto
shall, and the other persons indicated below are expected to, enter into the
following agreements to the extent they have not previously done so, as provided
below:
(a) HFMI and the Trustee are entering into the Trust Agreement and
Newco is executing a counterpart thereof;
(b) HFMI, Newco and the Trust are entering into the Transfer
Agreement;
(c) HFMI, the Trust and Newco are entering into the Administration
and Servicing Agreement;
(d) the Trust and Newco are entering into the Newco License; and
(e) the Trust and HFMI are entering into the HFMI License.
Section 4.2. Actions by HFMI prior to Closing. In order to effectuate the
transactions contemplated by this Agreement and the Related Agreements, HFMI
agrees that at or prior to the Closing, it shall (i) enter into the Trust
Agreement and establish the Trust and enter into the Transfer Agreement, whereby
it will assign the
<PAGE>
14
Intellectual Property to the Trust; (ii) cause the Trust to issue to it, the
Worldwide Class Owner Certificate, representing the Worldwide Class Interests
and the Georgia Class Owner Certificate representing the Georgia Class
Interests; (iii) cause the Trust to grant to it the Newco License and the HFMI
License; and (iv) file, or cooperate with Newco, as Servicer, to file (at or
immediately following the Closing) assignments and new applications, if any, in
the name of the Trust in the United States Patent and Trademark Office for any
and all trademarks included as part of the Intellectual Property and any state,
local, foreign or other Federal Filings required to be made in relation thereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HMFI
--------------------------------------
A. HFMI hereby represents and warrants to Newco, with respect to HFMI, as
follows:
Section 5A.1. Corporate Organization. HFMI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted. True,
accurate and complete copies of the Articles of Incorporation and Bylaws of HFMI
as in effect on the date hereof, including all amendments thereto, have
heretofore been delivered or made available to Newco.
Section 5A.2. Authority; Authorization and Validity of Agreement. HFMI
has all requisite corporate power and authority to enter into this Agreement and
<PAGE>
15
the Related Agreements to which it is a party and carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
Related Agreements to which it is a party and the performance of HFMI's
obligations here under and thereunder have been duly authorized by all necessary
corporate action by the Board of Directors and shareholders of HFMI, and no
other corporate proceedings on the part of HFMI are necessary to authorize such
execution, delivery and performance. This Agreement has been duly executed by
HFMI and each of the Related Agreements to which it is a party have been duly
executed by HFMI and this Agreement constitutes, and each of the Related
Agreements to which it is a party constitute, its valid and binding obligation,
enforceable against it in accordance with their respective terms.
Section 5A.3. No Conflict or Violation. The execution, delivery and
performance by HFMI of this Agreement and the Related Agreements to which it is
a party do not and will not (i) violate or conflict with any provision of the
Articles of Incorporation or By-laws of HFMI, (ii) violate any law, statute,
rule or regulation, or any order, writ, judgment or decree of any court or other
Governmental Body, or (iii) violate or result in a breach of or constitute (with
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation, or acceleration), or result in the
creation of any Lien upon any of the Worldwide Assets, under any material
contract, lease, loan agreement, mortgage, security agreement, trust indenture
or other agreement or instrument or obligation to which HFMI or any of its
Affiliates is a party or by which any of them or their respective assets may be
bound.
<PAGE>
16
Section 5A.4. Consents and Approvals. Except for such filings, permits,
authorizations, consents and approvals as may be required under the HSR Act and
federal and state securities laws and by the U.S. Patent and Trademark Office
and foreign Governmental Bodies having jurisdiction over intangible property,
the execution, delivery and performance of this Agreement and the Related
Agreements to which it is or will be a party do not require, on the part of
HFMI, the consent or approval of, or filing with, any Governmental Body or any
third party.
Section 5A.5. No Material Adverse Change. During the period from January
31, 1996 to the date hereof, there has not been any change, event or effect in,
on or relating to the business, assets (including, without limitation, the
Intellectual Property), condition (financial or otherwise), prospects or results
of operations of HFMI which could not reasonably be expected to be materially
adverse (a "Material Adverse Effect") to the Intellectual Property or HFMI's (or
the Trust's) ownership thereof.
Section 5A.6. Intellectual Property.
(a) Exhibit D to the Trust Agreement sets forth a complete and
accurate list of all the intangible property owned by HFMI (or the Trust) and
required in order for HFMI and its Affiliates to operate the Business as
currently contemplated to be conducted. The Worldwide Intellectual Property
will, at Closing, constitute all of the intangible property necessary for Newco
to operate a business substantially similar to the Business, in the manner the
business has been, or is contemplated by HFMI to be, conducted. Exhibit D to the
Trust Agreement also sets
<PAGE>
17
forth, for each registered trademark, trademark registration and application,
copyright and copyright registration and application of HFMI with respect
thereto; the country of such registration or application; the registration or
application number; the registration or filing date; and the class of goods
covered by such registration or application as it relates to trademark filings.
Except as set forth in Section 5A.6 of the Disclosure Schedule, HFMI owns the
Intellectual Property free and clear of any Liens and free and clear of any
licenses and sublicenses to any third parties. All trademark and service mark
registrations and applications, and all patents, patent applications, copyright
registrations and applications included in the Intellectual Property are
recorded in the name of HFMI to the extent they have been recorded (except to
the extent they have been recorded in the name of the Trust, as contemplated
hereby).
(b) All of the Intellectual Property is valid, subsisting in full
force and effect, and enforceable and no registration or application therefor
has lapsed, expired, or been abandoned or canceled or is the subject of any
pending or threatened opposition or cancellation proceeding before any
trademark, copyright or patent office or other registration authority over
intangible property in any jurisdiction. HFMI is not aware of any claims pending
before any Governmental Body or threatened by any third party anywhere in the
world challenging (i) the registrability, validity or enforceability of the
Intellectual Property, (ii) HFMI's ownership rights therein or (iii) HFMI's use
of the material Intellectual Property on the grounds that such use violates the
legitimate rights of a third party. All United States trademarks for which there
is a registration or application for registration have been in continuous use by
HFMI from the date of first
<PAGE>
18
use alleged in any registration or application for registration, and such use
continues to the date hereof and inures to the benefit of HFMI. To the best of
HFMI's knowledge neither HFMI's use of the Intellectual Property nor HFMI's
conduct of the Business, infringes upon the legitimate proprietary rights of any
third party and there are no material infringement actions being taken or
contemplated to be taken against third parties for infringement of the
Intellectual Property.
Neither HFMI nor any of its Affiliates has entered into any consents,
consent decrees, indemnifications, forbearances to sue, or settlement agreements
with any third party relating to the Intellectual Property adversely affecting
to any degree or restricting to any degree any rights of HFMI (and the Trust and
Newco hereunder) with respect to the Intellectual Property.
Section 5A.7. Compliance with Law. HFMI and each of its Affiliates has
complied with all laws, regulations, orders or other legal requirements, and is
not in default with respect to any material order, writ, judgment, award,
injunction or decree of any national, state or local court or other Governmental
Body or regulatory authority or arbitrator, domestic or foreign, applicable to
the Business or any of the assets, properties or operations with respect
thereto, with which failure to comply or default could reasonable be expected to
adversely affect the Intellectual Property or HFMI's (or the Trust's) ownership
thereof.
Section 5A.8. Litigation. Section 5A.8 of the Disclosure Schedule sets
forth all claims, actions, suits, proceedings, or investigations pending or, to
HFMI's knowledge, threatened, before any arbitration or other tribunal, or any
federal or state
<PAGE>
19
court or Governmental Body brought against HFMI or any of its Affiliates
relating to the Intellectual Property. None of the matters listed in Section
5A.8 of the Disclosure Schedule could reasonably be expected to have a Material
Adverse Effect on the Intellectual Property or HFMI's (or the Trust's) ownership
thereof.
Section 5A.9. Investment Purpose; Legend. HFMI will acquire the shares of
Newco Common Stock to be issued by Newco pursuant to the terms hereof for its
own account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof. HFMI agrees that all certificates
representing the shares of Newco Common Stock shall bear a legend to the effect
that such securities have not been registered under the Securities Act or the
securities laws of any state and neither such securities nor any interest
therein may be sold or otherwise transferred in the absence of such registration
or an exemption thereunder.
Section 5A.10. Disclosure. Except as set forth in Section 5A.10 of the
Disclosure Schedule, to the best of HFMI's knowledge, the information listed on
the Disclosure Schedule or by HFMI on any schedule, exhibit or annex to this
Agreement or any Related Agreement is or was not inaccurate in any material
respect at the time it was made in light of the circumstances under which it was
made. HFMI has not knowingly failed to disclose to Newco any facts or
circumstances which would reasonably be expected to have a Material Adverse
Effect on the Intellectual Property or HFMI's, the Trust's or Newco's ownership
thereof.
Section 5A.11. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the
<PAGE>
20
transactions contemplated hereby or by the Related Agreements based upon
arrangements made by or on behalf of HFMI.
Section 5A.12. Prevention or Delay of the Contemplated Transactions. No
change, event, effect or circumstance has occurred or exists relating to HFMI
that could reasonably be expected to prevent or materially delay the
transactions contemplated by this Agreement or the performance by HFMI of its
obligations under this Agreement.
B. HFMI represents and warrants to Newco, with respect to the Trust, as
follows:
Section 5B.1. Authorization. As of the Closing Date, the Trust Agreement
shall have been duly authorized by HFMI and shall constitute a valid and binding
agreement of HFMI. The Owners Certificates representing the Worldwide Class
Interests and the Georgia Class Interests, and the Newco License and HFMI
License, and shall have been duly authorized, duly and validly executed in
accordance with the Trust Agreement and delivered and granted to HFMI and shall
have been validly issued and outstanding and entitled to the benefits of the
Trust Agreement.
Section 5B.2. No Violation. (a) As of the Closing Date, the Trust shall
not be in violation of its organizational documents or in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any agreement or instrument to which it is a party or by which it
is bound, which violation or default could affect interests held by (i) the
Trust in the Intellectual Property, or
<PAGE>
21
(ii) HFMI in the Worldwide Class Interests, the Georgia Class Interests, the
Newco License or the HFMI License.
(b) The authorization, execution, delivery and performance of the
Trust Agreement and the consummation of the transactions contemplated thereby
will not result in a breach or violation of any of the terms and provisions of
the Trust Agreement, or constitute a default under, any statute, order, rule or
regulation of any Governmental Body having jurisdiction over the Trust or any
agreement, indenture or instrument to which the Trust is a party or by which the
Trust is bound.
Section 5B.3. Litigation. As of the Closing Date, there shall be no
action, suit or proceeding before or by any court or Governmental Body pending
or, to the knowledge of HFMI, threatened, against the Trust.
Section 5B.4. Consents. Except for filings in the U.S. Patent and
Trademark Office and filings in the appropriate trademark offices in state
and/or foreign jurisdictions, no consent, approval, authorization or order of,
or filing with, any court or Governmental Body or any third party is required to
be obtained or made by the Trust in connection with the consummation of the
transactions contemplated by this Agreement, including the issuance of the Owner
Certificates or the granting of the Newco License or the HFMI License.
Section 5B.5. Title. As of the Closing Date, HFMI shall have good, valid
and marketable title to the Owner Certificates representing the Worldwide Class
Interests and the Georgia Class Interests, free and clear of any Lien, and all
rights as licensee in and to the Newco License and the HFMI License.
<PAGE>
22
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco hereby represents and warrants to HFMI as follows:
Section 6.1. Corporate Organization. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted. True,
accurate and complete copies of the Restated Certificate of Incorporation and
Bylaws of Newco as in effect on the date hereof, including all amendments
thereto, have heretofore been delivered to HFMI.
Section 6.2. Authority; Authorization and Validity of Agreements. Newco
has all requisite corporate power and authority to enter into this Agreement and
the Related Agreements to which it is a party, to issue and deliver the shares
of Newco Common Stock constituting the Share Consideration and to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Related Agreements to which it is a party and the issuance and
delivery of the shares of Newco Common Stock constituting the Share
Consideration and the performance of Newco's obligations hereunder and
thereunder have been duly authorized by all necessary corporate action by the
Board of Directors of Newco, and no other corporate proceedings on the part of
Newco are necessary to authorize such execution, issuance, delivery and
performance. This Agreement has been, and the Related Agreements to
<PAGE>
23
which Newco is a party have been, duly executed by Newco and this Agreement
constitutes, and the Related Agreements to which it is a party, constitute its
valid and binding obligation, enforceable against it in accordance with their
respective terms.
Section 6.3. No Conflict or Violation. The execution, delivery and
performance by Newco of this Agreement, and the Related Agreements to which it
is a party, and the issuance and delivery of the shares of Newco Common Stock do
not and will not (i) violate or conflict with any provision of the Restated
Certificate of Incorporation or Bylaws of Newco, (ii) violate any law, statute,
rule or regulation, or any order, writ, judgment or decree of any court or other
Governmental Body, or (iii) violate or result in a breach of or constitute (with
due notice or lapse of time or both), except to the extent a waiver or consent
has been obtained, a default (or give rise to any right of termination,
amendment, cancellation, or acceleration), or result in the creation of any
Lien, upon any property of Newco, or under any contract, lease, loan agreement,
mortgage, security agreement, trust indenture or other agreement or instrument
to which Newco is a party or by which it or its properties may be bound.
Section 6.4. Consent and Approvals. Except for such filings, permits,
authorizations, consents and approvals as may be required under the HSR Act and
federal and state securities laws and with the U.S. Patent and Trademark Office
or state or foreign Governmental Bodies having jurisdiction over intangible
property, the execution, delivery and performance of this Agreement by Newco and
the Related Agreements to which it is a party, and the issuance and delivery of
the shares of Newco
<PAGE>
24
Common Stock do not require the consent or approval of, or filing with, any
Governmental Body or any third party.
Section 6.5. Capital Stock and Related Matters. The authorized capital
stock of Newco consists of 100,000 shares of Newco Common Stock, of which
(giving effect to the issuance of the Newco Common Stock contemplated hereby)
9,379.0416 shares are issued and outstanding on the date hereof, and 50,000
shares of Newco Preferred Stock, of which no shares were issued and outstanding
as of the date hereof. All of the outstanding shares of capital stock of Newco
have been duly authorized and validly issued and are fully paid and
nonaccessible. Newco has entered into a secured loan agreement with Parent (the
"Loan Agreement"), pursuant to which Parent has the right to acquire, upon
conversion of its loan or exercise of the related option, up to 14,782.6087
shares of Newco Common Stock, and Newco has entered into subscription agreements
with Scott A. Beck and Saad J. Nadhir pursuant to which each of them has agreed
to purchase 2,166.6665 shares of Newco Common Stock, in addition to shares of
Newco Common Stock owned by them as of the date hereof (the "Subscription
Agreements"). Newco has previously delivered to HFMI true and correct copies of
the Loan Agreement and the Subscription Agreements.
Section 6.6. Authorization and Validity of the Shares of Newco Common
Stock to be Issued. As of the Closing Date, the shares of Newco Common Stock to
be issued at the Closing shall have been duly authorized by all necessary
corporate action on the part of Newco. When issued pursuant to the terms of the
<PAGE>
25
Agreement, the shares of Newco Common Stock will be validly issued and
outstanding, fully paid and nonassessable.
Section 6.7. Operations of Newco. Except for the transactions provided
for by this Agreement or otherwise contemplated hereby or by the Transaction
Agreement of even date herewith between HFMI and Newco (the "Transaction
Agreement"), as of the date hereof and as of the Closing Date, Newco has not and
shall not have (as the case may be) conducted any material operations or engaged
in any material transactions or entered into any material agreements.
Section 6.8. Disclosure. Newco has not knowingly failed to disclose to
HFMI any facts or circumstances which would have a material adverse effect on
Newco.
Section 6.9. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby or by the Related Agreements based
upon arrange ments made by or on behalf of Newco.
Section 6.10. Prevention or Delay of the Contemplated Transactions. No
change, event, effect or circumstance has occurred or exists relating to Newco
that could reasonably be expected to prevent or materially hinder or delay the
transactions contemplated by this Agreement or the performance by Newco of its
obligations under this Agreement.
ARTICLE VII
OTHER AGREEMENTS AND COVENANTS OF THE PARTIES
---------------------------------------------
<PAGE>
26
Section 7.1. Certain Actions. Each of HFMI and Newco shall refrain from
taking any action or agreeing in writing or otherwise to take any action that
would result in (i) any of the representations and warranties of such party
(without giving effect to any "knowledge" qualification) set forth in this
Agreement that are qualified as to materiality becoming untrue or incorrect,
(ii) any of such representations and warranties (without giving effect to any
"knowledge" qualification) that are not so qualified becoming untrue or
incorrect in any material respect or (iii) any of the conditions set forth in
Article VIII not being satisfied.
Section 7.2. Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to fulfill all conditions to
the obligations of the parties under this Agreement and to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated hereby, including, but not limited to, (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Bodies and the making of all necessary registrations and filings
(including filings under the HSR Act, with the U.S. Patent and Trademark Office,
comparable foreign Governmental Bodies and all other filings with Governmental
Bodies, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval, waiver or exemption from, or to avoid an action or
proceeding by, any Governmental Body; (ii) the obtaining of all necessary
consents, approvals, waivers or
<PAGE>
27
exemption from non-governmental third parties; (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Body vacated or reversed; and (iv)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by and to carry out the purposes of, this
Agreement.
Section 7.3. Further Assurances. After the Closing, HFMI shall, from time
to time at the request of Newco and without further cost or expense to Newco,
execute and deliver such other instruments of conveyance and transfer and take
such other actions as Newco may reasonably request, in order to more effectively
consummate the transactions contemplated hereby.
Section 7.4. Public Announcements. Newco and HFMI will consult and
cooperate with one another before issuing any press release or otherwise making
any public statements with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law or by
obligations pursuant to any listing agreement with the Nasdaq Stock Market, Inc.
as determined by Newco or HFMI, as the case may be, but only upon the advice of
independent counsel.
Section 7.5. Notification of Certain Matters. Each party shall give
prompt notice to the other party of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or
<PAGE>
28
warranty contained in this Agreement that is qualified as to materiality to be
untrue or inaccurate or any such representation or warranty not so qualified to
be untrue or inaccurate in any material respect, in either case, at or prior to
the Effective Time, (ii) any material failure of Newco or HFMI, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder or (iii) any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement; provided, however, that the delivery of any notice pursuant to this
Section 7.5 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 7.6. Obligations of Newco. HFMI agrees that, notwithstanding
the consummation of the transactions contemplated hereby and by the Related
Agreements, Newco shall not have any obligation to establish, operate or
continue any operations of any business or to otherwise exploit or make use of
the Worldwide Class Interests or the Newco License.
Section 7.7. HFMI Board Observer.
(a) During the period commencing on the date hereof and ending on the
earlier of (i) the date of the initial public offering of shares of Newco Common
Stock or (ii) the date HFMI owns less than 1% of Newco Common Stock on a Fully
Diluted Basis, HFMI shall have the right to have a representative (the "HFMI
Observer") attend meetings of the Newco Board of Directors, or any committee
thereof, and Newco will permit the HFMI Observer to attend all such meetings as
an observer, subject to reasonable limitations on such HFMI observer to permit
maintenance of attorney-client privilege. The
<PAGE>
29
HFMI Observer shall not have the right to vote on any matter presented to the
Board or any committee thereof. Newco shall give the HFMI Observer notice of
such meeting of the Board of Directors or any committee thereof and all written
materials and other information given to Newco's directors and committee members
in the same manner and at the same time such notices, materials and other
information are given to the directors and committee members. If the Board of
Directors or any committee thereof proposes to take any action by written
consent in lieu of a meeting, Newco shall give written notice thereof to the
HFMI Observer prior to the effective date of such consent describing the nature
and substance of such action.
(b) HFMI shall cause the HFMI Observer to keep confidential all
confidential information provided to it in its capacity as an observer pursuant
to this Section 7.7; provided, however, that the HFMI Observer may disclose such
confidential information to HFMI. HFMI shall also be bound by this Section 7.7
confidentiality obligation, except that HFMI may disclose such confidential
information to its directors, officers, employees, consultants, advisors and
professional representatives who need to know such information so long as prior
to disclosing such confidential information to any such person, HFMI shall
inform such person of the confidential nature of such information and of HFMI's
obligations under this Section 7.7 and direct such person to treat such
information confidentially; provided that, in the case of advisors or
consultants, such persons shall execute a confidentiality agreement reasonably
acceptable to Newco. The confidentiality obligations contained in this Section
7.7 shall not apply to any information which (i) is
<PAGE>
30
or becomes generally available to and known by the public (other than as a
result of a disclosure by HFMI or the HFMI Observer) or (ii) is or becomes
available to HFMI or the HFMI Observer on a non-confidential basis from a source
other than Newco.
Section 7.8. Acquisition Agreement. HFMI hereby acknowledges and agrees
that Newco shall not be restricted in any manner whatsoever from processing,
preparing, selling, distributing and marketing in Georgia and Alabama any ready-
to-heat or ready-to-eat prepared foods under any trademarks other than the
trademarks included in the Intellectual Property.
Section 7.9. Utilization of Intellectual Property. Newco agrees that the
development of any business concept involving primarily the retail sale of fresh
fruits and vegetables, fresh meats, seafood or bakery (but excluding packaged
prepared foods) primarily for take out which utilizes the Intellectual Property,
shall be undertaken either by Newco directly or, if by any other party, through
transactions with Newco which are on terms not less favorable to Newco than
those which could be obtained in an arms length transaction; provided, however,
that Newco shall not be obligated to develop any such business concepts.
Section 7.10. HFMI Refinancing In the event that HFMI refinances the
Senior Indebtedness (as defined in the Intercreditor Agreement dated the date
hereof between Creditanstalt-Bankverein, an Austrian banking corporation, as
agent, and Newco (the "Intercreditor Agreement")), Newco agrees to offer to
enter into a form of agreement with the lender providing such refinancing which
contains provisions with respect to the transfer of Intellectual Property
substantially equivalent to those
<PAGE>
31
contained in Section 2(d) of the Intercreditor Agreement; provided Newco shall
also be granted the notice, cure and purchase rights contained in Sections 7 and
8 of the Intercreditor Agreement.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF NEWCO AND HFMI
-----------------------------------------------
Section 8.1. Mutual Conditions. The obligations of each of Newco and HFMI
to consummate the transactions contemplated hereby are subject to the
fulfillment, prior to or at Closing, of each of the following conditions:
(a) no statute, rule, regulation, executive order, decree, ruling,
injunction or other legal prohibition shall have been enacted, entered,
promulgated or enforced by any Governmental Body which prohibits, restrains,
enjoins or imposes material restrictions on the consummation of the transactions
contemplated hereby or by any of the Related Agreements;
(b) any waiting period applicable to the transaction contemplated hereby
or by the Related Agreements under the HSR Act shall have terminated or expired;
and
(c) all governmental or regulatory notices (other than those in
connection with the HSR Act) or approvals required with respect to the
transactions contemplated hereby and by the Related Agreements shall have been
either filed or received, except where the failure to file such notices or
receive such approvals, individually or in the aggregate, could not reasonably
be expected to have a Material
<PAGE>
32
Adverse Effect on HFMI, Newco or the Intellectual Property or the ownership of
the Intellectual Property by HFMI, Newco or the Trust and could not reasonably
be expected to adversely affect the ability of Newco or HFMI (as applicable) to
consummate such transactions.
Section 8.2. Conditions to the Obligations of Newco. The obligations of
Newco to consummate the transactions contemplated hereby are subject to the
fulfillment or waiver by Newco prior to or at the closing of each of the
following conditions:
(a) the representations and warranties of the HFMI set forth in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations and warranties of HFMI set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, in each
case as of the Closing Date, as though made on and as of the Closing Date,
except to the extent the representation or warranty is expressly limited by its
terms to another date, and Newco shall have received a certificate signed on
behalf of HFMI by the chief executive officer of HFMI to such effect;
(b) each of the obligations of HFMI to be performed at or before the
Closing pursuant to the terms of this Agreement shall have been duly performed
and HFMI shall have delivered to Newco a certificate signed on behalf of HFMI by
the chief executive officer of HFMI to such effect;
(c) the transactions contemplated by the Transfer Agreement shall have
been consummated;
<PAGE>
33
(d) the Related Agreements to which HFMI is a party shall have been
executed and delivered by HFMI;
(e) the transactions contemplated by the Transaction Agreement required
to be performed at or prior to the Closing shall have been consummated;
(f) the Company shall have obtained the consent, approval or waiver of
each non-governmental person whose consent, approval or waiver shall be required
in order for each of them to consummate the transactions contemplated hereby,
except those for which the failure to obtain such consent, approval or waiver,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect;
(g) Newco shall have obtained the consent, approval or waiver of each
non-governmental person whose consent, approval or waiver shall be required in
order for Newco to consummate the transactions contemplated hereby and by the
Related Agreements, except those for which the failure to obtain such consent,
approval or waiver, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on Newco;
(h) HFMI shall have delivered to Newco a certificate, dated the Closing
Date, executed on behalf of HFMI, by its Chief Executive officer, certifying as
to the fulfillment of the conditions specified in Sections 8.1 and 8.2 hereof;
and
(i) Newco shall have received the opinion of outside counsel to HFMI
referred to in Article III.
<PAGE>
34
Section 8.3. Conditions to the Obligations of HFMI. The obligations of
HFMI under this Agreement to consummate the transactions contemplated hereby are
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions:
(a) the representations and warranties of Newco set forth in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations and warranties of Newco set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, in each
case as of the Closing Date, as though made on and as of the Closing Date,
except to the extent the representation or warranty is expressly limited by its
terms to another date, and HFMI shall have received a certificate signed on
behalf of Newco by the chief executive officer of Newco to such effect; and
(b) each of the obligations of Newco to be performed at or before closing
pursuant to the terms of this Agreement shall have been duly performed and Newco
shall have delivered to HFMI a certificate signed on behalf of Newco by the
chief executive officer of Newco to such effect.
Section 8.4. Certificate of Newco. Newco shall have delivered to HFMI a
certificate, dated the Closing Date, executed on behalf of Newco by its chief
executive officer certifying as to the fulfillment of the conditions specified
in Sections 8.1 and 8.3.
<PAGE>
35
ARTICLE IX
TERMINATION; FEES AND EXPENSES
Section 9.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by written consent of Newco and HFMI;
(b) by either party, if the Closing shall not have occurred on or before
February 6, 1997; provided, however, that the right to terminate this Agreement
under this Section 9.1(b) shall not be available to the party whose failure to
fulfill any obligation under this Agreement shall have been the cause of, or
resulted in, the failure of the Closing to occur on or before such date;
(c) by either party, if any final order, decree or ruling preventing the
consummation of the transactions contemplated hereby shall have been entered by
any court of competent jurisdiction or Governmental Body and shall have become
final and nonappealable;
(d) by Newco, (i) in the case of HFMI's representations and warranties
set forth in this Agreement that are not qualified as to materiality, upon a
material breach by HFMI of any such representation or warranty, or if any such
representation or warranty shall have become untrue in any material respect and
(ii) in the case of HFMI's representations and warranties set forth in this
Agreement that are qualified as to materiality, upon a breach by HFMI of any
such representation or warranty, or if any such representation or warranty shall
have become untrue (any, a "Terminating HFMI Breach"), in any case such that the
conditions set forth in
<PAGE>
36
Section 8.2(a) could not reasonably be expected to be satisfied within 15 days
following such Terminating HFMI Breach upon HFMI's exercise of its reasonable
best efforts or such breach has not in any event been cured within 15 days
following notification by Newco to HFMI of such Terminating HFMI Breach;
(e) by HFMI, (i) in the case of Newco's representations and warranties
set forth in this Agreement that are not qualified as to materiality, upon a
material breach by Newco of any such representation or warranty, or if any such
representation or warranty shall have become untrue in any material respect and
(ii) in the case of Newco's representations and warranties set forth in this
Agreement that are qualified as to materiality, upon a breach by Newco of any
such representation or warranty, or if any such representation or warranty shall
become untrue (any, a "Terminating Newco Breach"), in any case such that the
conditions set forth in Section 8.3(a) could not reasonably be expected to be
satisfied within 15 days following such Terminating Newco Breach upon Newco's
exercise of its reasonable best efforts or such Terminating Newco Breach has not
in any event been cured within 15 days following notification by HFMI to Newco
of such Terminating Newco Breach;
(f) by Newco, upon the material breach by HFMI of any covenant or
agreement of HFMI set forth in this Agreement which is not reasonably capable of
being cured within 15 days following such breach upon HFMI's exercise of its
reasonable best efforts or, in any event, upon the 15th day following
notification by Newco to HFMI of such breach if such breach has not been cured
by such 15th day;
<PAGE>
37
(g) by HFMI, upon the material breach by Newco of any covenant or
agreement of Newco set forth in this Agreement which is not reasonably capable
of being cured within 15 days following such breach upon Newco's exercise of its
reasonable best efforts or, in any event, upon the 15th day following
notification by HFMI to Newco of such breach if such breach has not been cured
by such 15th day; and
(h) by Newco, upon the termination of the Transaction Agreement (other
than by reason of the default of Newco thereunder).
ARTICLE X
SURVIVAL AND INDEMNIFICATION
----------------------------
Section 10.1. Survival of Representations and Agreements. All
representations, warranties, covenants and agreements made by any party in this
Agreement or pursuant hereto shall survive the Closing hereunder and any
investigation at any time made by or on behalf of any party hereto.
Section 10.2. Statements as Representations. All statements contained
in any certificate and in any schedule delivered pursuant hereto (including the
Disclosure Schedule) shall be deemed representations and warranties for all
purposes of this Agreement.
Section 10.3. Indemnification by HFMI. (a) Subject to the terms and
conditions of this Article X, HFMI hereby agrees to indemnify, fully defend,
save and hold harmless Newco and any Affiliate thereof or any of their directors
or officers (the
<PAGE>
38
"Newco Indemnified Group") from and against all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties, amounts paid in settlement
and reasonable attorneys' fees and expenses (collectively, "Damages"), asserted
against, resulting to, imposed upon or incurred by the Newco Indemnified Group
or any member thereof, directly or indirectly, by reason of or resulting from:
(i) any and all liabilities or obligations of, or claims against,
HFMI (whether absolute, accrued, contingent or otherwise) relating to the
Business existing as of the Closing Date or arising out of facts or
circumstances existing at or prior thereto, whether or not such claims were
known at the time of the Closing;
(ii) any inaccuracy in, or a breach of, any representation,
warranty, covenant or agreement of HFMI contained in or made pursuant to this
Agreement or any facts or circumstances constituting such a breach;
(iii) any and all liabilities, direct or indirect, absolute or
contingent, for Taxes or related claims asserted against the Newco Indemnified
Group or any member thereof (A) with respect to any sales or other transfer
taxes which may be payable in connection with any sale, conveyance, assignment,
transfer and delivery made pursuant to this Agreement or (B) with respect to any
Taxes relating to the operations or properties of the Business; or
(iv) the failure by HFMI to comply with any "bulk sales" law under
the Uniform Commercial Code applicable to the transactions contemplated by this
Agreement.
<PAGE>
39
(b) Each matter for which HFMI has agreed to provide indemnification
pursuant to Section 10.3(a) hereof is hereinafter referred to individually as a
"Claim" and collectively as the "Claims".
Section 10.4. Indemnification by Newco. (a) Subject to the terms and
conditions of this Article X, Newco hereby agrees to indemnify, fully defend,
save and hold harmless HFMI and any of its directors or officers (the "HFMI
Indemnified Group") from and against all Damages, asserted against, resulting
to, imposed upon or incurred by the HFMI Indemnified Group or any member
thereof, directly or indirectly, by reason of or resulting from any inaccuracy
in, or a breach of, any representation, warranty, covenant or agreement of Newco
contained in or made pursuant to this Agreement or any facts or circumstances
constituting such a breach;
(b) Each matter for which Newco has agreed to provide indemnification
pursuant to Section 10.4(a) hereof is hereinafter referred to individually as a
"Claim" and collectively as the "Claims".
Section 10.5. Conditions of Indemnification. The obligations and
liabilities of any party to indemnify any other party under Sections 10.3 and
10.4 hereof with respect to Claims shall be subject to the following terms and
conditions:
(a) The party to be indemnified (the "Indemnified Party") will give the
other party or parties (the "Indemnifying Party") prompt notice of any such
Claim. Such notice shall be a condition precedent to any liability of the
Indemnifying Party under the provisions for indemnification contained in this
Agreement (provided that the delay to notify the Indemnifying Party promptly
shall not relieve such Indemnifying
<PAGE>
40
Party of its obligations under this Article X except to the extent that the
failure to so notify adversely and materially prejudices the Indemnifying
Party's ability to defend such Claim).
(b) The Indemnifying Party may elect to undertake the defense of any
Claim with respect to which indemnification is sought by the Indemnified Party
by representatives chosen by it reasonably satisfactory to the Indemnified
Party. If the Indemnifying Party elects to compromise or defend such asserted
liability, it shall within 30 days from delivery of the notice pursuant to
Section 10.5(a) (or sooner, if the nature of the asserted liability so requires)
notify the Indemnified Party of its intent to do so and the Indemnified Party
shall cooperate in the compromise of, or defense against, any such asserted
liability. In such case, the Indemnified Party may participate in such defense
at its own expense. If the Indemnifying Party, within such 30-day period after
notice of any such Claim, fails to so defend, the Indemnified Party will have
the right to assume the defense, compromise or settlement of such Claim on
behalf of and for the account and risk of the Indemnifying Party, subject to the
right of the Indemnifying Party to assume the defense of such Claim at any time
prior to settlement, compromise or final determination thereof. If, in the
opinion of counsel to an Indemnified Party, the interests of the Indemnified
Party and the Indemnifying Party with respect to any Claim are conflicting, the
Indemnified Party shall be entitled to undertake the defense of such Claim at
the expense of the Indemnifying Party.
<PAGE>
41
(c) The notice referred to in Section 10.5(a) hereof shall set forth the
details of the Claim (including the amount, estimated, if necessary, of the
asserted Damages) and the specific provisions of this Agreement relating
thereto.
(d) Anything in this Section 10.5 to the contrary notwithstanding, (i) if
there is a reasonable probability that a Claim may materially and adversely
affect the Indemnified Party other than solely as a result of money damages or
other money payments, the Indemnified Party shall have the right, at its own
cost and expense, to defend, compromise or settle such Claim, and (ii) the
Indemnifying Party shall not, without the written consent of the Indemnified
Party (which consent shall not be unreasonably withheld), settle or compromise
any Claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such Claim.
Section 10.6. Limitation on Indemnification. Notwithstanding anything to
the contrary set forth in this Agreement, no indemnification payment for any
Damages shall be made by HFMI or Newco, as the case may be, pursuant to Section
10.3(a)(ii) or 10.4 hereof, respectively, except to the extent that the amounts
which would otherwise be payable pursuant to either such Section relating to
such Damages aggregate at least $50,000 (the "Minimum Amount"), and such Minimum
Amount shall be deducted from the aggregate amount payable under Section
10.3(a)(ii) or 10.4, as the case may be, with respect to Damages payable
pursuant to such sections of this Agreement.
<PAGE>
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1. Fees and Expenses. Each party shall bear its own expenses
in connection with this Agreement and the transactions contemplated hereby.
Section 11.2. Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only and are not
meant in any way to affect the meaning or interpretation of this Agreement.
Section 11.3. Notices. Any notices or other communications required or
permitted hereunder shall be given in writing and shall be delivered by
facsimile, hand or air courier or sent by certified or registered mail, postage
prepaid, addressed as follows:
If to HFMI, to:
1180 Upper Hembree Road
Roswell, Georgia 30076
Attention: Harry Blazer
Telecopier: (770) 664-4920
Copy to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309
Facsimile: (404) 881-7777
Attention: John Latham, Esq.
<PAGE>
43
or:
If to Newco, to:
HFMI Acquisition Corporation
14103 Denver West Parkway
Golden, Colorado 80401
Attention: Saad J. Nadhir
Telecopier: (303) 771-4860
or to such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date delivered, if by hand or air courier, and five days following the
date of mailing if mailed.
Section 11.4. Assignment. This Agreement, and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 11.5. Complete Agreement. This Agreement, including the
Disclosure Schedule, the schedules and any other documents specifically referred
to herein, and the Related Agreements contain the entire understanding of the
parties with respect to the transactions contemplated hereby and supersede all
prior arrangements or understandings with respect thereto. There are no
agreements, promises, warranties, covenants or undertakings other than those
expressly set forth herein and therein.
<PAGE>
44
Section 11.6. Severability. In the event that any part of this Agreement
is declared by any court or other judicial or administrative body to be null,
void or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
Section 11.7. Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto or their respective successors or assigns, or in the case of a
waiver, by the party waiving compliance. Any waiver by any party of any
condition, or of the breach of any provision, term, covenant, representation or
warranty contained in this Agreement, in any one or more instances, shall not be
deemed to be nor construed as a further or continuing waiver of any such
condition, or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
Section 11.8. Parties in Interest. Nothing in this Agreement is intended
to confer any rights or remedies under or by reason of this Agreement on any
persons other than HFMI and Newco and their respective successors and permitted
assigns. Nothing in this Agreement is intended to relieve or discharge the
obligations or liability of any third persons to HFMI or Newco.
Section 11.9. Counterparts. This Agreement may be executed in two or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
<PAGE>
45
Section 11.10. Specific Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
Section 11.11. Interpretation. The table of contents and headings herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof. Where a reference in this Agreement is made to a schedule, section,
exhibit or annex, such reference shall be to a schedule, section of or exhibit
or annex to this Agreement unless otherwise indicated. All capitalized terms
used without definition in any such schedule, section, exhibit or annex shall
have the meaning assigned to them in this Agreement and any capitalized terms
used without definition in this Agreement shall have the meanings assigned to
them in such schedules, exhibits and annexes. Where the reference "hereby" or
"herein" appears in this Agreement, such reference shall be deemed to be a
reference to this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 11.12. Brokers, Finders. HFMI and Newco will each hold the other
harmless from, and pay and discharge, any claims for liabilities for brokerage
<PAGE>
46
commissions or finder's or investment banker's fees incurred by reason of any
action on their or its behalf.
Section 11.13. Governing Law. This Agreement shall be governed by the
laws of the State of Georgia (regardless of the laws that might be applicable
under principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect and performance.
SECTION 11.14. JURISDICTION AND WAIVER. THE PARTIES HERETO IRREVOCABLY
ELECT AS THE SOLE JUDICIAL FORUM FOR THE ADJUDICATION OF ANY MATTERS ARISING
UNDER OR IN CONNECTION WITH THIS AGREEMENT, AND CONSENT TO THE JURISDICTION OF,
THE COURTS OF GEORGIA. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO (I) A TRIAL BY JURY OR
(II) ANY PUNITIVE OR EXEMPLARY DAMAGES THAT MAY OTHERWISE BE AWARDED, IN
CONNECTION WITH ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY RELATED AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY RELATED AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (i) NO REPRESENTATIVE,
<PAGE>
47
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.13.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, as of the day and year first above written.
HARRY'S FARMERS MARKET, INC.
By /s/ Harry A. Blazer
--------------------------
Name: Harry A. Blazer
Title: President
HFMI ACQUISITION CORPORATION
By /s/ Saad J. Nadhir
--------------------------
Name: Saad J. Nadhir
Title: Chief Executive Officer
<PAGE>
EXHIBIT 10.4
================================================================================
--------------------------
TRUST AGREEMENT
BETWEEN AND AMONG
WILMINGTON TRUST COMPANY
HFMI ACQUISITION CORPORATION
AND
HARRY'S FARMERS MARKET, INC.
--------------------------
Dated as of January , 1997
--
--------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
Definitions...................................................................... 2
-----------
ARTICLE II
Organization..................................................................... 5
------------
SECTION 2.01 Name............................................................... 5
----
SECTION 2.02 Office............................................................. 5
------
SECTION 2.03 Purposes and Powers................................................ 5
-------------------
SECTION 2.04 Appointment of Trustee............................................. 6
----------------------
SECTION 2.05 Declaration of Trust............................................... 6
--------------------
SECTION 2.06 Liability of the Owners............................................ 6
-----------------------
SECTION 2.07 Title to Trust Property............................................ 7
-----------------------
SECTION 2.08 Situs of Trust..................................................... 7
--------------
ARTICLE III
Owner Certificates and Transfer of Interests..................................... 7
--------------------------------------------
SECTION 3.01 Initial Ownership, Transfers of Ownership to Newco and
------------------------------------------------------
Additional Intellectual Property............................................ 7
--------------------------------
SECTION 3.02 Series of Beneficial Interests..................................... 8
------------------------------
SECTION 3.03 Registration of Transfer and Exchange of Owner Certificates........ 10
-----------------------------------------------------------
SECTION 3.04 Mutilated, Destroyed, Lost or Stolen Owner Certificates............ 10
-------------------------------------------------------
SECTION 3.05 Transfers.......................................................... 11
---------
SECTION 3.06 Call Option on Change of Control of HFMI........................... 12
----------------------------------------
SECTION 3.07 Exercise of Call Option............................................ 13
-----------------------
SECTION 3.08 Persons Deemed Owners.............................................. 14
---------------------
ARTICLE IV
Actions by the Trust and the Trustee............................................. 14
------------------------------------
SECTION 4.01 Actions by the Trust; Power of Owners with Respect to
-----------------------------------------------------
Certain Matters............................................................. 14
---------------
SECTION 4.02 Action with Respect to Bankruptcy.................................. 14
---------------------------------
SECTION 4.03 Restrictions on Owners' and Servicer's Power....................... 14
--------------------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V
Distribution of Trust Estate..................................................... 15
----------------------------
SECTION 5.01 Distribution of Trust Estate....................................... 15
----------------------------
ARTICLE VI
Authority and Duties of Trustee.................................................. 15
-------------------------------
SECTION 6.01 General Authority.................................................. 15
-----------------
SECTION 6.02 General Duties..................................................... 15
--------------
SECTION 6.03 Action upon Instruction............................................ 15
-----------------------
SECTION 6.04 No Duties Except as Specified in this Agreement or in
-----------------------------------------------------
Instructions................................................................ 16
------------
SECTION 6.05 No Action Except Under Specified Documents or Instructions......... 16
----------------------------------------------------------
SECTION 6.06 Accounting and Reports to the Owners, the Internal Revenue
----------------------------------------------------------
Service and Others.......................................................... 17
------------------
SECTION 6.07 Signature on Returns............................................... 17
--------------------
SECTION 6.08 Restrictions....................................................... 17
------------
ARTICLE VII
Concerning the Trustee........................................................... 17
----------------------
SECTION 7.01 Acceptance of Trusts and Duties.................................... 17
-------------------------------
SECTION 7.02 Furnishing of Documents............................................ 18
-----------------------
SECTION 7.03 Representations and Warranties of WTC.............................. 18
-------------------------------------
SECTION 7.04 Reliance; Advice of Counsel........................................ 19
---------------------------
SECTION 7.05 Not Acting in Individual Capacity.................................. 20
---------------------------------
SECTION 7.06 Bankruptcy Matters................................................. 20
------------------
ARTICLE VIII
Compensation of Trustee.......................................................... 20
-----------------------
SECTION 8.01 Trustee's Fees and Expenses........................................ 20
---------------------------
SECTION 8.02 Indemnification.................................................... 20
---------------
ARTICLE IX
Termination of Trust Agreement................................................... 21
------------------------------
SECTION 9.01 Termination of Trust Agreement..................................... 21
------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE X
Successor Trustees and Additional Trustees....................................... 22
------------------------------------------
SECTION 10.01 Resignation or Removal of Trustee................................. 22
---------------------------------
SECTION 10.02 Successor Trustee................................................. 22
-----------------
SECTION 10.03 Merger or Consolidation of Trustee................................ 23
----------------------------------
SECTION 10.04 Appointment of Co-Trustee or Separate Trustee..................... 23
---------------------------------------------
ARTICLE XI........................................................................... 24
Indemnification.................................................................. 24
---------------
SECTION 11.01 General Indemnification........................................... 24
-----------------------
SECTION 11.02 Notice and Opportunity to Defend.................................. 24
--------------------------------
ARTICLE XII
Miscellaneous.................................................................... 25
-------------
SECTION 12.01 Supplements and Amendments........................................ 25
--------------------------
SECTION 12.02 No Legal Title to Trust Estate in Owners.......................... 25
----------------------------------------
SECTION 12.03 Limitations on Rights of Others................................... 26
-------------------------------
SECTION 12.04 Notices........................................................... 26
-------
SECTION 12.05 Arbitration....................................................... 27
-----------
SECTION 12.06 Severability...................................................... 27
------------
SECTION 12.07 Separate Counterparts............................................. 28
---------------------
SECTION 12.08 Successors and Assigns............................................ 28
----------------------
SECTION 12.09 Headings.......................................................... 28
--------
SECTION 12.10 Governing Law..................................................... 28
-------------
SECTION 12.11 Unanimous Consent of Owners....................................... 28
---------------------------
Exhibit A - Worldwide Class Owner Certificate
Exhibit B - Georgia Class Owner Certificate
Exhibit C - Certificate of Trust
Exhibit D - Intellectual Property
Annex I - Newco License
Annex II - HFMI License
</TABLE>
iii
<PAGE>
TRUST AGREEMENT dated as of January 30, 1997 between HARRY'S FARMERS
MARKET, INC., a Georgia corporation ("HFMI"), and WILMINGTON TRUST COMPANY, a
----
Delaware banking corporation (in its individual capacity, "WTC"), as Trustee
---
(the "Trustee").
-------
(a) HFMI and the Trustee intend to establish a trust (the "Trust")
-----
pursuant to the Delaware Business Trust Act, as amended (the "Act").
---
(b) Pursuant to the Transfer Agreement dated as of the date hereof (the
"Transfer Agreement") between and among HFMI, the Trust and HFMI Acquisition
- -------------------
Corporation., a Delaware corporation ("Newco"), and the Assignment of
-----
Intellectual Property, dated as of the date hereof and attached as Exhibit A to
the Transfer Agreement (the "Assignment of Intellectual Property"), HFMI will
-----------------------------------
transfer, assign and contribute to the Trust on the date hereof, and from time
to time hereafter, all of its right, title and interest worldwide in and to
federal, state and foreign patents, trademarks (registered and unregistered)
trademark applications, service marks (registered and unregistered), service
mark applications, trade names, trade name rights and publicity rights,
copyrights and copyright registrations, trade secrets and know-how and other
proprietary rights and information set forth on Exhibit D (as it may be amended
from time to time) and the goodwill associated therewith (the "Intellectual
------------
Property").
- --------
(c) Pursuant to an Acquisition Agreement dated as of the date hereof (the
"Acquisition Agreement") between HFMI and Newco, HFMI has agreed to transfer to
---------------------
Newco the Worldwide Class Owner Certificate (as defined below) representing the
Worldwide Class Interests (as defined below) in the Trust in return for the
consideration specified in the Acquisition Agreement.
(d) Pursuant to an Administration and Servicing Agreement dated as of the
date hereof (the "Administration and Servicing Agreement") between and among the
--------------------------------------
Trust, HFMI and Newco, the latter as servicer thereunder (hereinafter referred
to in such capacity as the "Servicer"), the Trust has engaged the Servicer to
--------
act on behalf of the Trust with respect to certain matters involving the
Intellectual Property.
NOW, THEREFORE, in consideration of the foregoing, other good and
valuable consideration and the mutual terms and covenants contained herein, the
parties hereto agree as follows:
<PAGE>
2
ARTICLE I
Definitions
-----------
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
"Acquisition Agreement" has the meaning set forth in the recitals of this
---------------------
Trust Agreement.
"Act" has the meaning set forth in the recitals of this Trust Agreement.
---
"Additional Intellectual Property" has the meaning set forth in Section
--------------------------------
3.01(c) of this Trust Agreement.
"Administration and Servicing Agreement" has the meaning set forth in the
--------------------------------------
recitals of this Trust Agreement.
"Affiliate" has the meaning set forth in Section 3.06 of this Trust
---------
Agreement.
"Asserted Liability" has the meaning set forth in Section 11.02(a) of
------------------
this Trust Agreement.
"Assignment of Intellectual Property" has the meaning set forth in the
-----------------------------------
recitals of this Trust Agreement.
"Change of Control" has the meaning set forth in Section 3.06 of this
-----------------
Trust Agreement.
"Claims Notice" has the meaning set forth in Section 11.02(a) of this
-------------
Trust Agreement.
"Expenses" has the meaning set forth in Section 8.02 of this Trust
--------
Agreement.
"Georgia Class Interests" has the meaning set forth in Section 3.02 of
-----------------------
this Trust Agreement.
"Georgia Class Intellectual Property" has the meaning set forth in
-----------------------------------
Section 3.02(b) of this Trust Agreement.
<PAGE>
3
"Georgia Class Owner Certificate" has the meaning set forth in Section
-------------------------------
3.01(a) of this Trust Agreement.
"Georgia Class Series Estate" has the meaning set forth in Section 3.02
---------------------------
of this Trust Agreement.
"HFMI" has the meaning set forth in the recitals of this Trust Agreement.
----
"HFMI License" has the meaning set forth in Section 3.02(b) of this Trust
------------
Agreement.
"HFMI Trust" has the meaning set forth in Section 2.01 of this Trust
----------
Agreement.
"Indemnifying Party" has the meaning set forth in Section 11.01 of this
------------------
Trust Agreement.
"Indemnitees" has the meaning set forth in Section 11.01 of this Trust
-----------
Agreement.
"Intellectual Property" has the meaning set forth in the recitals of this
---------------------
Trust Agreement.
"Liens" has the meaning set forth in Section 12.02 of this Trust
-----
Agreement.
"Losses" has the meaning set forth in Section 11.01 of this Trust
------
Agreement.
"Newco" has the meaning set forth in the recitals of this Trust
-----
Agreement.
"Newco License" has the meaning set forth in Section 3.02(a) of this
-------------
Trust Agreement.
"Option" has the meaning set forth in Section 3.06 of this Trust
------
Agreement.
"Owner Certificates" shall mean collectively the Worldwide Class Owner
------------------
Certificate and the Georgia Class Owner Certificate.
"Owner of Intellectual Property" has the meaning set forth in Section
------------------------------
3.05(b) of this Trust Agreement.
<PAGE>
4
"Owners" has the meaning set forth in Section 2.02 of this Trust
------
Agreement.
"Ownership Interests" has the meaning set forth in Section 3.02 of this
-------------------
Trust Agreement.
"Person" has the meaning set forth in Section 3.06 of this Trust
------
Agreement.
"Series Estate" has the meaning set forth in Section 3.02 of this Trust
-------------
Agreement.
"Servicer" has the meaning set forth in the recitals of this Trust
--------
Agreement.
"Successors" has the meaning set forth in Section 3.05(a) of this Trust
----------
Agreement.
"Transfer Agreement" has the meaning set forth in the recitals of this
------------------
Trust Agreement.
"Transferee" has the meaning set forth in Section 3.05(b) of this Trust
----------
Agreement.
"Trust" has the meaning set forth in the recitals of this Trust
-----
Agreement.
"Trust Estate" has the meaning set forth in Section 2.03 of this Trust
------------
Agreement.
"Trustee" has the meaning set forth in the recitals of this Trust
-------
Agreement.
"Trustee Indemnified Parties" has the meaning set forth in Section 8.02
---------------------------
of this Trust Agreement.
"Worldwide Class Interests" has the meaning set forth in Section 3.02 of
-------------------------
this Trust Agreement.
"Worldwide Class Intellectual Property" has the meaning set forth in
-------------------------------------
Section 3.02(a) of this Trust Agreement.
"Worldwide Class Owner Certificate" has the meaning set forth in Section
---------------------------------
3.01(a) of this Trust Agreement.
<PAGE>
5
"Worldwide Class Series Estate" has the meaning set forth in Section 3.02
-----------------------------
of this Trust Agreement.
"Worldwide Owner" has the meaning set forth in Section 3.06 of this Trust
---------------
Agreement.
"WTC" has the meaning set forth in the recitals of this Trust Agreement.
---
ARTICLE II
Organization
------------
SECTION 2.01 Name. The Trust created hereby shall be known as "HFMI
---- ----
Trust", in which name the Trustee may take any action as provided herein on
- -----
behalf of the Trust.
SECTION 2.02 Office. The office of the Trust shall be in care of the
------
Trustee at the address set forth in Section 12.04 or at such other address in
Delaware as the Trustee may designate by written notice to the owners of the
Owner Certificates (the "Owners").
------
SECTION 2.03 Purposes and Powers. The purpose of the Trust is to
-------------------
engage solely in the following activities:
(i) to own, preserve, maintain, defend and protect the Intellectual
Property as allocated among the Worldwide Class Series Estate (as
defined below) and the Georgia Class Series Estate (as defined below)
(collectively, the "Trust Estate") and to authorize and/or license
------------
others to take such actions in accordance with the Administration and
Servicing Agreement;
(ii) to employ accountants, attorneys and agents (including,
without limitation, the Servicer);
(iii) to make distributions of the Trust Estate pursuant to Article
V and Article IX;
(iv) to engage in only those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith, including,
without limitation, activities as may be required in connection with the
protection or conservation of the Trust Estate; and
<PAGE>
6
(v) to grant the Newco License (as defined below) and the HFMI
License (as defined below).
The Trust shall not (i) engage in any activity other than the foregoing
or that is required by or authorized by the terms of this Agreement, (ii)
conduct any business or incur or guarantee any debt, or (iii) own or hold any
assets other than the Trust Estate.
SECTION 2.04 Appointment of Trustee. HFMI hereby appoints WTC as
----------------------
trustee of the Trust effective as of the date hereof, to have all the rights,
powers and duties of the Trustee set forth herein.
SECTION 2.05 Declaration of Trust. HFMI hereby declares that,
--------------------
simultaneously with the execution of this Agreement, pursuant to the Assignment
of Intellectual Property, it has transferred, assigned, set over and otherwise
conveyed (and shall continue to do so as provided in Section 3.01) all of the
Intellectual Property to the Trust for the benefit of the Owners and for the
purposes set forth in Section 2.03. The Trustee hereby acknowledges receipt of
all of the Intellectual Property in trust and declares that it will hold the
Trust Estate in trust upon and subject to the conditions set forth herein for
the sole use and benefit of the Owners.
It is the intention of the parties hereto that the Trust constitute a
business trust under the Act and that this Agreement constitute the governing
instrument of such business trust. On the business day prior to the date
hereof, the Trustee shall have caused the filing of the Certificate of Trust for
the Trust in the form attached hereto as Exhibit C with the Secretary of State
of the State of Delaware. It is the further intention of the parties hereto
that, solely for Federal and State income tax purposes, the Trust qualify as a
grantor trust. The parties agree that the Trust will file or cause to be filed
annual and other necessary returns, reports and other forms consistent with the
characterization of the Trust as a grantor trust for Federal and State income
tax purposes unless otherwise required by law. Effective as of the date hereof,
the Trustee shall have all rights, powers and duties set forth herein and in the
Act with respect to accomplishing the purposes of the Trust.
SECTION 2.06 Liability of the Owners. The Owners of the Owner
-----------------------
Certificates (as defined below) shall be liable for all debts, liabilities and
expenses attributable to the Series Estate (as defined below) allocated to the
Ownership Interest (as defined below) represented by such Owner's Owner
Certificate and shall be jointly and severally liable for all other debts,
liabilities and expenses of the Trust not allocable to a Series Estate to the
extent that a general partner would be liable if the Trust were a general
partnership under Delaware law; provided, however, that each such Owner shall be
entitled to the indemnification set forth in Article XI.
<PAGE>
7
SECTION 2.07 Title to Trust Property. Legal title to all of the Trust
-----------------------
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Trust Estate to be vested in a trustee, trustees or a nominee's name, in
which case title shall be deemed to be vested in the Trustee, a co-trustee, a
separate trustee or Newco as nominee, for the Trust, as the case may be.
SECTION 2.08 Situs of Trust. The Trust will be located and
--------------
administered in the State of Delaware. Bank accounts, if any, maintained by the
Trustee on behalf of the Trust shall be located in the State of Delaware. The
Trust shall not have any employees in any state other than Delaware; provided,
--------
however, that nothing herein shall restrict or prohibit the Trustee from having
- -------
employees within or without the State of Delaware. The only office of the Trust
will be at the address set forth in Section 12.04 in Delaware.
ARTICLE III
Owner Certificates and Transfer of Interests
--------------------------------------------
SECTION 3.01 Initial Ownership, Transfers of Ownership to Newco and
------------------------------------------------------
Additional Intellectual Property.
- --------------------------------
(a) Upon the formation of the Trust and the contribution of the
Intellectual Property from HFMI to the Trust pursuant to the Assignment of
Intellectual Property, HFMI shall be the sole beneficial owner of the Trust and
the Trustee shall issue and deliver to HFMI (i) the Worldwide Class Owner
Certificate in the form attached hereto as Exhibit A (the "Worldwide Class Owner
---------------------
Certificate") representing the Worldwide Class Interests (as defined below) and
- -----------
(ii) the Georgia Class Owner Certificate in the form attached hereto as Exhibit
B (the "Georgia Class Owner Certificate") representing the Georgia Class
-------------------------------
Interests (as defined below).
(b) Immediately following the issuance of the Owner Certificates to HFMI
by the Trustee, HFMI, pursuant to the Acquisition Agreement, shall transfer the
Worldwide Class Owner Certificate representing the Worldwide Class Interests to
Newco, and Newco shall execute a counterpart to this Agreement agreeing to be
bound by its terms and provisions as the Owner of the Worldwide Class Owner
Certificate.
(c) HFMI shall, from time to time, transfer to the Trust, as they come
into being, additional trademarks, service marks, trade names, logos or other
designations trade secrets, copyrights, or know-how hereafter acquired, created
or developed by HFMI ("Additional Intellectual Property"). Simultaneously with
--------------------------------
such transfer, the Servicer shall direct the Trustee to (i) amend Exhibit D to
this Agreement to add such Additional Intellectual Property as Worldwide Class
Intellectual Property
<PAGE>
8
and Georgia Class Intellectual Property (both as defined below) and (ii) issue
to Newco an amended Worldwide Class Owner Certificate representing the Worldwide
Class Interests in the Worldwide Class Intellectual Property and to HFMI an
amended Georgia Class Owner Certificate representing the Georgia Class Interests
in the Georgia Class Intellectual Property, both of which shall include the
Additional Intellectual Property.
(d) The Owner Certificates shall be executed on behalf of the Trust by
manual signature of a trust officer of the Trustee together with the Trustee's
seal imprinted thereon. Owner Certificates bearing the manual signatures of
individuals who were, at the time such signatures were affixed, authorized to
sign on behalf of the Trust, shall be validly issued and entitled to the
benefits of this Agreement, notwithstanding that any of such individuals shall
have ceased to be so authorized prior to the delivery of such Owner Certificates
or did not hold such offices on the date of execution of such Owner Certificates
or at any other time.
(e) Newco, by accepting the Worldwide Class Owner Certificate, and any
other person or entity that may purchase or otherwise acquire any beneficial
interest in the Trust and become a party to this Agreement, represents, warrants
and covenants that it will treat its right, title and interest in the Trust for
Federal income tax purposes in a manner consistent with the characterization of
the Trust as a grantor trust unless otherwise required by law. In addition,
Newco and any other person or entity that may purchase or otherwise acquire a
beneficial interest in the Trust agrees that, by its acceptance of an Owner
Certificate, such beneficial owner agrees to be bound by the terms and
provisions of this Agreement.
(f) The parties agree that the Consulting Agreement shall be the
mechanism by which the know how and trade secrets shall be included in and
transferred to the Trust, and further that no other process or procedure shall
be required to transfer such know how and trade secrets. From the expiration of
the initial five year term of the Consulting Agreement the parties agree that
the obligation upon Harry Blazer and HFMI to transfer know how and trade secrets
to the Trust shall cease.
SECTION 3.02 Series of Beneficial Interests. Pursuant to Section
------------------------------
3806(b)(2) of the Act, the beneficial interests of the Owners of Owner
Certificates in the Trust Estate shall be initially divided into two separate
series of beneficial interests (the "Ownership Interests"), which shall be
-------------------
designated as the "Worldwide Class Interests" and the "Georgia Class Interests"
------------------------- -----------------------
and shall have separate rights with respect to that portion of the Trust Estate
allocated to that series (respectively, the "Worldwide Class Series Estate" and
-----------------------------
the "Georgia Class Series Estate," each a "Series Estate").
--------------------------- -------------
The Trust Estate shall be allocated to the Series Estates as follows:
<PAGE>
9
(a) the Worldwide Class Interests shall represent the Worldwide Class
Series Estate, which shall consist of (i) the Intellectual Property listed as
Worldwide Class Intellectual Property on Exhibit D, as may be updated from time
to time (the "Worldwide Class Intellectual Property") and (ii) the license
-------------------------------------
annexed hereto as Annex I to utilize the Worldwide Class Intellectual Property
in countries throughout the world with the exception of the States of Georgia
and Alabama, United States of America (the "Newco License"); and
-------------
(b) the Georgia Class Interests shall represent the Georgia Class
Series Estate, which shall consist of (i) the Intellectual Property listed as
Georgia Class Intellectual Property on Exhibit D, as may be updated from time to
time (the "Georgia Class Intellectual Property") and (ii) the license annexed
-----------------------------------
hereto as Annex II to utilize the Georgia Class Intellectual Property only in
the States of Georgia and Alabama, United States of America (the "HFMI
----
License").
Each Ownership Interest shall be separate from the other Ownership
Interests in respect of the assets and liabilities of the Trust or the Series
Estate allocated to that Ownership Interest. The assets and liabilities of each
Series Estate shall be held and accounted for separately from the other assets
and liabilities of the Trust and of the other Series Estate, and the Trustee
shall maintain separate and distinct records for each Series Estate. The assets
of a particular Series Estate shall belong to that Series Estate for all
purposes, and not to the other Series Estate, and any assets, income, earnings,
profits, funds, payments or proceeds with respect thereto that are not
identifiable as belonging to any Series Estate shall be allocated between the
Series Estates as mutually determined by the Owners of the Owner Certificates;
provided, that, if such Owners cannot agree on such allocation within 30 days,
- -------- ----
the allocation shall be settled by arbitration in accordance with Section 12.05.
The assets of a particular Series Estate shall be so recorded upon the books of
the Trust and shall be charged with the liabilities of the Series Estate and all
expenses, costs, charges or reserves of the Trust that are not identifiable as
belonging to any Series Estate shall be allocated and charged by the Trustee
between the Series Estates as mutually determined by the Owners of the Owner
Certificates; provided, that, if such Owners cannot agree on such allocation
-------- ----
within 30 days, the allocation shall be settled by arbitration in accordance
with Section 12.05.
Without limitation of the foregoing provisions of this Section 3.02,
Section 3804(a) of the Act is applicable to the Trust, and the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Series Estate shall be enforceable against
the assets of such Series Estate only, and not against the assets of the other
Series Estate. Notice of this limitation on inter-series liability shall be set
forth in the Certificate of Trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State
pursuant to the Act. Every note, bond, contract or other undertaking issued by
or
<PAGE>
10
on behalf of a particular Series Estate shall include a recitation expressly
limiting the obligation represented thereby to that Series Estate and its
assets.
SECTION 3.03 Registration of Transfer and Exchange of Owner
----------------------------------------------
Certificates. The Trustee shall maintain, at the office or agency referred to
- ------------
in Section 2.02, a certificate register in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for the registration
of Owner Certificates and of transfers and exchanges of Owner Certificates as
herein provided.
Upon surrender for registration of transfer of any Owner Certificate at
the office or agency maintained pursuant to Section 2.02, the Trustee shall
execute and deliver, in the name of the designated transferee, a new Owner
Certificate representing a like interest dated the date of execution by the
Trustee. At the option of an Owner, an Owner Certificate may be exchanged for
another Owner Certificate representing a like interest upon surrender of the
Owner Certificate to be exchanged at the office or agency maintained pursuant to
Section 2.02.
Every Owner Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee duly executed by the Owner. In addition, every
transferee of an Owner Certificate shall execute and deliver to the Trustee, a
letter, in form and substance satisfactory to the Trustee, agreeing to be bound
by the terms of this Agreement. Each Owner Certificate surrendered for
registration of transfer and exchange shall be canceled and subsequently
disposed of by the Trustee.
The Trustee may request a written opinion of counsel in form and
substance reasonably satisfactory to the Trustee to the effect that the proposed
transfer of Owner Certificates may be effected without registration under any
state or federal securities laws, and without adversely affecting the treatment
of the Trust as a grantor trust for Federal income tax purposes.
No service charge shall be made for any registration of transfer or
exchange of Owner Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Owner Certificates and for the
reasonable fees and charges of outside counsel.
SECTION 3.04 Mutilated, Destroyed, Lost or Stolen Owner Certificates.
-------------------------------------------------------
If (a) any mutilated Owner Certificate shall be surrendered to the Trustee, or
if the Trustee shall receive evidence to its satisfaction of the destruction,
loss or theft of any Owner Certificate and (b) there shall be delivered to the
Trustee such security or indemnity as may be reasonably required by it to save
it harmless, then, in the absence of notice that such Owner Certificate shall
have been acquired by a bona fide pur chaser, the Trustee on behalf of the Trust
shall execute and deliver, in exchange for or in lieu of any such mutilated,
<PAGE>
11
destroyed, lost or stolen Owner Certificate, a new Owner Certificate of like
tenor and denomination. In connection with the issuance of any new Owner
Certificate under this Section, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Owner Certificate issued pursuant to this
Section shall constitute conclusive evidence of ownership in the Trust, as if
the duplicate were originally issued, whether or not the lost, stolen or
destroyed Owner Certificate shall be found at any time.
SECTION 3.05 Transfers.
---------
(a) Except as contemplated in Section 3.06 and 3.07 below and as
permitted by the Intercreditor Agreement dated of even date herewith between
Newco and Creditanstalt-Bankverein, as agent (the "Intercreditor Agreement"),
-----------------------
HFMI shall not have the right to transfer, assign or otherwise convey all or any
part of its right, title or interest in and to this Agreement, the Trust, the
Georgia Class Series Estate, its Ownership Interests, the Georgia Class Owner
Certificate, the Georgia Interests or the Georgia Class Intellectual Property.
(b) Subject to the provisions of Sections 9.01, 5.01 and 3.05(a) above,
an Owner other than HFMI may transfer, assign or otherwise convey all right,
title and interest in and to this Agreement, the Trust, the applicable Series
Estate, the Ownership Interests or any Owner Certificate without the consent of
the Trustee to any successors, assigns, transferees or other successors in
interests (collectively, "Successors") provided that (i) the Owner provides to
----------
the other Owners written notice of the transfer and receives the written consent
of the Servicer, which consent may not be unreasonably withheld, (ii) the
Successor agrees in writing to be bound by the terms and conditions of this
Agreement, the Administration and Servicing Agreement, and the relevant license
agreement from the Trust, (iii) the Owner obtains a written, signed and
notarized acknowledgment by the Successor that such Successor is and will be
bound by the terms and conditions of this Agreement, the Administration and
Servicing Agreement, and the relevant license agreement from the Trust, and such
Successor agrees similarly to obtain such acknowledgments from its Successors,
(iv) the Owner obtains a written opinion of outside counsel that such transfer
does not breach any relevant securities law, (v) such transfer does not cause
HFMI or the Trust any adverse tax effect; and (vi) any approvals of Governmental
Bodies required by the Owner in relation to the Owner's ownership of the
Ownership Interest remains in full force and effect following the transfer.
(c) Subject to the provisions of Sections 9.01, 5.01 and 3.05(a)
above, any Owner other than HFMI or its Successor (each, an "Owner of
--------
Intellectual Property") may at its option subdivide its Worldwide Class Owner
- ---------------------
Certificate, Worldwide Class Interest and Worldwide Class Series Estate or its
certificate, interest and estate created by the prior application of this
<PAGE>
12
provision (as the case may be) and transfer, assign or otherwise convey such
subdivided beneficial interests to any person or entity (such person or entity
and any subsequent transferee or assignee, a "Transferee"); provided that (i)
----------
the Owner of Intellectual Property provides to the other Owners of Intellectual
Property and HFMI written notice of the transfer and receives the written
consent of the Servicer, which consent may not be unreasonably withheld, (ii)
the Transferee agrees in writing to be bound by the terms and conditions of this
Agreement, the Administration and Servicing Agreement, and the relevant license
agreement from the Trust, (iii) the Owner of Intellectual Property obtains a
written, signed and notarized acknowledgment by the Transferee that such
Transferee is and will be bound by the terms and conditions of this Agreement,
the Administration and Servicing Agreement and the relevant license agreement
from the Trust, and such Transferee agrees similarly to obtain such
acknowledgments from its Successors or Transferees; and (iv) such transfer does
not constitute an offering to the public or a distribution that would require
registration of such transfer pursuant to any applicable Federal, State or
foreign securities law or regulation, unless such offering or distribution has
been registered as required by such Federal, State or foreign securities law.
Upon satisfaction of conditions (i)-(iv) of this Section 3.05(b), such
Transferee shall be deemed an Owner of Intellectual Property.
SECTION 3.06 Call Option on Change of Control of HFMI. HFMI, as Owner
----------------------------------------
of the Georgia Class Owner Certificate, hereby grants to Newco an exclusive and
irrevocable option (the "Option") to purchase the Georgia Class Owner
------
Certificate, for $1,000, upon the occurrence of any Change of Control (as
defined below) of HFMI, unless (i) such Change of Control of HFMI is approved in
advance, in writing, by Newco, which approval shall not be unreasonably withheld
or (ii) such Option has been waived under the Intercreditor Agreement.
A "Change of Control" of HFMI shall occur if: (i) any individual,
-----------------
corporation, partnership, joint venture, association, trust, unincorporated
organization or other entity (each a "Person") or "group" (within the meaning of
------ -----
Section 13(a)(3) of the Securities Exchange Act of 1934, as amended), other than
Harry Blazer and affiliates (as defined below) of Harry Blazer, at any time (a)
acquires or becomes entitled to acquire or has or becomes entitled to have
beneficial ownership of securities (including options, warrants, rights and
convertible and exchangeable securities) having a majority of the voting power
of the capital stock of HFMI (assuming exercise or conversion solely of
securities held by such Persons or group), or (b) is or becomes entitled to
appoint a majority of the directors of HFMI, or (c) enters into any binding
arrangement, agreement or proposal to do any of the foregoing; or (ii) Harry
Blazer or affiliates of Harry Blazer, at any time, cease to be entitled (a) to
beneficial ownership of securities having a majority of the voting power of the
capital stock of HFMI, or (b) to appoint a majority of the directors of HFMI; or
(iii) a majority of the directors of HFMI at the date hereof are removed or
replaced without the approval of a majority of the directors of HFMI. An
"affiliate" of any Person means another Person that directly or indirectly,
---------
<PAGE>
13
through one or more intermediaries, controls, is controlled by, or is under the
control with, such first Person.
For the avoidance of doubt, (i) it shall be reasonable for Newco to
withhold its approval to a proposed Change of Control of HFMI under this Section
3.06 (except as set forth in the last paragraph of this Section 3.06) pursuant
to which the Person that will control HFMI following such proposed Change of
Control is a competitor of any of Newco, any subsidiary of Newco, Parent or any
subsidiary of Parent, and (ii) it shall not be reasonable for Newco to withhold
its approval to a proposed Change of Control of HFMI under this Section 3.06
where such Change of Control arises solely because of the death or disability of
Harry Blazer.
HFMI shall, and shall use its best efforts to procure that Harry Blazer
and Harry Blazer, Inc., will, prior to taking any action which may lead to a
Change of Control, including entering into negotiations or discussions with any
other Persons, provide reasonable notice to Newco to the effect that it is
taking such action. In the event that Newco receives information from HFMI,
Harry Blazer or Harry Blazer, Inc. under this provision, Newco agrees to hold
such information in confidence, except that it may share the information with
its legal advisors or as required by law.
Notwithstanding the foregoing provisions of this Section 3.06, in the
event that a Change of Control is proposed at a time when neither Newco nor any
of its successors has for at least 36 months prior to such Change of Control
actively engaged in the planning, development or operation of any business
involving primarily the retail sale of fresh fruits and vegetables, meats,
seafood or bakery goods primarily for take out, then HFMI may (subject to
Newco's written approval which shall not be unreasonably withheld) effect such a
Change of Control (even if as a result thereof a competitor of any of Newco, any
subsidiary of Newco, Parent or any subsidiary of Parent acquires control of
HFMI); provided, however, Newco may, immediately prior to the occurrence of such
Change of Control, exercise the Option, but only if Newco shall thereupon grant
to HFMI a perpetual, royalty-free nonexclusive license of the trade secrets and
know-how contained in the Intellectual Property for use by HFMI.
SECTION 3.07 Exercise of Call Option. In the event that Newco wishes
-----------------------
to exercise the Option, Newco shall send a written notice to HFMI specifying the
place, time and date for the closing of the purchase of the Georgia Class
Ownership Certificate. At such a closing for the exercise of the Option and
purchase by Newco of the Georgia Class Ownership Certificate:
(a) Newco shall pay the option price therefor to HFMI, by delivering
to Newco a certified or bank check payable to or upon the order of HFMI in the
amount of $1,000; and
<PAGE>
14
(b) HFMI shall deliver to the Trustee, with a copy to Newco, all
documentation, instruments and agreements, including the Georgia Class Ownership
Certificate, necessary to transfer all of its right, title and interest in the
Georgia Class Ownership Certificate to Newco.
SECTION 3.08 Persons Deemed Owners. Prior to the due presentation of
---------------------
an Owner Certificate for registration of transfer, the Trustee may treat the
Person in whose name any Owner Certificate shall be registered in the
certificate register as the Owner of such Owner Certificate for the purpose of
receiving distributions pursuant to Articles V and IX and for all other purposes
whatsoever, and the Trustee shall not be affected by any notice to the contrary.
ARTICLE IV
Actions by the Trust and the Trustee
------------------------------------
SECTION 4.01 Actions by the Trust; Power of Owners with Respect to
-----------------------------------------------------
Certain Matters. The Trust shall have no officers, employees or other
- ---------------
management. Pursuant to the Administration and Servicing Agreement and the
Licensee Control Agreement, the Trust has engaged the Servicer and will within a
reasonable period, engage a controller to take all actions that the Trust is
required to take pursuant to this Agreement and to protect, preserve, maintain
and defend the Trust Estate. The Trustee shall not take any actions on behalf
of the Trust unless authorized in writing by the Servicer to take such action.
In addition, in accordance with the provisions of the Administration and
Servicing Agreement, each Owner may request that the Servicer take actions under
the Administration and Servicing Agreement consistent with the terms, conditions
and purposes of this Agreement with respect to matters that exclusively affect
the portion of the relevant Series Estate represented by such Owner's Ownership
Interest in accordance with such Owner's written request.
SECTION 4.02 Action with Respect to Bankruptcy. None of the Trustee,
---------------------------------
the Owners or the Servicer shall have the power to commence or consent to the
commencement of a proceeding relating to the Trust under the Federal Bankruptcy
Code or similar insolvency laws and the Trust shall not have the power to
commence a voluntary case under the Federal Bankruptcy Code or similar
insolvency laws.
SECTION 4.03 Restrictions on Owners' and Servicer's Power. The Owners
--------------------------------------------
and the Servicer shall not direct the Trustee to take or refrain from taking any
action if such action or inaction would be contrary to any obligation of the
Trust or the Trustee under this Agreement, or would be contrary to Section 2.03;
nor shall the Trustee be obligated to follow any such direction, if given.
<PAGE>
15
SECTION 4.04 Approval of Servicer On the date hereof Newco will be
--------------------
appointed Servicer pursuant to the Administration and Servicing Agreement.
Prior to resigning as Servicer, Newco shall obtain the consent of HFMI to the
new servicer (which consent shall not be unreasonably withheld).
ARTICLE V
Distribution of Trust Estate
----------------------------
SECTION 5.01 Distribution of Trust Estate. Upon the termination of the
----------------------------
Trust (a) pursuant to Section 9.01(a)(i), the parties shall negotiate a mutually
acceptable division of the Trust; or (b) in the event of a voluntary or
involuntary liquidation, dissolution or winding up of the Trust, the entire
Trust Estate shall be distributed by the Servicer, on behalf of the Trust, as
follows: (i) the Worldwide Class Series Estate shall be assigned, conveyed and
distributed to the Owner by the Worldwide Class Owner Certificate and (ii) the
Georgia Class Series Estate shall be assigned, conveyed and distributed to the
Owner of the Georgia Class Owner Certificate. Upon termination of the Trust
pursuant to Section 9.01(a)(ii), the entire Trust Estate shall be immediately
distributed by the Servicer, on behalf of the Trust, to the Owner of the
Worldwide Class Owner Certificate.
ARTICLE VI
Authority and Duties of Trustee
-------------------------------
SECTION 6.01 General Authority. The Trustee is authorized and directed
-----------------
to execute and deliver on behalf of the Trust, the Administration and Servicing
Agreement, the Power of Attorney attached as an exhibit to the Administration
and Servicing Agreement, the Licensee Control Agreement, the Power of Attorney
attached as an exhibit to the Licensee Control Agreement, the Transfer
Agreement, the Assignment of Intellectual Property, the Newco License and the
HFMI License. In addition to the foregoing, the Trustee is authorized and
directed to take all actions required of the Trust pursuant to this Agreement if
so directed in writing by the Servicer in accordance with the Servicing
Agreement.
SECTION 6.02 General Duties. It shall be the duty of the Trustee to
--------------
discharge (or cause to be discharged by the Servicer [or the third party
management company] all of its responsibilities pursuant to the terms of this
Agreement and to administer the Trust in the interest of the various Owners, in
accordance with the provisions of this Agreement.
<PAGE>
16
SECTION 6.03 Action upon Instruction.
-----------------------
(a) Except as otherwise expressly specified to the contrary herein, the
Servicer, pursuant to the Administration and Servicing Agreement, may by written
instruction direct the actions of the Trustee with regard to the Trust so long
as such instructions are not inconsistent with the express terms set forth in
this Agreement.
(b) The Trustee shall not be required to take any action hereunder if
the Trustee shall have reasonably determined, or shall have been advised by
counsel (such counsel to be selected in good faith, without gross negligence or
willful misconduct), that such action is likely to result in liability on the
part of the Trustee or is contrary to the terms hereof or is otherwise contrary
to law. In such cases, the Trustee shall notify the Owners that it has decided
not to take an action directed by the Servicer and of its reasons for that
decision.
(c) Whenever (i) the Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or (ii)
the Trustee is unsure as to the application of any provision of this Agreement
or any such provision is ambiguous as to its application, or is, or appears to
be, in conflict with any other applicable provision, or this Agreement permits
any determination by the Trustee or is silent or is incomplete as to the course
of action that the Trustee is required to take with respect to a particular set
of facts, the Trustee shall promptly give notice (in such form as shall be
appropriate under the circumstances) to the Servicer; and, to the extent the
Trustee acts in good faith in accordance with any written instruction of the
Servicer received, the Trustee shall not be liable on account of such action to
any person. If the Trustee shall not have received appropriate written
instruction within ten days of such notice (or within such shorter period of
time as reasonably may be specified in such notice or may be necessary under the
circumstances), it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement, as it shall reasonably
in good faith deem to be in the best interests of the Owners, and shall have no
liability to any person for such action or inaction. In cases in which the
Trustee does not timely receive appropriate written instruction, the Trustee
shall notify the Owners concerning the action or inaction that it deemed to be
in the best interests of the Owners.
SECTION 6.04 No Duties Except as Specified in this Agreement or in
-----------------------------------------------------
Instructions. The Trustee shall not have any duty or obligation to manage, make
- ------------
any payment with respect to, register, record, sell, dispose of, perfect or
maintain any security interest in, or otherwise deal with any part of the Trust
Estate, prepare, file or record any document or report, or to otherwise take or
refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Trust is a party, except as expressly provided
by the terms of this Agreement or in any document or written instruction
received by the Trustee pursuant to Section 6.03; and no implied duties or
<PAGE>
17
obligations shall be read into this Agreement against the Trustee. WTC
nevertheless agrees that it will, at its own cost and expense, promptly take all
action as may be necessary to discharge any liens on any part of the Trust
Estate that result from actions by, or claims against, WTC that are not related
to the ownership or the administration of the Trust Estate.
SECTION 6.05 No Action Except Under Specified Documents or
---------------------------------------------
Instructions. The Trustee shall not manage, control, use, sell, dispose of or
- ------------
otherwise deal with any part of the Trust Estate except in accordance with any
document or instruction delivered to the Trustee pursuant to Section 6.03.
SECTION 6.06 Accounting and Reports to the Owners, the Internal Revenue
----------------------------------------------------------
Service and Others. The Servicer shall, on behalf of the Trust, (a) maintain
- ------------------
(or cause to be maintained) the books of the Trust, (b) deliver to each Owner,
as may be required by the Code and applicable Treasury Regulations, such
information as may be required to enable each Owner to timely prepare its
Federal and state income tax returns, (c) prepare in the manner required by law
and timely file such tax returns relating to the Trust consistent with the
characterization of the Trust as a grantor trust for Federal income tax purposes
unless otherwise required by law and (d) cause such tax returns to be signed in
the manner required by law.
SECTION 6.07 Signature on Returns. The Trustee shall sign on behalf of
--------------------
the Trust the tax returns of the Trust, unless applicable law requires an Owner
to sign such documents, in which case such documents shall be signed by the
Owner of the Worldwide Class Owner Certificate on behalf of the Trust.
SECTION 6.08 Restrictions. The Trustee shall not take any action (a)
------------
that is inconsistent with the purposes of the Trust set forth in Section 2.03 or
(b) that, to the actual knowledge of the Trustee, would result in the Trust
being treated as an association taxable as a corporation for Federal income tax
purposes. The Owners shall not direct the Trustee to take any action that would
violate the provisions of this Section.
ARTICLE VII
Concerning the Trustee
----------------------
SECTION 7.01 Acceptance of Trusts and Duties. The Trustee accepts the
-------------------------------
trusts hereby created and agrees to perform its duties hereunder with respect to
such trusts but only upon the terms of this Agreement. The Trustee or WTC, as
the case may be, shall not be answerable or accountable under any circumstances,
except (i) for its own bad faith, willful misconduct or gross negligence, (ii)
in the case of the inaccuracy of any representation or warranty contained in
<PAGE>
18
Section 7.03 expressly made by WTC, (iii) for liabilities arising from the
failure by the Trustee to perform obliga tions expressly undertaken by it in the
last sentence of Section 6.04, and (iv) for taxes, fees, or other charges that
are imposed on, based on, or measured by any fees, commissions or compensation
received by the Trustee in connection with any of the transactions contemplated
by this Agreement. In particular, but not by way of limitation (and subject to
the exceptions set forth in the preceding sentence):
(a) the Trustee shall not be liable for any error of judgment made by a
responsible officer of the Trustee (unless as a result of its bad faith, willful
misconduct or gross negligence);
(b) no provision of this Agreement shall require the Trustee to expend
or risk funds or otherwise incur any financial liability in the performance of
any of its rights or powers hereunder, if the Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
(c) under no circumstances shall the Trustee be liable for any
representation, warranty, covenant or agreement made by any party other than the
Trustee;
(d) the Trustee shall not be liable for any action taken or not taken in
good faith reliance upon any written representation, warranty, covenant or
agreement made by any party other than the Trustee;
(e) the Trustee shall not be responsible for or with respect to the
validity or sufficiency of this Agreement or for the due execution hereof by
HFMI or for the form, character, genuineness, sufficiency, value or validity of
any of the Trust Estate, and the Trustee shall in no event assume or incur any
liability, duty, or obligation to any Owner, other than as expressly provided
for herein;
(f) the Trustee will have no duty or liability for the actions or
omissions of the Servicer and shall not be responsible for performance of any
duties that are to be performed by the Servicer under the Administration and
Servicing Agreement; and
(g) the Trustee shall not be liable for any action or inaction taken or
omitted in good faith in accordance with the written instructions of the
Servicer pursuant to this Agreement.
SECTION 7.02 Furnishing of Documents. The Trustee shall furnish to the
-----------------------
Owners and the Servicer promptly upon receipt of a request therefor, duplicates
or copies of all reports, notices, requests, demands, certificates and any other
instruments furnished to or issued by the Trustee hereunder or with respect to
the Intellectual Property and other property or rights held hereunder.
<PAGE>
19
SECTION 7.03 Representations and Warranties of WTC. WTC hereby
-------------------------------------
represents and warrants to the Owners that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority and all material governmental licenses,
authorizations, consents and approvals required under the laws of the State of
Delaware and of the United States to execute, deliver and perform its
obligations under this Agreement and to act as a trustee and fiduciary under
this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby nor compliance by
it with any of the terms or provisions hereof will (i) contravene any Delaware
or Federal law, governmental rule or regulation governing the banking, trust or
fiduciary powers of the Trustee or any judgment or order binding on it, (ii)
constitute any default under its charter documents or by-laws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound, (iii) result in the creation or imposition
of any Lien on the Trust Estate or (iv) require any authorization or approval or
other action by, or notice to or filing with, any governmental or regulatory
authority under Delaware or Federal law with respect to the banking or the trust
powers of the Trustee, except such as have been obtained, given or accomplished.
(d) There is no action, suit, investigation or proceeding pending (or,
to the knowledge of WTC, threatened) against WTC or affecting the property of
WTC before any court, arbitrator or administrative or governmental body which,
individually or in the aggregate, if decided adversely to the interests of WTC,
would have a materially adverse effect upon the ability of WTC to perform its
obligations under this Agreement.
SECTION 7.04 Reliance; Advice of Counsel.
---------------------------
(a) The Trustee shall incur no liability to anyone in acting in good
faith upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond, or other document or paper believed
by it to be genuine and believed by it to be signed by the proper party or
parties. The Trustee may accept a certified copy of a resolution of the board
of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the method of the
<PAGE>
20
determination of which is not specifically prescribed herein, the Trustee may
for all purposes hereof rely on a certificate, signed by any officer of the
relevant party, as to such fact or matter, and such certificate shall constitute
full protection to the Trustee for any action taken or omitted to be taken by it
in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement, the Trustee (i)
may act directly or through its agents or attorneys pursuant to agreements
entered into with any of them, and the Trustee shall not be liable for the
conduct or misconduct of such agents or attorneys if such agents or attorneys
shall have been selected by the Trustee in good faith and without gross
negligence or willful misconduct, and (ii) may consult with counsel, accountants
and other skilled persons to be selected in good faith and without gross
negligence or willful misconduct and employed by it. The Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the written opinion of any such counsel, accountants or other such persons.
SECTION 7.05 Not Acting in Individual Capacity. Except as provided in
---------------------------------
this Article VII, in accepting the Trust hereby created, WTC acts solely as
Trustee hereunder and not in its individual capacity and all persons having any
claim against the Trustee by reason of the transactions contemplated by this
Agreement, shall look only to the Trust Estate for payment or satisfaction
thereof.
SECTION 7.06 Bankruptcy Matters. WTC hereby agrees that it will not
------------------
commence an involuntary bankruptcy proceeding under the Federal Bankruptcy Code
and similar insolvency laws against the Trust for non-payment of amounts owed to
WTC pursuant to Sections 8.01 and 8.02.
ARTICLE VIII
Compensation of Trustee
-----------------------
SECTION 8.01 Trustee's Fees and Expenses. The Trustee shall receive
---------------------------
as compensation for its services hereunder such reasonable fees as have been
separately agreed upon among HFMI, Newco and the Trustee. The Trustee shall be
entitled to be reimbursed from HFMI and Newco for its other reasonable expenses
authorized hereunder and incurred in the performance of its obligations,
including the reasonable compensation, expenses and disbursements of such
agents, representatives, experts and counsel as the Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder.
SECTION 8.02 Indemnification. The Trust, HFMI and Newco shall be
---------------
jointly and severally liable as primary obligors for, and shall indemnify WTC
<PAGE>
21
and its successors, assigns, agents and servants (collectively, the "Trustee
Indemnified Parties") whether or not any of the transactions contemplated hereby
are consummated from and against, any and all liabilities, obligations, losses,
damages, taxes, penalties, claims, actions and suits, and any and all costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "Expenses") which may at any time be
imposed on, incurred by, or asserted against the Trustee Indemnified Parties in
any way relating to or arising out of this Agreement, the administration of the
Trust and the Trust Estate or the action or inaction of the Trustee authorized
hereunder, except only that the Trust, HFMI and Newco shall not be liable for or
be required to indemnify the Trustee Indemnified Parties from and against
Expenses arising or resulting from any of the matters described in the second
sentence of Section 7.01. The indemnities contained in this Section 8.02 shall
survive the termination of this Agreement or the resignation or removal of the
Trustee.
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION 9.01 Termination of Trust Agreement.
------------------------------
(a) The Trust shall dissolve upon (i) the first date upon which the
Owners of the Worldwide Class Owner Certificate and the Georgia Class Owner
Certificate mutually agree and consent to the termination of the Trust or (ii)
the exercise by Newco of the Option, pursuant to Section 3.07, following the
occurrence of a Change of Control of HFMI and the subsequent transfer of the
Georgia Class Owner Certificate to Newco. The bankruptcy, liquidation,
dissolution, death or incapacity of any Owner or the Trustee shall not (x)
operate to terminate this Agreement or the Trust, nor (y) entitle such Owner's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding-up of all or any part of the
Trust or Trust Estate nor (z) otherwise affect the rights, obligations and
liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), neither HFMI, Newco nor any
other person shall be entitled to revoke or terminate the Trust.
(c) Upon completion of the winding-up of the Trust, the Trustee shall
cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
the Act and the Trust and this Agreement (other than Section 8.02) shall
terminate.
<PAGE>
22
ARTICLE X
Successor Trustees
and Additional Trustees
-----------------------
SECTION 10.01 Resignation or Removal of Trustee. The Trustee may at
---------------------------------
any time resign and be discharged from the trusts hereby created by giving 30-
days written notice thereof to the Owners and the Servicer. Upon receiving such
notice of resignation, the Servicer, on behalf of the Trust and as directed by
mutual consent of the Owners, shall promptly appoint a successor Trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor Trustee. If no
successor Trustee shall have been so appointed and have accepted appointment
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
If at any time the Trustee shall fail to resign after written request
therefor by the Owners or if at any time the Trustee shall be legally unable to
act, or shall be adjudged bankrupt or insolvent, or a receiver of the trustee or
of its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Owners (acting
unanimously) may remove the Trustee. If the Servicer (upon the instruction of
the Owners) or the Owners shall remove the Trustee under the authority of the
immediately preceding sentence, the Servicer or the Owners, as the case may be,
shall promptly appoint a successor Trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the outgoing Trustee so
removed and one copy to the successor Trustee and payment of all fees owed to
the outgoing Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor Trustee pursuant to
Section 10.02 and payment of all fees and expenses owed to the outgoing Trustee,
at which time the retiring Trustee will be fully discharged of its duties and
liabilities hereunder, except for liabilities arising prior to the date of such
resignation or removal.
SECTION 10.02 Successor Trustee. Any successor Trustee shall at all
-----------------
times be a trust company or a banking corporation organized and existing under
the laws of the State of Delaware having all corporate, trust and fiduciary
powers and all material government licenses, authorizations, consents and
approvals required to carry on a trust business and having at all times an
aggregate capital, surplus and undivided profits of not less than $50,000,000
(or the obligations and liabilities of which are irrevocably and unconditionally
guaranteed by the affiliated person having a combined capital and surplus of at
least $50,000,000 and shall not be an affiliate of any of the Owners) and shall
<PAGE>
23
have its principal place of business in the State of Delaware. Any successor
Trustee appointed pursuant to Section 10.01 shall execute, acknowledge and
deliver to its predecessor Trustee an instrument accepting such appointment
under this Agreement, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor Trustee, without
any further act, deed or conveyance, shall become fully vested with all the
estates, properties, rights, powers, duties, trusts, and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Trustee. The predecessor Trustee shall upon payment of its fees and expenses
deliver to the successor Trustee all documents and statements and monies held by
it under this Agreement; and the Owners and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Trustee all such rights, powers, duties, and obligations.
SECTION 10.03 Merger or Consolidation of Trustee. Any corporation into
----------------------------------
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or con
solidation to which the Trustee shall be a party, or any corporation succeeding
to all or substantially all of the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder without the execution or filing
of any instrument or any further act on the part of any of the parties hereto;
anything herein to the contrary notwithstanding, provided such resulting entity
shall be eligible under the Act and this Agreement.
SECTION 10.04 Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provision of this Agreement, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Trust Estate may at the time be located, the Servicer and the Trustee,
acting jointly in consultation with HFMI, shall have the power and shall execute
and deliver all instruments to appoint one or more persons, approved by the
Trustee, to act as co-trustee, jointly with the Trustee, or as separate trustee,
solely at the direction of the Trustee, of all or any part of the Trust Estate,
and to vest in such person, in such capacity, such title to the Trust Estate, or
any part thereof, and, subject to the terms of this Agreement, such powers,
duties, obligations, rights and trusts as the Servicer and the Trustee may
consider necessary or desirable. No co-trustee or separate trustee shall be
required to meet the eligibility requirements for a successor trustee pursuant
to Section 10.02, and no notice of appointment of any co-trustee or separate
trustee shall be required.
<PAGE>
24
ARTICLE XI
Indemnification
---------------
SECTION 11.01 General Indemnification. Each Owner of an Owner
-----------------------
Certificate (the "Indemnifying Party") hereby agrees to indemnify, defend and
------------------
hold harmless the other Owner (and its directors, officers, employees,
affiliates, successors and assigns) (the "Indemnitees") from and against all
-----------
losses, liabilities, damages, deficiencies, demands, claims, actions, judgments
or causes of action, assessments, costs or expenses (including, without
limitation, interest, penalties and reasonable attorneys' fees and
disbursements) ("Losses") to the extent such Losses are based upon, arise out of
------
or otherwise are incurred as a result of the failure by the Indemnifying Party
to make any payment required to be made by such Indemnifying Party pursuant to
Section 2.06 of this Agreement.
SECTION 11.02 Notice and Opportunity to Defend.
--------------------------------
(a) Promptly after receipt by any Indemnitee of notice of any demand,
claim or circumstance that, with the lapse of time, would or might give rise to
a claim or the commencement (or threatened commencement) of any action,
proceeding or investigation (an "Asserted Liability") that may result in a Loss,
------------------
the Indemnitee shall give notice thereof (the "Claims Notice") to any
-------------
Indemnifying Party. The Claims Notice shall describe the Asserted Liability in
reasonable detail, and shall indicate the amount (estimated, if necessary and to
the extent feasible) of the Loss that has been or may be suffered by the
Indemnitee.
(b) The Indemnifying Party may elect to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall within 30
days (or sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the compromise of, or defense against,
such Asserted Liability. If the Indemnifying Party elects not to compromise or
defend the Asserted Liability, fails to notify the Indemnitee of its election as
herein provided or contests its obligation to indemnify under this Agreement,
the Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the objection of the other; provided,
--------
however, that consent to settlement or compromise shall not be unreasonably
- -------
withheld. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such Asserted Liability.
If the Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense.
<PAGE>
25
(c) Except to the extent expressly provided otherwise herein among the
Owners (in their capacities as such), the Owners shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations organized under the Delaware General Corporations Law.
ARTICLE XII
Miscellaneous
-------------
SECTION 12.01 Supplements and Amendments. This Agreement and the
--------------------------
Certificate of Trust may be amended by the Trustee, without the consent of the
Owners, to cure any ambiguity, to correct or supplement any provisions in this
Agreement or the Certificate of Trust, or to add any other provisions with
respect to matters or questions arising under this Agreement or the Certificate
of Trust that shall not be inconsistent with the provisions hereof or thereof;
provided, however, that such action shall not adversely affect in any respect
- -------- -------
the interests of the Owners, and the Owners shall be notified of such amendment
by the Trustee.
This Agreement and the Certificate of Trust may also be amended from time
to time by the Trustee with the consent of all of the Owners (which consent of
any Owner given pursuant to this Section or pursuant to any other provision of
this Agreement shall be conclusive and binding on Owner and on all future Owners
of such Owner's Owner Certificate and of any Owner Certificate issued upon the
transfer thereof or in exchange or in lieu thereof whether or not notation of
such consent is made upon the Owner Certificate) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or the Certificate of Trust or of modifying in any manner the
rights of the Owners.
Promptly after the execution of any amendment to the Certificate of
Trust, the Trustee shall cause the filing of such amendment with the Secretary
of State and provide copies thereof to the Owners.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Trustee shall be entitled to receive and rely upon a
written opinion of counsel reasonably satisfactory to the Trustee stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 12.02 No Legal Title to Trust Estate in Owners. The Owners
----------------------------------------
shall not have legal title to any part of the Trust Estate. The Owners shall
not be entitled to create any lien, security interest, mortgage, pledge, charge,
claim or other encumbrance (other than licenses granted in the ordinary course
<PAGE>
26
of business) (a "Lien") in the Trust Estate; provided, however, that the
---- -------- -------
foregoing shall in no respects prohibit any Owner from granting a Lien with
respect to its Ownership Interest. The Owners shall be entitled to receive
distributions with respect to their beneficial ownership interest therein only
in accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title, and interest of the Owners to and in their
ownership interest in the Trust Estate shall operate to terminate this Agreement
or the trusts hereunder or entitle any transferee or other successor to an
accounting or to the transfer to it of legal title to any part of the Trust
Estate.
SECTION 12.03 Limitations on Rights of Others. No person other than
-------------------------------
the Trustee or the Owners shall have any legal or equitable right, remedy or
claim in the Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein. No creditor of an Owner
shall have any right to obtain possession of, or otherwise exercise legal or
equitable remedies with respect to, the property of the Trust.
SECTION 12.04 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given when delivered
in person, by facsimile or telegram or on the next business day when sent by
reputable overnight courier or on the third succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(i) if to HFMI, to
Harry's Farmers Market, Inc.
1180 Upper Hembree Road
Roswell, Georgia 30076
Attention: Harry Blazer
Telecopier: (770) 664-4920
with a copy to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: John Latham, Esq.
Telecopier: (404) 881-7458
<PAGE>
27
(ii) if to the Trust or the Trustee, to
Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopier: (302) 651-1576
with a copy to:
Richards, Layton & Finger
One Rodney Square
Wilmington, Delaware 19899
Attention: Eric A. Mazie, Esq.
Telecopier: (302) 658-6548
(iii) if to Newco or to the Servicer, to
HFMI Acquisition Corporation
14103 Denver West Parkway
Golden, Colorado 80401
Attention: Saad J. Nadhir
Telecopier: (303) 771-4860
SECTION 12.05 Arbitration. If the Owners cannot agree upon an
-----------
allocation of assets or liabilities to a particular Series Estate pursuant to
Section 3.02 within 30 days, the dispute shall be settled and determined by an
arbitrator (which may be the Trustee) mutually agreed upon by the parties (or,
if the parties cannot agree upon an arbitrator within 30 days, an arbitrator
selected by the president of the American Arbitration Association). Such
arbitration shall take place in Atlanta, Georgia in accordance with and pursuant
to the then existing rules of the American Arbitration Association. The fees
and expenses of the arbitrator shall be shared equally by the parties to the
arbitration. The parties agree that the arbitrator shall have the power to
award reasonable attorney's fees and expenses in any proceeding and that the
arbitration award shall be final and binding upon the parties.
SECTION 12.06 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
<PAGE>
28
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 12.07 Separate Counterparts. This Agreement may be executed by
---------------------
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 12.08 Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of the Trustee
and its successors and each Owner and its permitted successors and assigns, all
as herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of such
Owner.
SECTION 12.09 Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 12.10 Governing Law. This agreement shall be construed in
-------------
accordance with the laws of the State of Delaware, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 12.11 Unanimous Consent of Owners. Unless otherwise specified
---------------------------
herein, any action, consent or instruction of the Owners referred to in this
Trust Agreement shall require the unanimous consent of the then-current Owners
of all series.
<PAGE>
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.
WILMINGTON TRUST COMPANY HARRY'S FARMERS MARKET, INC.
By: /s/ Christopher L. Kaiser By: /s/Harry A. Blazer
---------------------------- ------------------------------
Name: Christopher L. Kaiser Name: Harry A. Blazer
Title: Vice President Title: President
HFMI ACQUISITION CORPORATION
By: /s/ Saad J. Nadhir
----------------------------
Name: Saad J. Nadhir
Title: Chief Executive Officer
<PAGE>
EXHIBIT C
---------
[LETTERHEAD OF OFFICE OF THE SECRETARY OF STATE, STATE OF DELAWARE APPEARS HERE]
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF BUSINESS
TRUST REGISTRATION OF "HFMI TRUST", FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY
OF JANUARY, A.D. 1997, AT 5 O'CLOCK P.M.
[SEAL APPEARS HERE]
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2712251 8100 AUTHENTICATION: 8307676
971030925 DATE: 01-29-97
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 05:00 PM 01/29/1997
971030925 - 2712251
CERTIFICATE OF TRUST OF
HFMI TRUST
THIS Certificate of Trust of HFMI Trust (the "Trust"), dated January 29,
--
1997, is being duly executed and filed by Wilmington Trust Company, a Delaware
banking corporation, as trustee, to form a business trust under the Delaware
Business Trust Act (12 Del. C. (S) 3801 et seq).
------ -- ---
1. Name. The name of the business trust formed hereby is HFMI Trust.
----
2. Delaware Trustee. The name and business address of the trustee of the
----------------
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attn: Corporate Trust
Administration.
3. Series Trust. The Trust shall be a series trust and the debts,
------------
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular series shall be enforceable against the
assets of such series only, and not against the assets of the Trust generally.
4. Effective Date. This Certificate of Trust shall be effective on
--------------
January 30, 1997.
--
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY,
as trustee
By: /s/ Norma P. Closs
------------------------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT A
THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND MAY NOT BE SOLD, OR OFFERED FOR SALE, UNLESS REGISTERED PURSUANT TO SUCH ACT
OR UNLESS AN EXEMPTION UNDER SUCH ACT IS AVAILABLE.
TRANSFER OF THIS TRUST CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND
LIMITATIONS SET FORTH IN THE TRUST AGREEMENT.
HFMI TRUST
WORLDWIDE CLASS OWNER CERTIFICATE
UNDER TRUST AGREEMENT DATED AS OF
January 30, 1997
THIS CERTIFIES THAT Harry's Farmers Market, Inc. ("HFMI") is the
----
registered owner of the Worldwide Class Interests in the HFMI Trust (the
"Trust"), a Delaware business trust formed pursuant to the Trust Agreement (as
-----
amended, supplemented or otherwise modified from time to time, the ("Trust
-----
Agreement"), dated as of January 30, 1997, between Wilmington Trust Company, as
- ---------
trustee (the "Trustee") and HFMI. This Trust Certificate is issued pursuant to
-------
and is entitled to the benefits of the Trust Agreement, and each Owner (as
defined in the Trust Agreement) by acceptance hereof shall be bound by the terms
of the Trust Agreement. Reference is hereby made to the Trust Agreement for a
statement of the rights and obligations of the Owner hereof. The Trustee may
treat the person shown on the register maintained by the Trustee pursuant to
Section 3.03 of the Trust Agreement as the absolute Owner hereof for all
purposes.
Capitalized terms used herein without definition have the respective
meanings ascribed to them in the Trust Agreement.
As set forth more fully in the Trust Agreement, each Ownership Interest
in the Trust is separate from the other Ownership Interests in respect of the
assets and liabilities of the Trust allocated to such Ownership Interest. The
Worldwide Class Interests represented by this Worldwide Class Owner Certificate
represent solely the Worldwide Class Series Estate. Pursuant to Section 3804(a)
of the Delaware Business Trust Act, as amended, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to the Worldwide Class Series Estate shall be enforceable against the
assets of such Series Estate only, and not against the assets of any other
Series Estate.
In the manner more fully set forth in, and as limited by, the Trust
Agreement, this Trust Certificate may be transferred upon the books of the
Trustee by the
<PAGE>
registered Owner upon surrender of this Trust Certificate to the Trustee
accompanied by a written instrument of the transferee in form satisfactory to
the Trustee.
In addition, any transferee of this Trust Certificate shall execute and
deliver to the Trustee a letter, in form and substance satisfactory to the
Trustee, agreeing to be bound by the terms of the Trust Agreement.
The Trustee may request an opinion of counsel in form and substance
satisfactory to the Trustee to the effect that the proposed transfer of this
Trust Certificate may be effected without registration under any state or
Federal Securities laws.
This Trust Certificate shall be construed in accordance with the laws
of the State of Delaware, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
IN WITNESS WHEREOF, the Trustee, pursuant to the Trust Agreement, has
caused this Trust Certificate to be issued as of the date hereof.
Dated as of January , 1997
--
Wilmington Trust Company,
not in its individual capacity but solely as Trustee,
By:
-------------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND MAY NOT BE SOLD, OR OFFERED FOR SALE, UNLESS REGISTERED PURSUANT TO SUCH ACT
OR UNLESS AN EXEMPTION UNDER SUCH ACT IS AVAILABLE.
TRANSFER OF THIS TRUST CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND
LIMITATIONS SET FORTH IN THE TRUST AGREEMENT.
HFMI TRUST
GEORGIA CLASS OWNER CERTIFICATE
UNDER TRUST AGREEMENT DATED AS OF
January 30, 1997
THIS CERTIFIES THAT Harry's Farmers Market, Inc. ("HFMI") is the registered
----
owner of the Georgia Class Interests in the HFMI Trust (the "Trust"), a Delaware
-----
business trust formed pursuant to the Trust Agreement (as amended, supplemented
or otherwise modified from time to time, the "Trust Agreement"), dated as of
---------------
January 30, 1997, between Wilmington Trust Company, as trustee (the "Trustee")
-------
and HFMI. This Trust Certificate is issued pursuant to and is entitled to the
benefits of the Trust Agreement, and each Owner (as defined in the Trust
Agreement) by acceptance hereof shall be bound by the terms of the Trust
Agreement. Reference is hereby made to the Trust Agreement for a statement of
the rights and obligations of the Owner hereof. The Trustee may treat the person
shown on the register maintained by the Trustee pursuant to Section 3.03 of the
Trust Agreement as the absolute Owner hereof for all purposes.
Capitalized terms used herein without definition have the respective
meanings ascribed to them in the Trust Agreement.
As set forth more fully in the Trust Agreement, each Ownership Interest in
the Trust is separate from the other Ownership Interests in respect of the
assets and liabilities of the Trust allocated to such Ownership Interest. The
Georgia Class Interests represented by this Georgia Class Owner Certificate
represent solely the Georgia Class Series Estate. Pursuant to Section 3804(a) of
the Delaware Business Trust Act, as amended, the debts, liabilities, obligations
and expenses incurred, contracted for or otherwise existing with respect to the
Georgia Class Series Estate shall be enforceable against the assets of such
Series Estate only, and not against the assets of any other Series Estate.
In the manner more fully set forth in, and as limited by, the Trust
Agreement, this Trust Certificate may be transferred upon the books of the
Trustee by the registered Owner upon surrender of this Trust Certificate to the
Trustee accompanied by a written instrument of the transferee in form
satisfactory to the Trustee.
<PAGE>
In addition, any transferee of this Trust Certificate shall execute and
deliver to the Trustee a letter, in form and substance satisfactory to the
Trustee, agreeing to be bound by the terms of the Trust Agreement.
The Trustee may request an opinion of counsel in form and substance
satisfactory to the Trustee to the effect that the proposed transfer of this
Trust Certificate may be effected without registration under any state or
Federal Securities laws.
This Trust Certificate shall be construed in accordance with the laws of
the State of Delaware, without reference to its conflict of law provisions, and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
IN WITNESS WHEREOF, the Trustee, pursuant to the Trust Agreement, has
caused this Trust Certificate to be issued as of the date hereof.
Dated as of January __, 1997
Wilmington Trust Company,
not in its individual capacity but solely as Trustee,
By:
--------------------------------------
Name:
Title:
<PAGE>
DRAFT
EXHIBIT D
(To be supplemented from time to time as required under the Trust Agreement)
INTELLECTUAL PROPERTY includes the following intellectual property rights
whether now registered or existing, or hereafter registered or arising:
1. Trademarks (registered and unregistered, including applications for
registration thereof):
MARK REGISTRATION/APPLICATION NO.
---- ---------------------------
Bear Dance and Design 1943178
Grainger County (Stylized) 1883811
Harry's (Stylized) 1929015
Harry's Farmers Market (Stylized) 1854765
Harry's Old Fashioned Layer Cakes and Design 1883775
Marthasville Creamery and Design 1871456
The Pie to Die For 75/023343
Chipitos T-12,443 (Georgia)
Chipitos and Design T-12,444 (Georgia)
Chipitos Jalapeno Tortilla Chips T-12,439 (Georgia)
Chipitos Nacho Cheese Tortilla Chips T-12,438 (Georgia)
Chipitos Restaurant Style White Tortilla Chips T-12,441 (Georgia)
Chipitos Restaurant Style White Tortilla Chips
and Design T-12,442 (Georgia)
Chipitos Tortilla Chips T-12,440 (Georgia)
Grainger County Home Grown Tomatoes T-12,162 (Georgia)
Harry's Farmers Market T-9603 (Georgia)
Harry's Farmers Market and Design T-9602 (Georgia)
Hungry In A Hurry Meals T-10,945 (Georgia)
Coal River Orchard n/a
Crispitos n/a
Harry's High 5 and Design n/a
Spill-Da-Beans n/a
2. Trade Names
Harry's
Harry's Farmers Market
Marthasville Trading
<PAGE>
3. Service Marks (registered and unregistered, including applications for
registration thereof):
MARK REGISTRATION NO.
---- ----------------
Harry's (Stylized) 1929015
Harry's Farmers Market (Stylized) 1854765
Harry's In A Hurry and Design 1850126
Harry's Farmers Market S-9819 (Georgia)
Harry's Farmers Market and Design S-9820 (Georgia)
Hungry In A Hurry Meals S-10,946 (Georgia)
Lion Forest Supermarket S-15,415 (Georgia)
4. Logos
Attached
5. Copyrights (registered and unregistered, including applications for
registration thereof):
"Food for the way we live today."
product labels for Harry's brand name foods
training and instructional manuals
customized software
content of Harry's webpage
6. Trade Secrets
Recipes owned by Harry's for Harry's brand name foods
7. Know-How
Fresh food procurement, handling, preparation, transportation, storage and
replenishment
Fresh food waste control
Par baking, packaging and preparation of ready to eat meals
8. Domain Name
www.hfm.com
-2-
<PAGE>
WORLDWIDE CLASS INTELLECTUAL PROPERTY includes the rights in the Intellectual
Property that are available for worldwide use and commercialization, exclusive
of the State of Georgia and the State of Alabama, United States of America.
GEORGIA CLASS INTELLECTUAL PROPERTY includes the rights in the Intellectual
Property that are available for, and limited solely to, use and
commercialization within the State of Georgia and the State of Alabama, United
States of America.
-3-
<PAGE>
Int. Cls.: 29, 30, 31 and 42
Prior U.S. Cls.: 46, 100 and 101
Reg. No. 1,929,015
UNITED STATES PATENT AND TRADEMARK OFFICE Registered Oct. 24, 1995
- -------------------------------------------------------------------------------
TRADEMARK
SERVICE MARK
PRINCIPAL REGISTER
[Logo of Harry's appears here]
HARRY'S FARMERS MARKET, INC. (GEORGIA CORPORATION)
1180 UPPER HEMBREE ROAD
ROSWELL, GA 30076
FOR: FRESH FISH, SEAFOOD, POULTRY, MEATS AND CHEESE, IN CLASS 29 (U.S. CL.
46).
FIRST USE 7-1-1988; IN COMMERCE 7-1-1988
FOR: STAPLE FOODS, NAMELY BREADS, PASTRIES, PIZZA, PASTA, DRIED SPICES AND
COFFEE, IN CLASS 30 (U.S. CL. 46).
FIRST USE 7-1-1988; IN COMMERCE 7-1-1988.
FOR: FRESH FRUITS AND VEGETABLES AND READY-TO-EAT SALADS CONSISTING OF FRESH
FRUITS AND VEGETABLES, IN CLASS 31 (U.S. CL. 46).
FIRST USE 7-1-1988; IN COMMERCE 7-1-1988.
FOR; RETAIL SPECIALTY GROCERY, MEAT AND PRODUCE STORE SERVICES, IN CLASS 42
(U.S. CLS. 100 AND 101).
FIRST USE 7-1-1988; IN COMMERCE 7-1-1988.
SER. NO. 74-444,333, FILED 10-6-1993.
PRISCILLA MILTON, EXAMINING ATTORNEY
<PAGE>
Int. Cls: 29, 30, 31 and 42
Prior U.S. Cls.: 46 and 101
Reg. No. 1,854,765
United States Patent and Trademark Office Registered Sep. 20, 1994
- --------------------------------------------------------------------------------
TRADEMARK
SERVICE MARK
PRINCIPAL REGISTER
[LOGO OF HARRY'S FARMERS MARKET APPEARS HERE]
HARRY'S FARMERS MARKET, INC. (GEORGIA CORPORATION)
1180 UPPER HEMBREE ROAD
ROSWELL, GA 30076
FOR: FRESH FISH, SEAFOOD, POULTRY, AND MEATS; READY-TO-HEAT, READY-TO-COOK AND
READY-TO-EAT ENTREES CONSISTING OF FISH, SEAFOOD, POULTRY, MEATS AND CHEESE, IN
CLASS 29 (U.S. CL. 46).
FIRST USE 7-1-1988; IN COMMERCE 7-1-1988.
FOR: STAPLE FOODS; NAMELY, BREADS, PASTRIES, PIZZA, DRIED SPICES, AND COFFEE,
IN CLASS 30 (U.S. CL. 46).
FIRST USE 7-1-1988; IN COMMERCE 7-1-1988.
FOR: FRESH FRUITS AND VEGETABLES, AND READY-TO-EAT SALADS CONSISTING OF FRESH
FRUITS AND VEGETABLES, IN CLASS 31 (U.S. CL. 46).
FIRST USE 7-1-1988; IN COMMERCE 7-1-1988.
FOR:RETAIL SPECIALTY GROCERY, MEAT AND PRODUCE SERVICES, IN CLASS 42 (U.S. CL.
101).
FIRST USE 7-1-1988; IN COMMERCE 7-1-1988.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "FARMERS MARKET", APART FROM
THE MARK AS SHOWN.
SER. NO. 74-444,332, FILED 10-6-1993.
PRISCILLA MILTON, EXAMINING ATTORNEY
<PAGE>
Int. Cl.: 42
Prior U.S. Cl.: 101
Reg. No. 1,850,126
UNITED STATES PATENT AND TRADEMARK OFFICE Registered Aug. 16, 1994
- -------------------------------------------------------------------------------
SERVICE MARK
PRINCIPAL REGISTER
[Logo of Harry's In A Hurry appears here]
HARRY'S FARMERS MARKET, INC. (GEORGIA CORPORATION)
1180 UPPER HEMBREE ROAD
ROSWELL, GA 30076
FOR: RETAIL SPECIALTY GROCERY, MEAT AND PRODUCE SERVICES, IN CLASS 42 (U.S. CL.
101).
FIRST USE 3-1-1993; IN COMMERCE 3-1-1993.
SER. NO. 74-444,330, FILED 10-6-1993.
PRISCILLA MILTON, EXAMINING ATTORNEY
<PAGE>
Int. Cl.: 30
Prior U.S. Cl.: 46
Reg. No. 1,883,775
UNITED STATES PATENT AND TRADEMARK OFFICE Registered Mar. 14, 1995
- -------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
[Logo of Harry's Old Fashioned Layer Cakes appears here]
HARRY'S FARMERS MARKET, INC. (GEORGIA CORPORATION)
1180 UPPER HEMBREE ROAD
ROSWELL, GA 30076
FOR: BAKERY GOODS; NAMELY, CAKE, IN CLASS 30 (U.S. CL. 46).
FIRST USE 11-8-1993; IN COMMERCE 11-8-1993.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "OLD FASHIONED LAYER
CAKES", APART FROM THE MARK AS SHOWN.
THE STIPPLING IN THE DRAWING IS A FEATURE OF THE MARK AND IS NOT
INTENDED TO INDICATE COLOR.
SER. NO. 74-501,924, FILED 3-16-1994.
RACHEL BLUE, EXAMINING ATTORNEY
<PAGE>
Int. Cl.: 29
Prior U.S. Cl.: 46
Reg. No. 1,871,456
UNITED STATES PATENT AND TRADEMARK OFFICE Registered Jan. 3, 1995
- -------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
[LOGO OF MARTHASVILLE CREAMERY APPEARS HERE]
HARRY'S FARMERS MARKET, INC. (GEORGIA CORPORATION)
1180 UPPER HEMBREE ROAD
ROSWELL, GA 30076
FOR: DAIRY PRODUCTS; NAMELY, MILK IN CLASS 29 (U.S. CL. 46).
FIRST USE 11-22-1993; IN COMMERCE 11-22-1993.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "FARM FRESH & GOOD" AND
"CREAMERY", APART FROM THE MARK AS SHOWN.
SER. NO. 74-476,509, FILED 1-4-1994.
KEVIN L. SAUL, EXAMINING ATTORNEY
<PAGE>
Int. Cl.: 33
Prior U.S. Cls.: 47 and 49
Reg. No. 1,943,178
UNITED STATES PATENT AND TRADEMARK OFFICE Registered Dec. 19, 1995
- -------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
[Logo of Bear Dance appears here]
HARRY'S FARMERS MARKET, INC. (GEORGIA CORPORATION)
1180 UPPER HEMBREE ROAD
ROSWELL, GA 30076
FOR: WINES, IN CLASS 33 (U.S. CLS. 47 AND 49).
FIRST USE 1-15-1994; IN COMMERCE 1-15-1994.
SN 74-476,223, FILED 1-4-1994.
ZHALEH DELANEY, EXAMINING ATTORNEY
<PAGE>
Int. Cl.: 31
Prior U.S. Cl.: 46
Reg. No. 1,883,811
UNITED STATES PATENT AND TRADEMARK OFFICE Registered Mar. 14, 1995
- -------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
[Logo of Grainger County appears here]
HARRY'S FARMERS MARKET, INC. (GEORGIA CORPORATION)
1180 UPPER HEMBREE ROAD
ROSWELL, GA 30076
FOR: FRESH VEGETABLES; NAMELY, TOMATOES, IN CLASS 31 (U.S. CL. 46).
FIRST USE 5-20-1992; IN COMMERCE 5-20-1992.
SER. NO. 74-444,331, FILED 10-6-1993.
RICHARD A. FRIEDMAN, EXAMINING ATTORNEY
<PAGE>
REGISTERED TRADEMARK OF
Grainger County
Home Grown
Tomatoes
Grown Especially for:
Harry's
Farmers Market
APPEARS HERE
<PAGE>
REGISTERED TRADEMARK OF
Chipitos
White Tortilla Chips
Restaurant Style
APPEARS HERE
<PAGE>
REGISTERED TRADEMARK OF
Chipitos
Tortilla Chips
Nacho Cheese
APPEARS HERE
<PAGE>
REGISTERED TRADEMARK OF
Salted
Chipitos
Tortilla Chips
Jalapeno
APPEARS HERE
<PAGE>
REGISTERED TRADEMARK OF
Salted
Chipitos
Tortilla Chips
APPEARS HERE
<PAGE>
REGISTERED TRADEMARK OF
Harry's
High
5
APPEARS HERE
<PAGE>
EXHIBIT 10.5
================================================================================
----------------------------
NEWCO LICENSE AGREEMENT
BETWEEN
HFMI TRUST
AND
HFMI ACQUISITION CORPORATION
Dated as of January 31, 1997
----------------------------
================================================================================
<PAGE>
NEWCO LICENSE AGREEMENT (the "Agreement") dated as of January 31, 1997
---------
between HFMI TRUST, a Delaware business trust ("Licensor") and HFMI ACQUISITION
--------
CORPORATION., a Delaware corporation ("Newco" or "Licensee").
----- --------
(a) Pursuant to a Trust Agreement dated as of the date hereof (the "Trust
-----
Agreement") between Harry's Farmers Market, Inc., a Georgia corporation
- ---------
("HFMI"), and Wilmington Trust Company, a Delaware banking corporation, as
----
Trustee, HFMI has established Licensor pursuant to the Delaware Business Trust
Act, as amended.
(b) Pursuant to a Transfer Agreement dated as of the date hereof (the
"Transfer Agreement") between and among Newco, HFMI and Licensor, HFMI has
- -------------------
agreed to transfer to Licensor, as more fully described therein and in the
Assignment of Intellectual Property annexed thereto as Exhibit A, all right,
title and interest worldwide in and to the Intellectual Property (as defined in
the Trust Agreement).
(c) Pursuant to the Trust Agreement, Licensor shall issue to HFMI on the
date hereof the Worldwide Class Owner Certificate (as defined in the Trust
Agreement) representing the Worldwide Class Intellectual Property (as defined in
the Trust Agreement) and the Georgia Class Owner Certificate (as defined in the
Trust Agreement) representing the Georgia Class Intellectual Property (as
defined in the Trust Agreement), together with the corresponding irrevocable,
exclusive, perpetual licenses to the Worldwide Class Intellectual Property and
the Georgia Class Intellectual Property.
(d) Pursuant to an Acquisition Agreement dated as of the date hereof (the
"Acquisition Agreement") between Newco and HFMI, HFMI has agreed to transfer to
---------------------
Newco the Worldwide Class Owner Certificate, together with the corresponding
irrevocable, exclusive, perpetual license to the Worldwide Class Intellectual
Property.
(e) Pursuant to an Administration and Servicing Agreement dated as of the
date hereof (the "Administration and Servicing Agreement") between and among
--------------------------------------
Licensor, Newco and HFMI, Newco, as Servicer thereunder, has agreed to perform
certain services for and on behalf of Licensor with respect to certain matters
involving the Intellectual Property.
(f) Licensor wishes to grant to Licensee and Licensee wishes to receive
from Licensor an irrevocable, exclusive, perpetual license with respect to the
Worldwide Class Intellectual Property.
NOW, THEREFORE, in consideration of the foregoing, other good and valuable
consideration and the mutual terms and covenants contained herein, the parties
hereto agree as follows:
<PAGE>
ARTICLE I
Grant of License; Sublicensing
------------------------------
SECTION 1.01 License. Licensor hereby grants Licensee an
-------
irrevocable, exclusive, perpetual license throughout the world, except for the
states of Georgia and Alabama, United States of America (the "Worldwide
---------
Territory") to use, license or sublicense (or refrain from doing the same) the
- ---------
Worldwide Class Intellectual Property on and in connection with the manufacture,
distribution, sale, promotion, advertising, provision and/or marketing of Newco
Products. "Newco Products" shall mean any and all products and services sold,
--------------
licensed, sublicensed, distributed, advertised, provided, and/or marketed with,
under or in connection with the Worldwide Class Intellectual Property.
SECTION 1.02 Sublicensing. Licensee shall have the right to grant
------------
sublicenses to third parties to use the Worldwide Class Intellectual Property,
provided that (i) copies of all such sublicenses granted by Licensee shall be
delivered to Licensor immediately after execution and (ii) any such sublicensee
shall agree in writing to be bound by the terms of this Agreement and the
Administration and Servicing Agreement.
ARTICLE II
Compliance with Other Agreements; Quality Control and Confidentiality
---------------------------------------------------------------------
In connection with their performance under this Agreement, Licensor
and Licensee hereby agree to comply with their respective obligations under the
Transfer Agreement and with the quality control and confidentiality terms and
procedures set forth in Exhibit A annexed hereto.
ARTICLE III
Ownership of Intellectual Property
----------------------------------
SECTION 3.01 Licensee acknowledges that Licensor owns all legal
right, title and interest in and to the Intellectual Property. The parties
agree that any use of the Worldwide Class Intellectual Property made by Licensee
in connection with the manufacture, distribution, sale, promotion, advertising,
provision and/or marketing of Newco Products by Licensee and its affiliates and
sublicensees, shall be deemed to have been made by Licensor for purposes of
trademark and copyright maintenance and registration, and all such uses (and any
goodwill resulting from any such uses) shall inure solely to the benefit of
Licensor. Licensee hereby assigns to Licensor any rights acquired by Licensee by
operation of law or otherwise as a result of any such use.
SECTION 3.02 Licensee shall, at Licensor's reasonable request,
execute any documents and take any actions reasonably required by Licensor to
confirm Licensor's legal title in and to the Intellectual Property and the
respective rights of Licensor and Licensee pursuant to this Agreement. Licensee
2
<PAGE>
will reasonably cooperate with Licensor and will, at Licensor's reasonable
request, take any actions requested by Licensor in connection with the
enforcement of Licensor's rights in and to the Worldwide Class Intellectual
Property, including, without limitation, the settlement of claims and disputes,
the filing and prosecution by Licensor of applications in Licensor's name to
register or otherwise protect the Worldwide Class Intellectual Property and the
maintenance and renewal of such registrations or similar rights as may issue,
subject to the grant to Licensee of the irrevocable, exclusive, perpetual rights
hereunder.
SECTION 3.03 Licensee agrees to take whatever actions that the
Licensor reasonably deems to be necessary to effectuate the purposes of this
Agreement, including recording this Agreement, or other documents prepared by
Licensee and acceptable to Licensor with appropriate government offices
throughout the Worldwide Territory. All reasonable costs of compliance with
this Section (including recording fees, taxes and attorneys' fees) shall be
borne by the Licensee.
ARTICLE IV
Miscellaneous Provisions
------------------------
SECTION 4.01 Amendments. This Agreement supersedes all prior oral or
----------
written understandings and agreements relating thereto, and may not be modified,
discharged or terminated except by a written instrument signed by the parties
hereto.
SECTION 4.02 Waivers. No failure or delay on the part of any party
-------
in exercising any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other or further exercise thereof or the exercise
of any other power, right or remedy.
SECTION 4.03 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability, without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 4.04 No Joint Ventures. Nothing contained in this Agreement
-----------------
shall be construed to create a relationship of partnership, joint venture or
agency between the parties, and this Agreement shall not confer on any party any
power to obligate or bind any other party in any manner whatsoever, except as
specifically provided herein.
SECTION 4.05 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of Georgia applicable to
agreements made and to be performed wholly within such State, and in accordance
with the trademark or copyright laws of the United States, as applicable. The
parties hereby consent to the jurisdiction of the state and federal courts of
general jurisdiction situated in Georgia for the resolution of all
disputes arising out of or relating to this Agreement, and the parties hereby
waive any and all defenses of improper venue or that the forum is inconvenient.
3
<PAGE>
SECTION 4.06 Counterparts. This Agreement may be executed in two or
------------
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which taken together shall constitute one
and the same instrument.
SECTION 4.07 Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of each party
and its respective Successors (as defined in the Trust Agreement).
SECTION 4.08 Limitation of Liability. It is expressly understood and
-----------------------
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as
Trustee of the Trust under the Trust Agreement, in the exercise of the powers
and authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Trust is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Trust, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the Licensee and by any person claiming by,
through or under it and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of
the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under this
Agreement or any related documents.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers duly authorized as of the date and year
first above written.
HFMI ACQUISITION CORPORATION HFMI TRUST
By: WILMINGTON TRUST
By: /s/ Saad J. Nadhir COMPANY, not in its individual
------------------------------ capacity but solely as Trustee,
Name: Saad J. Nadhir
Title: Chief Executive Officer
By: /s/ Christopher L. Kaiser
---------------------------------
Name: Christopher L. Kaiser
Title: Vice President
5
<PAGE>
Exhibit A
---------
QUALITY CONTROL AND CONFIDENTIALITY
-----------------------------------
Newco agrees that all of the Newco Products sold, licensed, sublicensed,
distributed, advertised, provided and/or marketed with or in connection with the
Intellectual Property shall be of a consistent standard of quality, commensurate
with the prestige of the trademarks, service marks, tradename or logos included
in the Intellectual Property, consistent with the Specified Quality Standards
and bearing the relevant copyright and/or trademark notices, as applicable. The
"Specified Quality Standards" shall mean the historical standards of design,
---------------------------
functionality, appearance and safety established, as to the date of this
Agreement, for all products and services sold, licensed, sublicensed,
distributed, advertised, provided and/or marketed with or in connection with the
Worldwide Class Intellectual Property.
Newco shall provide to the Licensor or its authorized agent six samples,
or, in the case of services, sufficient information to evaluate the quality of
such services, with regard to all Newco Products as each Newco Product is
released. Newco shall also provide to the Licensor samples of advertising and
marketing material as such material is released.
The Licensor or its authorized agent shall review such samples and
information provided by Licensee in order to ensure that the Newco Products are
of a consistent standard of quality commensurate with the prestige of the
trademarks, service marks, tradename or logos included in the Intellectual
Property, and the Specified Quality Standards and that the advertising and
marketing material are properly marked and will not adversely affect the
goodwill associated with the trademarks, service marks, Intellectual Property
tradename or logos included in the Intellectual Property nor compromise the
protection of trademarks (whether or not registered), tradenames, logos, or
copyrights (whether or not registered).
Newco shall cooperate fully with the instructions of the Licensor or its
authorized agent with respect to the maintenance of the foregoing standards and
promptly make any changes to the Newco Products, advertising or marketing
material that the Licensor or its authorized agent reasonably requests in
writing in order to achieve compliance with those standards. In the event Newco
fails to cooperate fully with the instructions of the Licensor or its authorized
agent, or in the event Newco reasonably believes the instructions of the
Licensor, or its authorized agent are not warranted, Newco and the Licensor
agree to submit the dispute to binding arbitration.
Newco covenants that with respect to trade secrets, know-how or other
confidential information included in the Intellectual Property, it will maintain
such standards of confidential treatment (whether by itself, its agents,
employees, sublicensees, or others) as may be necessary to preserve any such
legal protection as may be available within the Worldwide Territory for these
items of the Intellectual Property.
<PAGE>
Newco acknowledges that there may not be an adequate remedy at law for
breach of its covenants to maintain the Specified Quality Standards. Newco
therefore consents to the entry of an order against it for specific performance
of its quality control obligations hereunder in the event (a) it is in breach of
that covenant and (b) the Trust, or Servicer acting for the Trust, can meet the
requisite burden of proof for preliminary injunctive relief before the tribunal
chosen to enter the consent order. Such tribunal shall be a court of competent
jurisdiction or an arbitral tribunal chosen by the parties. Newco acknowledges
and agrees that if the parties agree to present any dispute regarding the
maintenance of the Specified Quality Standards to an arbitral tribunal, the
tribunal shall have power to grant such injunctive relief, and Newco will not
contest the validity of any such order for relief based on grounds of lack of
authority or jurisdiction.
<PAGE>
EXHIBIT 10.6
================================================================================
---------------------------
HFMI LICENSE AGREEMENT
BETWEEN
HFMI TRUST
AND
HARRY'S FARMERS MARKET, INC.
Dated as of January 31, 1997
--
---------------------------
================================================================================
<PAGE>
HFMI LICENSE AGREEMENT (the "Agreement") dated as of January 31, 1997
---------
between HFMI TRUST, a Delaware business trust ("Licensor") and Harry's Farmers
--------
Market, Inc., a Georgia corporation ("HFMI" or "Licensee").
---- --------
(a) Pursuant to a Trust Agreement dated as of the date hereof (the "Trust
-----
Agreement") between HFMI and Wilmington Trust Company, a Delaware banking
- ---------
corporation, as Trustee, HFMI has established Licensor pursuant to the Delaware
Business Trust Act, as amended.
(b) Pursuant to a Transfer Agreement dated as of the date hereof (the
"Transfer Agreement") between and among HFMI Acquisition Corporation, a Delaware
- -------------------
corporation ("Newco"), HFMI and Licensor, HFMI has agreed to transfer to
-----
Licensor, as more fully described therein and in the Assignment of Intellectual
Property annexed thereto as Exhibit A, all right, title and interest worldwide
in and to the Intellectual Property (as defined in the Trust Agreement).
(c) Pursuant to the Trust Agreement, Licensor shall issue to HFMI on the
date hereof the Worldwide Class Owner Certificate (as defined in the Trust
Agreement) representing the Worldwide Class Intellectual Property (as defined in
the Trust Agreement) and the Georgia Class Owner Certificate (as defined in the
Trust Agreement) representing the Georgia Class Intellectual Property (as
defined in the Trust Agreement), together with the corresponding irrevocable,
exclusive, perpetual licenses to the Worldwide Class Intellectual Property and
the Georgia Class Intellectual Property.
(d) Pursuant to an Acquisition Agreement dated as of the date hereof (the
"Acquisition Agreement") between Newco and HFMI, HFMI has agreed to transfer to
---------------------
Newco the Worldwide Class Owner Certificate, together with the corresponding
irrevocable, exclusive, perpetual license to the Worldwide Class Intellectual
Property.
(e) Pursuant to an Administration and Servicing Agreement dated as of the
date hereof (the "Administration and Servicing Agreement") between and among
--------------------------------------
Licensor, Newco and HFMI, Newco, as Servicer thereunder, has agreed to perform
certain services for and on behalf of Licensor with respect to certain matters
involving the Intellectual Property.
(f) Licensor wishes to grant to Licensee and Licensee wishes to receive
from Licensor an irrevocable, exclusive, perpetual license with respect to the
Georgia Class Intellectual Property.
NOW, THEREFORE, in consideration of the foregoing, other good and valuable
consideration and the mutual terms and covenants contained herein, the parties
hereto agree as follows:
1
<PAGE>
ARTICLE I
Grant of License; Sublicensing
------------------------------
SECTION 1.01 License. Licensor hereby grants Licensee an
-------
irrevocable, exclusive, perpetual license throughout the states of Georgia and
Alabama, United States of America (the "Georgia Territory") to use and, subject
-----------------
to Section 1.02 below, license and sublicense (or refrain from doing the same)
the Georgia Class Intellectual Property on and in connection with the
manufacture, distribution, sale, promotion, advertising, provision and/or
marketing of HFMI Products. "HFMI Products" shall mean any and all products and
-------------
services sold, licensed, sublicensed, distributed, advertised, provided, and/or
marketed with, under or in connection with the Georgia Class Intellectual
Property.
SECTION 1.02 Restriction on Sublicense and Transfer. Licensee shall
--------------------------------------
not, without the prior written approval of Newco (which shall not be
unreasonably withheld), sublicense, license, transfer, assign or otherwise
convey ("Transfer") all or any part of its right, title or interest in and to
--------
this Agreement and the Georgia Intellectual Property. For the avoidance of
doubt, it shall be reasonable for Newco to withhold its approval to a proposed
Transfer of all or any part of HFMI's right, title or interest in and to this
Agreement and the Georgia Intellectual Property where the individual,
corporation, partnership, joint venture, association, trust, unincorporated
organization or other entity that HFMI proposes will receive the rights or
interest subject to such Transfer is a competitor (in the determination of Newco
at its absolute discretion) of Newco, any subsidiary of Newco, Parent, or any
subsidiary of Parent.
SECTION 1.03 Transfer following exercise of Call Option. In the
------------------------------------------
event that Newco exercises the Option (as defined in the Trust Agreement) to
purchase the Georgia Class Owner Certificate from HFMI, HFMI shall transfer and
assign all of its right, title and interest in and to this Agreement and the
Georgia Class Intellectual Property to Newco, without further consideration
being payable to HFMI by Newco.
ARTICLE II
Compliance with Other Agreements; Quality Control and Confidentiality
---------------------------------------------------------------------
In connection with their performance under this Agreement, Licensor
and Licensee hereby agree to comply with their respective obligations under the
Transfer Agreement and with the quality control and confidentiality terms and
procedures set forth in Exhibit A annexed hereto.
2
<PAGE>
ARTICLE III
Ownership of Intellectual Property
----------------------------------
SECTION 3.01 Licensee acknowledges that Licensor owns all legal
right, title and interest in and to the Intellectual Property. The parties
agree that any use of the Georgia Class Intellectual Property made by Licensee
in connection with the manufacture, distribution, sale, promotion, advertising,
provision and/or marketing of HFMI Products by Licensee and its affiliates and
sublicensees, shall be deemed to have been made by Licensor for purposes of
trademark and copyright maintenance and registration, and all such uses (and any
goodwill resulting from any such uses) shall inure solely to the benefit of
Licensor. Licensee hereby assigns to Licensor any rights acquired by Licensee by
operation of law or otherwise as a result of any such use.
SECTION 3.02 Licensee shall, at Licensor's reasonable request,
execute any documents and take any actions reasonably required by Licensor to
confirm Licensor's legal title in and to the Intellectual Property and the
respective rights of Licensor and Licensee pursuant to this Agreement. Licensee
will reasonably cooperate with Licensor and will, at Licensor's reasonable
request, take any actions requested by Licensor in connection with the
enforcement of Licensor's rights in and to the Georgia Class Intellectual
Property, including, without limitation, the settlement of claims and disputes,
the filing and prosecution by Licensor of applications in Licensor's name to
register or otherwise protect the Georgia Class Intellectual Property and the
maintenance and renewal of such registrations or similar rights as may issue,
subject to the grant to Licensee of the irrevocable, exclusive, perpetual rights
hereunder.
SECTION 3.03 Licensee agrees to take whatever actions that the
Licensor reasonably deems to be necessary to effectuate the purposes of this
Agreement, including recording this Agreement, or other documents prepared by
Licensee and acceptable to Licensor with appropriate government offices
throughout the Georgia Territory. All reasonable costs of compliance with this
Section (including recording fees, taxes and attorneys' fees) shall be borne by
the Licensee.
ARTICLE IV
Miscellaneous Provisions
------------------------
SECTION 4.01 Amendments. This Agreement supersedes all prior oral or
----------
written understandings and agreements relating thereto, and may not be modified,
discharged or terminated except by a written instrument signed by the parties
hereto.
SECTION 4.02 Waivers. No failure or delay on the part of any party
-------
in exercising any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other or further exercise thereof or the exercise
of any other power, right or remedy.
3
<PAGE>
SECTION 4.03 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability, without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 4.04 No Joint Ventures. Nothing contained in this Agreement
-----------------
shall be construed to create a relationship of partnership, joint venture or
agency between the parties, and this Agreement shall not confer on any party any
power to obligate or bind any other party in any manner whatsoever, except as
specifically provided herein.
SECTION 4.05 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of Georgia applicable to
agreements made and to be performed wholly within such State, and in accordance
with the trademark or copyright laws of the United States, as applicable. The
parties hereby consent to the jurisdiction of the state and federal courts of
general jurisdiction situated in Georgia for the resolution of all disputes
arising out of or relating to this Agreement, and the parties hereby waive any
and all defenses of improper venue or that the forum is inconvenient. In the
event Newco fails to cooperate fully with the instructions of the Licensor or
its authorized agent, or in the event Newco reasonably believes the instructions
of the Licensor, or its authorized agent are not warranted, Newco and the
Licensor agree to submit the dispute to binding arbitration.
SECTION 4.06 Counterparts. This Agreement may be executed in two or
------------
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which taken together shall constitute one
and the same instrument.
SECTION 4.07 Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of each party
and its respective Successors (as defined in the Trust Agreement).
SECTION 4.08 Limitation of Liability. It is expressly understood and
-----------------------
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as
Trustee of the Trust under the Trust Agreement, in the exercise of the powers
and authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Trust is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Trust, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the Licensee and by any person claiming by,
through or under it and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of
the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under this
Agreement or any related documents.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers duly authorized as of the date and year
first above written.
HARRY'S FARMERS MARKET, INC. HFMI TRUST
By: WILMINGTON TRUST
By: /s/ Harry A. Blazer COMPANY, not in its individual
------------------------ capacity but solely as Trustee,
Name: Harry A. Blazer
Title: President
By: /s/ Christopher L. Kaiser
---------------------------------
Name: Christopher L. Kaiser
Title: Vice President
5
<PAGE>
Exhibit A
---------
QUALITY CONTROL AND CONFIDENTIALITY
-----------------------------------
HFMI agrees that all of the HFMI Products sold, licensed, sublicensed,
distributed, advertised, provided and/or marketed with or in connection with the
Intellectual Property shall be of a consistent standard of quality, commensurate
with the prestige of the trademarks, service marks, tradename or logos included
in the Intellectual Property, consistent with the Specified Quality Standards
and bearing the relevant copyright and/or trademark notices, as applicable. The
"Specified Quality Standards" shall mean the historical standards of design,
---------------------------
functionality, appearance and safety established, as to the date of this
Agreement, for all products and services sold, licensed, sublicensed,
distributed, advertised, provided and/or marketed with or in connection with the
Georgia Class Intellectual Property.
HFMI shall provide to the Licensor or its authorized agent six samples, or,
in the case of services, sufficient information to evaluate the quality of such
services, with regard to all HFMI Products as each HFMI Product is released.
HFMI shall also provide to the Licensor samples of advertising and marketing
material as such material is released.
The Licensor or its authorized agent shall review such samples and
information provided by Licensee in order to ensure that the HFMI Products are
of a consistent standard of quality commensurate with the prestige of the
trademarks, service marks, tradename or logos included in the Intellectual
Property, and the Specified Quality Standards and that the advertising and
marketing material are properly marked and will not adversely affect the
goodwill associated with the trademarks, service marks, Intellectual Property
tradename or logos included in the Intellectual Property nor compromise the
protection of trademarks (whether or not registered), tradenames, logos, or
copyrights (whether or not registered).
HFMI shall cooperate fully with the instructions of the Licensor or its
authorized agent with respect to the maintenance of the foregoing standards and
promptly make any changes to the HFMI Products, advertising or marketing
material that the Licensor or its authorized agent reasonably requests in
writing in order to achieve compliance with those standards. In the event HFMI
fails to cooperate fully with the instructions of the Licensor or its authorized
agent, or in the event HFMI reasonably believes the instructions of the Licensor
or its authorized agent are not warranted, HFMI and Licensor agree to submit the
dispute to binding arbitration.
HFMI covenants that with respect to trade secrets, know-how or other
confidential information included in the Intellectual Property, it will maintain
such standards of confidential treatment (whether by itself, its agents,
employees, sublicensees, or others) as may be necessary to preserve any such
legal protection as may be available within the Georgia Territory for these
items of the Intellectual Property.
<PAGE>
HFMI acknowledges that there may not be an adequate remedy at law for breach
of its covenants to maintain the Specified Quality Standards. HFMI therefore
consents to the entry of an order against it for specific performance of its
quality control obligations hereunder in the event (a) it is in breach of that
covenant and (b) the Trust, or Servicer acting for the Trust, can meet the
requisite burden of proof for preliminary injunctive relief before the tribunal
chosen to enter the consent order. Such tribunal shall be a court of competent
jurisdiction or an arbitral tribunal chosen by the parties. HFMI acknowledges
and agrees that if the parties agree to present any dispute regarding the
maintenance of the Specified Quality Standards to an arbitral tribunal, the
tribunal shall have power to grant such injunctive relief, and HFMI will not
contest the validity of any such order for relief based on grounds of lack of
authority or jurisdiction.
7
<PAGE>
EXHIBIT 10.7
================================================================================
---------------------------
TRANSFER AGREEMENT
BETWEEN AND AMONG
HARRY'S FARMERS MARKET, INC.
HFMI TRUST
AND
HFMI ACQUISITION CORPORATION
Dated as January 31, 1997
--
---------------------------
================================================================================
<PAGE>
TRANSFER AGREEMENT dated as of 1/31 , 1997, between and among HARRY'S
--------
FARMERS MARKET, INC., a Georgia corporation ("Transferor"), HFMI TRUST, a
----------
Delaware business trust ("Transferee" or "Trust") and HFMI ACQUISITION
---------- -----
CORPORATION, a Delaware corporation ("Newco").
-----
(a) Pursuant to a Trust Agreement dated as of the date hereof (the "Trust
-----
Agreement") between Transferor and Wilmington Trust Company, a Delaware banking
- ---------
corporation, as Trustee, Transferor has established Transferee pursuant to the
Delaware Business Trust Act, as amended.
(b) Pursuant to the Trust Agreement, Transferee shall issue to Transferor
on the date hereof the Worldwide Class Owner Certificate (as defined in the
Trust Agreement) representing the Worldwide Class Intellectual Property (as
defined in the Trust Agreement) and the Georgia Class Owner Certificate (as
defined in the Trust Agreement) representing the Georgia Class Intellectual
Property (as defined in the Trust Agreement), together with the corresponding
irrevocable, exclusive, perpetual licenses to the Worldwide Class Intellectual
Property and the Georgia Class Intellectual Property.
(c) Pursuant to an Acquisition Agreement dated as of the date hereof (the
"Acquisition Agreement") between Transferor and Newco, Transferor has agreed to
---------------------
transfer to Newco the Worldwide Class Owner Certificate, together with the
corresponding irrevocable, exclusive, perpetual license to the Worldwide Class
Intellectual Property.
(d) Pursuant to an Administration and Servicing Agreement dated as of the
date hereof (the "Administration and Servicing Agreement") between and among the
--------------------------------------
Trust, Newco and Transferor, Newco has agreed to perform certain services for
and on behalf of Transferee with respect to certain matters involving the
Intellectual Property.
(e) Pursuant to a Consulting Services Agreement dated as of the date
hereof (the "Consulting Services Agreement") between and among Harry Blazer,
-----------------------------
Transferor and Newco, Harry Blazer and Transferor shall provide consulting
services to Newco.
(f) Transferor, Transferee and Newco wish to set forth the terms pursuant
to which (i) Transferor will transfer to Transferee, as more fully described in
the Assignment of Intellectual Property attached hereto as Exhibit A, all of the
Transferor's Intellectual Property (as defined in the Trust Agreement) and (ii)
the Worldwide Class Intellectual Property and Georgia Class Intellectual
Property will be licensed to Newco and Transferor, respectively.
NOW, THEREFORE, in consideration of the foregoing, other good and valuable
consideration and the mutual terms and covenants contained herein, the parties
hereto agree as follows:
<PAGE>
2
ARTICLE I
Transfer of the Intellectual Property
-------------------------------------
SECTION 1.01. Transfer of the Intellectual Property.
-------------------------------------
(a) Pursuant to the Trust Agreement and the Assignment of Intellectual
Property, which is substantially in the form of Exhibit A hereto, Transferor
hereby contributes, transfers, assigns, sets over and otherwise conveys to
Transferee all of Transferor's worldwide right, title and interest in and to the
Intellectual Property and hereby pledges to continue to do so as additional
Intellectual Property may come into being, all as provided for in the Trust
Agreement, in return for the Owner Certificates. Transferor, Newco and
Transferee shall cooperate to record this transfer and the Assignment of
Intellectual Property, in each appropriate government office throughout the
world (including any other documents necessary to effect such assignment of the
Intellectual Property to Transferee) with all reasonable speed.
(b) Pursuant to the Trust Agreement, Transferor shall, from time to time,
transfer to the Transferee, as they come into being, additional trademarks,
service marks, trade names, logos or other designations, trade secrets,
copyrights, or knowhow, hereafter acquired, created or developed by HFMI
("Additional Intellectual Property").
- ----------------------------------
SECTION 1.02. Transfer Conditions.
-------------------
(a) The parties acknowledge that they will perform the transactions
contemplated by Section 1.01 of this Agreement in each jurisdiction in which (i)
such transaction does not violate the law of such jurisdiction, (ii)
consummation of the transaction will not adversely affect the validity or
registration or other issued documentation of the Intellectual Property or the
Additional Intellectual Property, as the case may be, or impair the ability to
file new applications for registration or issuance of other documentation of the
Intellectual Property or the Additional Intellectual Property, as the case may
be, or renew or maintain existing registrations or other issued documentation of
rights and (iii) consummation of the transaction will not impair the right to
prevent unauthorized third parties from using the Intellectual Property and the
Additional Intellectual Property (collectively, the "Transfer Conditions").
-------------------
(b) In the event that both Transferor and Newco agree that, as a result
of a material change of law or otherwise, the transfer of any of the
Intellectual Property or the Additional Intellectual Property to the Trust in
any jurisdiction does (or will) not satisfy the Transfer Conditions, they shall
cooperate to transfer the Intellectual Property or the Additional Intellectual
Property or relevant portion thereof in such jurisdiction to Newco, as nominee
for the Trust. In the event that the parties agree to transfer the Intellectual
Property or the Additional Intellectual Property or any portion thereof to
Newco, as nominee, Newco shall execute a nominee agreement reasonably acceptable
to Newco, Transferor and the Trust confirming that the Trust has legal title to
the Intellectual Property or the Additional Intellectual Property or relevant
portion thereof, as the case may be. In the event that both Newco and
Transferor agree that, as a result of a material change of law
<PAGE>
3
or otherwise, the transfer of the Intellectual Property or the Additional
Intellectual Property or any portion thereof to Newco, as nominee, in any
jurisdiction also does (or will) not satisfy the Transfer Conditions, the
parties shall cooperate to transfer the Intellectual Property or the Additional
Intellectual Property or relevant portion thereof in such jurisdiction to Newco
on its own behalf, provided, however, that nothing in this Agreement shall
-------- -------
prohibit the parties from agreeing on another mutually acceptable structure for
ownership of the Intellectual Property or the Additional Intellectual Property
or relevant portion thereof in a jurisdiction. In the event that Newco and
Transferor agree to transfer the Georgia Class Intellectual Property or the
Additional Intellectual Property or any portion thereof to Newco on its own
behalf in any jurisdiction other than pursuant to the Option (as defined in the
Trust Agreement) granted to the Worldwide Owner (as defined in the Trust
Agreement) by the Transferor pursuant to Section 3.06 of the Trust Agreement,
Newco shall grant to Transferor an exclusive, perpetual license to use the
Georgia Class Intellectual Property, the terms of which license shall be
identical to the terms of the license granted under Section 2.02 of this
Agreement.
SECTION 1.03. Costs and Expenses. Transferor shall bear the reasonable
------------------
costs and expenses associated with the transfer of the Intellectual Property and
the Additional Intellectual Property from Transferor to the Trust pursuant to
Section 1.01 of this Agreement. Transferor and Newco shall share equitably the
reasonable costs and expenses incurred in connection with a transfer of the
Intellectual Property and the Additional Intellectual Property or relevant
portion thereof pursuant to Section 1.02(b) of this Agreement. Such costs and
expenses shall include recording fees, any government fees or taxes imposed by
virtue of the transaction, the cost of recording the registered user's
agreements or licenses and all reasonable attorney's fees incurred by any party
to effect such transfer.
ARTICLE II
Licenses
--------
SECTION 2.01. Grant of Exclusive, Irrevocable, and Perpetual Licenses. On
-------------------------------------------------------
the date hereof, the Trust shall issue to Transferor as the owner of the
Worldwide Class and Georgia Class Owner Certificates exclusive, irrevocable and
perpetual licenses in the forms attached to the Trust Agreement as Annexures I
and II, respectively.
ARTICLE III
Miscellaneous Provisions
------------------------
SECTION 3.01. Term. The term of this Agreement begins as of the
----
effective date hereof and continues in perpetuity.
<PAGE>
4
SECTION 3.02. Further Assurances. From and after the Closing (as defined
------------------
in the Acquisition Agreement), upon the reasonable request of any party to this
Agreement, any other party shall execute, acknowledge and deliver all such
further deeds, assignments, transfers, acts, assurances, conveyances and other
instruments and papers as may be necessary or appropriate to carry out the
transactions contemplated by this Agreement. The party requesting such
assurances shall bear the reasonable costs and expenses of compliance with this
Section 3.02.
SECTION 3.03. Integration; Amendments. This Agreement supersedes all
-----------------------
prior oral or written understandings and agreements relating thereto, and may
not be modified, discharged or terminated except by a written instrument signed
by the parties hereto.
SECTION 3.04. Waivers. No failure or delay on the part of any party in
-------
exercising any power, right or remedy under this Agreement or the Assignment of
Intellectual Property shall operate as a waiver hereof or thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude any other
or further exercise thereof or the exercise of any other power, right or remedy.
SECTION 3.05. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given when delivered
in person, by facsimile or on the next business day when sent by reputable
overnight courier or on the fourth succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
<PAGE>
5
(i) if to the Transferor, to:
Harry's Farmers Market, Inc.
1180 Upper Hembree Road
Roswell, Georgia 30076
Attention: Harry Blazer
Telecopier: (770) 664-4920
and to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: John Latham, Esq.
Telecopier: (404) 881-7458
(ii) if to the Transferee, to:
HFMI Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust
Administration
Telecopier: (302) 651-1576
and to:
Richards, Layton & Finger
One Rodney Square
Wilmington, Delaware 19899
Attention: Eric A. Mazie, Esq.
Telecopier: (302) 658-6548
<PAGE>
6
(iii) if to Newco, to:
HMFI Acquisition Corporation
14103 Denver West Parkway
Golden, Colorado 80401
Attention: Saad J. Nadhir
Telecopier: (303) 771-4860
and to:
SECTION 3.06. Headings and Cross-References. The various headings in
-----------------------------
this Agreement are included for convenience only and shall not affect the
meaning or interpretation of any provision of this Agreement. References in
this Agreement to Section names or numbers are to such Sections of this
Agreement.
SECTION 3.07. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability, without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 3.08. No Joint Ventures. Nothing herein contained shall be
-----------------
construed to constitute the parties hereto as partners, joint venturers or
agents of the other, and no party shall have any power to obligate or bind any
other in any manner whatsoever.
SECTION 3.09. Governing Law. This Agreement and the Assignment of
-------------
Intellectual Property shall be construed in accordance with the internal laws of
the State of Georgia applicable to agreements made and to be performed wholly
within such State, and the trademark or copyright laws of the United States, as
applicable. The parties hereby consent to the jurisdiction of the state and
federal courts of general jurisdiction situated in Georgia for the resolution of
all disputes arising out of or relating to this Agreement, and the parties
hereby waive any and all defenses of improper venue or that the forum is
inconvenient.
SECTION 3.10. Counterparts. This Agreement may be executed in two or
------------
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which taken together shall constitute one
and the same instrument.
<PAGE>
7
SECTION 3.11. Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, Transferor,
the Trust and Newco, and their respective Successors (as defined in the Trust
Agreement).
SECTION 3.12. Limitations on Liability. It is expressly understood and
------------------------
agreed by the parties hereto that (i) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as
trustee of the Trust under the Trust Agreement, in the exercise of the powers
and authority conferred and vested in it, (ii) each of the representations,
undertakings and agreements herein made on the part of the Trust is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose of binding
only the Trust, (iii) except as Wilmington Trust Company shall otherwise
expressly agree, nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by any person directly or by any person claiming
by, through or under any other person and (iv) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expense of the Trust or be liable for the breach or failure of
any obligation, repre sentation, warranty or covenant made or undertaken by the
Trust under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers duly authorized as of the date and year
first above written.
HFMI TRUST HARRY'S FARMERS MARKET, INC.
By: WILMINGTON TRUST By: /s/ Harry A. Blazer
COMPANY, not in its individual -------------------------------
capacity but solely as Trustee, Name: Harry A. Blazer
Title: President
By: /s/ Christopher L. Kaiser
------------------------------
Name: Christopher L. Kaiser
Title: Vice President
HFMI ACQUISITION CORPORATION
By: /s/ Saad J. Nadhir
-------------------------------
Name: Saad J. Nadhir
Title: Chief Executive Officer
<PAGE>
EXHIBIT 10.8
THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND MAY NOT BE SOLD, OR OFFERED FOR SALE, UNLESS REGISTERED PURSUANT TO SUCH ACT
OR UNLESS AN EXEMPTION UNDER SUCH ACT IS AVAILABLE.
TRANSFER OF THIS TRUST CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND
LIMITATIONS SET FORTH IN THE TRUST AGREEMENT.
HFMI TRUST
GEORGIA CLASS OWNER CERTIFICATE
UNDER TRUST AGREEMENT DATED AS OF
January 30, 1997
THIS CERTIFIES THAT Harry's Farmers Market, Inc. ("HFMI") is the registered
----
owner of the Georgia Class Interests in the HFMI Trust (the "Trust"), a Delaware
-----
business trust formed pursuant to the Trust Agreement (as amended, supplemented
or otherwise modified from time to time, the "Trust Agreement"), dated as of
---------------
January 30, 1997, between Wilmington Trust Company, as trustee (the "Trustee")
-------
and HFMI. This Trust Certificate is issued pursuant to and is entitled to the
benefits of the Trust Agreement, and each Owner (as defined in the Trust
Agreement) by acceptance hereof shall be bound by the terms of the Trust
Agreement. Reference is hereby made to the Trust Agreement for a statement of
the rights and obligations of the Owner hereof. The Trustee may treat the
person shown on the register maintained by the Trustee pursuant to Section 3.03
of the Trust Agreement as the absolute Owner hereof for all purposes.
Capitalized terms used herein without definition have the respective
meanings ascribed to them in the Trust Agreement.
As set forth more fully in the Trust Agreement, each Ownership Interest in
the Trust is separate from the other Ownership Interests in respect of the
assets and liabilities of the Trust allocated to such Ownership Interest. The
Georgia Class Interests represented by this Georgia Class Owner Certificate
represent solely the Georgia Class Series Estate. Pursuant to Section 3804(a)
of the Delaware Business Trust Act, as amended, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to the Georgia Class Series Estate shall be enforceable against the
assets of such Series Estate only, and not against the assets of any other
Series Estate.
In the manner more fully set forth in, and as limited by, the Trust
Agreement, this Trust Certificate may be transferred upon the books of the
Trustee by the registered Owner upon surrender of this Trust Certificate to the
Trustee accompanied by a written instrument of the transferee in form
satisfactory to the Trustee.
<PAGE>
In addition, any transferee of this Trust Certificate shall execute and
deliver to the Trustee a letter, in form and substance satisfactory to the
Trustee, agreeing to be bound by the terms of the Trust Agreement.
The Trustee may request an opinion of counsel in form and substance
satisfactory to the Trustee to the effect that the proposed transfer of this
Trust Certificate may be effected without registration under any state or
Federal Securities laws.
This Trust Certificate shall be construed in accordance with the laws of
the State of Delaware, without reference to its conflict of law provisions, and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
IN WITNESS WHEREOF, the Trustee, pursuant to the Trust Agreement, has
caused this Trust Certificate to be issued as of the date hereof.
Dated as of January , 1997
--
Wilmington Trust Company,
not in its individual capacity but solely as Trustee,
By: /s/ Norma F. Closs
Name: NORMA F. CLOSS
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 10.9
THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND MAY NOT BE SOLD, OR OFFERED FOR SALE, UNLESS REGISTERED PURSUANT TO SUCH ACT
OR UNLESS AN EXEMPTION UNDER SUCH ACT IS AVAILABLE.
TRANSFER OF THIS TRUST CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND
LIMITATIONS SET FORTH IN THE TRUST AGREEMENT.
HFMI TRUST
WORLDWIDE CLASS OWNER CERTIFICATE
UNDER TRUST AGREEMENT DATED AS OF
January 30, 1997
THIS CERTIFIES THAT Harry's Farmers Market, Inc. ("HFMI") is the registered
----
owner of the Worldwide Class Interests in the HFMI Trust (the "Trust"), a
-----
Delaware business trust formed pursuant to the Trust Agreement (as amended,
supplemented or otherwise modified from time to time, the "Trust Agreement"),
---------------
dated as of January 30, 1997, between Wilmington Trust Company, as trustee (the
"Trustee") and HFMI. This Trust Certificate is issued pursuant to and is
-------
entitled to the benefits of the Trust Agreement, and each Owner (as defined in
the Trust Agreement) by acceptance hereof shall be bound by the terms of the
Trust Agreement. Reference is hereby made to the Trust Agreement for a
statement of the rights and obligations of the Owner hereof. The Trustee may
treat the person shown on the register maintained by the Trustee pursuant to
Section 3.03 of the Trust Agreement as the absolute Owner hereof for all
purposes.
Capitalized terms used herein without definition have the respective
meanings ascribed to them in the Trust Agreement.
As set forth more fully in the Trust Agreement, each Ownership Interest in
the Trust is separate from the other Ownership Interests in respect of the
assets and liabilities of the Trust allocated to such Ownership Interest. The
Worldwide Class Interests represented by this Worldwide Class Owner Certificate
represent solely the Worldwide Class Series Estate. Pursuant to Section 3804(a)
of the Delaware Business Trust Act, as amended, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to the Worldwide Class Series Estate shall be enforceable against the
assets of such Series Estate only, and not against the assets of any other
Series Estate.
In the manner more fully set forth in, and as limited by, the Trust
Agreement, this Trust Certificate may be transferred upon the books of the
<PAGE>
Trustee by the registered Owner upon surrender of this Trust Certificate to the
Trustee accompanied by a written instrument of the transferee in form
satisfactory to the Trustee.
In addition, any transferee of this Trust Certificate shall execute and
deliver to the Trustee a letter, in form and substance satisfactory to the
Trustee, agreeing to be bound by the terms of the Trust Agreement.
The Trustee may request an opinion of counsel in form and substance
satisfactory to the Trustee to the effect that the proposed transfer of this
Trust Certificate may be effected without registration under any state or
Federal Securities laws.
This Trust Certificate shall be construed in accordance with the laws of
the State of Delaware, without reference to its conflict of law provisions, and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
IN WITNESS WHEREOF, the Trustee, pursuant to the Trust Agreement, has
caused this Trust Certificate to be issued as of the date hereof.
Dated as of January , 1997
--
Wilmington Trust Company,
not in its individual capacity but solely as Trustee,
By: /s/ Norma F. Closs
-------------------------
Name: NORMA F. CLOSS
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 10.10
------------------------------
ADMINISTRATION AND SERVICING AGREEMENT
BETWEEN AND AMONG
HMFI TRUST
HMFI ACQUISITION CORPORATION
AND
HARRY'S FARMERS MARKET,INC.
DATED AS OF JANUARY 31, 1997
------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ADMINISTRATION AND SERVICING AGREEMENT dated as of January 31, 1997
between and among HFMI TRUST, a Delaware Business Trust (the "Trust"), HFMI
ACQUISITION CORPORATION, a Delaware corporation ("Newco" or the "Servicer"), and
----- --------
Harry's Farmers Market, Inc., a Georgia corporation ("HFMI").
(a) Pursuant to a Trust Agreement dated as of the date hereof (the "Trust
-----
Agreement") between HFMI and Wilmington Trust Company, a Delaware banking
- ---------
corporation, as Trustee, HFMI has established the Trust pursuant to the Delaware
Business Trust Act, as amended.
(b) Pursuant to a Transfer Agreement dated as of the date hereof (the
"Transfer Agreement") between and among HFMI, Newco and the Trust, HFMI has
- -------------------
agreed to transfer to the Trust, as more fully described therein and in the
Assignment of Intellectual Property annexed thereto as Exhibit A, all right,
title and interest worldwide in and to the Intellectual Property (as defined in
the Trust Agreement).
(c) Pursuant to the Trust Agreement, the Trust shall issue to HFMI on the
date hereof the Worldwide Class Owner Certificate (as defined in the Trust
Agreement) representing the Worldwide Class Intellectual Property (as defined in
the Trust Agreement) and the Georgia Class Owner Certificate (as defined in the
Trust Agreement) representing the Georgia Class Intellectual Property (as
defined in the Trust Agreement), together with the corresponding irrevocable,
exclusive, perpetual licenses to the Worldwide Class Intellectual Property and
the Georgia Class Intellectual Property (the "Licenses").
--------
(d) Pursuant to an Acquisition Agreement dated as of the date hereof (the
"Acquisition Agreement") between HFMI and Newco, HFMI has agreed to transfer to
---------------------
Newco the Worldwide Class Owner Certificate, together with the corresponding
irrevocable, exclusive, perpetual license to the Worldwide Class Intellectual
Property.
(e) The parties hereto wish to enter into this Agreement to provide for
the appointment of the Servicer as the agent of the Trust to perform all of the
Trust's obligations in connection with the administration, maintenance,
protection and enforcement of the Intellectual Property.
NOW, THEREFORE, in consideration of the mutual premises and covenants
hereinafter set forth, the parties hereto agree as follows:
<PAGE>
2
ARTICLE I
The Servicer
------------
SECTION 1.01 Appointment of Servicer as Agent. The Trust hereby
--------------------------------
appoints the Servicer as its agent to perform the functions and duties, and to
prepare and file such documents, as are provided in the Trust Agreement, the
Transfer Agreement, the Licenses and this Agreement to be performed or prepared
by the Trust, its agent or the Servicer on behalf of the Trust. In addition,
the Servicer agrees to take such actions on behalf of the Trust as the Trust,
any Owner of Intellectual Property (as defined in the Trust Agreement) or the
Trustee may reasonably request on a timely basis in writing that are consistent
with the terms, provisions, and purposes of the Trust Agreement, the Transfer
Agreement, and this Agreement. The Servicer shall prepare for signature on
behalf of the Trust, or shall cause the preparation by other appropriate
persons, all documents, certificates, and other filings as the Trust shall be
required to prepare and/or file in connection with the Trust Agreement, the
Transfer Agreement, or this Agreement. In order to enable Servicer to carry out
such obligations, the Trustee has executed on behalf of the Trust the Power of
Attorney accompanying this Agreement as Exhibit A, and the Trustee agrees that
it will cooperate fully with the Servicer in executing such additional Powers of
Attorney or other documents, and by taking such actions as the Servicer may
direct, in order to facilitate the Servicer's performance of its obligations
hereunder.
SECTION 1.02 Rights and Duties of Servicer.
-----------------------------
(a) As part of its performance of such obligations, the Servicer's
permitted activities shall include, without limitation:
(1) taking any steps reasonably necessary to the preservation and
maintenance (including of any registrations or recordations therefor or
thereof) of the Intellectual Property, including without limitation
preservation of requisite confidentiality arrangements, payment of
applicable renewal fees, payment of periodic taxes, filing use
declarations, filing proof of use, and the like;
(2) executing and/or requiring the execution of confidentiality
agreements, filing and prosecuting applications to register, renew, record,
or otherwise perfect and/or confirm the ownership and integrity of the
Intellectual Property, and filing, prosecuting, defending, and resolving
(by any means deemed appropriate by Servicer, including, without
<PAGE>
3
limitation, negotiated settlement), any suit, opposition, cancellation,
reconsideration, appeal, or other proceeding related to or affecting any of
the Intellectual Property;
(3) recording any sublicenses or other agreements evidencing
confidentiality requirements, and filing additional applications,
registrations and recordations with respect to the Intellectual Property or
with respect to any Additional Intellectual Property (as defined in the
Trust Agreement) as shall be necessary and appropriate, including, without
limitation, the filing of applications in the United States Patent and
Trademark Office or with the United States Register of Copyrights, and
elsewhere throughout the world, covering the Intellectual Property and/or
any Additional Intellectual Property;
(4) taking all steps reasonably necessary and appropriate to
enforce the Trust's rights and/or legal title in the Intellectual Property,
and to enforce the rights and obligations of the Trust under this Agreement
and the Licenses, including, without limitation, with regard to (i) the
preservation of the confidentiality of trade secrets and know-how included
in the Intellectual Property; and (ii) the use of the appropriate marks
indicating registration and/or ownership of copyrights, logos, trade names,
service marks and trademarks included in the Intellectual Property.
(b) In the event that any Intellectual Property is infringed or
misappropriated or otherwise subject to unauthorized use by a third party, any
Owner of Intellectual Property that has knowledge of such third party use shall
promptly notify the Servicer and the other Owners of Intellectual Property in
writing, and the Servicer shall take such actions deemed by the Servicer to be
reasonably necessary and appropriate under the circumstances with respect
thereto, including without limitation, bringing legal action on behalf of the
Trustee (or, as set forth in Section 1.03, delegating authority to the relevant
Owner of Intellectual Property to bring such action) for infringement and/or
misappropriation and for appropriate remedies, which may include injunctive
relief; provided, however, that the Servicer shall consult with the relevant
-------- -------
Owner of Intellectual Property prior to taking any action. Any monetary
recovery from any action brought pursuant to this paragraph shall be apportioned
between the Owners in a manner to be agreed upon in good faith by the Owners.
(c) Servicer will use its best commercially reasonable efforts to avoid
intentionally abandoning, failing to renew, or failing to maintain any
application or registration or other documentation of ownership rights for any
Intellectual Property that an Owner of Intellectual Property notifies Servicer
in writing on a timely basis is to be maintained or otherwise renewed by
Servicer.
(d) Servicer will use its best commercially reasonable efforts to avoid
intentional lapse into the public domain of any of the Intellectual Property
that requires confidential treatment to maintain its value or validity.
<PAGE>
4
(e) Servicer's obligations are conditioned on the full and timely
cooperation from the Owners of Intellectual Property and/or the Trustee.
Servicer shall have no duty to take any steps to maintain confidentiality or to
maintain any registrations, recordations, or other filings that Servicer deems
no longer feasible, possible, practical, desirable, or cost-effective to
maintain; provided, however, that Servicer shall notify the Owners of
Intellectual Property of its decision not to maintain any of the foregoing and
(ii) in such event, HFMI shall have the option of requiring Servicer assign such
Intellectual Property to it prior to such registration, recordation or other
filing rights expiring.
SECTION 1.03 Delegation to Owners of Intellectual Property.
---------------------------------------------
(a) Notwithstanding any provisions to the contrary contained in this
Article I, the Servicer may delegate to an Owner of Intellectual Property the
authority to take in the name of the Trust any and all actions to maintain and
defend the Intellectual Property covered by the Owner Certificate of that Owner
of Intellectual Property, but in no event shall the Owner be obligated to take
such action. In the event that Servicer so delegates any such authority, the
party to whom such authority is delegated shall provide the Servicer with copies
of all correspondence and documents relating thereto. Notwithstanding the
foregoing, if in the good faith judgment of the Servicer the Owner of
Intellectual Property to which the Servicer has delegated authority acts in a
manner prejudicial to the value of the Intellectual Property, the Servicer may
revoke the authority previously delegated.
(b) Subject to the preceding sentence, if the Servicer delegates to an
Owner of Intellectual Property authority to take all actions in the name of and
on behalf of the Trust with respect to any infringement, misappropriation, or
unauthorized third-party use of any Intellectual Property, the Servicer shall
cooperate with such Owner of Intellectual Property in all respects in any such
actions, such cooperation including without limitation causing the Trust to be a
plaintiff or co-plaintiff in any such action, causing the officers of the Trust
to execute pleadings and other necessary documents, and providing such documents
signed on behalf of Servicer or the Trust, if such documents are required.
(c) Notwithstanding the foregoing, nothing herein is intended to or
shall serve in any way to restrict any rights the Owners may have to bring suit
in their own names as exclusive licensees.
SECTION 1.04 Servicing Expenses.
------------------
(a) HFMI shall pay for all reasonable fees and expenses, including the
reasonable fees and expenses of its attorneys, consultants and agents, incurred
by the Servicer in connection with the transfer of the Intellectual Property
<PAGE>
5
from HFMI to the Trust (including all governmental recordation, filing and other
taxes and fees).
(b) Each Owner of Intellectual Property shall pay for all fees and
expenses, including the reasonable fees and expenses of attorneys, consultants
and agents, incurred by the Servicer in connection with the performance of
services for the Trust, that relate solely to the Intellectual Property covered
by the Owner Certificate of that Owner of Intellectual Property. In the event
the Servicer undertakes litigation in Georgia or Alabama that HFMI reasonably
considers should not be undertaken, HFMI shall not be required to fund such
litigation.
(c) Where the services rendered by the Servicer do not relate solely
to the Intellectual Property of a particular Owner of Intellectual Property,
each Owner of Intellectual Property shall pay for all fees and expenses,
including the reasonable fees and expenses of its attorneys, consultants and
agents, incurred by the Servicer in connection with that Owner of Intellectual
Property's Portion. The "Owner of Intellectual Property's Portion" shall be
----------------------------------------
determined on a case by case basis in good faith by the Owner of the
Intellectual Property in consideration of the nature of the services rendered.
(d) Any fees and expenses incurred by an Owner of Intellectual
Property in connection with the taking of an action pursuant to Section 1.03(b)
shall be borne by such Owner of Intellectual Property, and such Owner of
Intellectual Property shall pay for all fees and expenses, including the
reasonable fees and expenses of attorneys, consultants and agents, incurred by
the Servicer in connection with such action.
(e) In the event that the Trust is a party to a lawsuit concerning
any issue relating to the Intellectual Property, Servicer agrees not to commit
to any settlement of such lawsuit without the consent of the Owners of
Intellectual Property, which consent shall not be unreasonably withheld.
SECTION 1.05 Advance of Expenses.
-------------------
(a) HFMI agrees to pay the Servicer one thousand dollars, upon execution
of this Agreement as an advance on the fees and expenses to be incurred by the
Servicer in connection with the transfer of the Intellectual Property from HFMI
to the Trust pursuant to the Transfer Agreement.
(b) HFMI agrees to pay the Servicer one thousand dollars annually no
later than March 31 of each year (the "Annual Servicing Advance"), as an advance
------------------------
to cover expenses expected to be incurred by the Servicer in performing its
duties under this Article I for that year. The first Annual Servicing Advance
payment shall be due upon execution of this Agreement; the amount of such
<PAGE>
6
initial payment shall be adjusted by multiplying the Annual Servicing Advance by
the number of days remaining in calendar year 1997, divided by 365.
(c) The Servicer shall reimburse HFMI for the amount by which any
advances exceed actual expenses, and HFMI shall pay the Servicer the amount by
which actual expenses exceed any advances.
(d) Commencing in the year 2000 and for each year thereafter, the
Servicer shall increase or decrease the amount of the Annual Servicing Advance
to equal the average actual servicing expenses incurred by the Servicer during
the prior two calendar years.
1.06 Proceeds. The Owner of Intellectual Property for the Intellectual
--------
Property involved in an action pursuant to Section 1.02 or 1.03 shall be
entitled to all of the proceeds from a claim brought by the Servicer or by that
Owner of Intellectual Property to enforce or protect the Intellectual Property
involved.
1.07 Independence of the Servicer. For all purposes of this
----------------------------
Agreement, the Servicer shall be an independent contractor with respect to the
manner in which it accomplishes the performance of its obligations hereunder,
and the Trust shall not interfere with the performance by the Servicer of the
Services. Neither the Trust nor an Owner of Intellectual Property may require
the Servicer to act contrary to its obligations under this Agreement or the
Trust Agreement.
ARTICLE II
Administration Fee
------------------
SECTION 2.01 Administration Fee. HFMI agrees that it will also pay the
------------------
Servicer, in order to cover the Servicer's overhead costs and expenses in
connection with the administration of the Intellectual Property, an
administration fee of one thousand dollars annually by January 30 of each year
(the "Annual Administration Fee"). The first Annual Administration Fee shall be
-------------------------
due upon execution of this Agreement; the amount of such initial payment shall
be adjusted by multiplying the Annual Administration Fee by the number of days
remaining in calendar year 199, divided by 365. Commencing in 2000 and for each
year thereafter, the Servicer shall increase or decrease the amount of the
Annual Administration Fee to equal the actual budgeted overhead costs and
expenses for the administration of the Intellectual Property during that year.
<PAGE>
7
ARTICLE III
Use of Intellectual Property
----------------------------
SECTION 3.01 Use of Intellectual Property. (a) Unless the Servicer
----------------------------
consents in advance in writing, which consent may be withheld in the Servicer's
sole discretion, the Owner of Georgia Class Intellectual Property shall not (i)
use any Additional Intellectual Property (as defined in the Trust Agreement)
other than the Georgia Class Intellectual Property, which may include Additional
Intellectual Property (ii) co-join any other name or names with any of the
trademarks, service marks, trade names or logos included in the Intellectual
Property to create a composite trademark, service mark, trade name or logo or
(ii) use a modified version of a trademark, service mark, trade name or logo
included in the Georgia Class Intellectual Property.
(b) The Owner of the Georgia Class Intellectual Property shall not
apply to register any of the Intellectual Property, file any document relating
to any of the Intellectual Property with any government authority or take any
action that would affect the ownership by Newco of the Worldwide Class
Intellectual Property.
ARTICLE IV
Miscellaneous Provisions
------------------------
SECTION 4.01 Term. The term of this Agreement and of the Power of
----
Attorney shall begin as of the effective date hereof and continue in perpetuity.
SECTION 4.02. Limitations on Liability.
------------------------
(a) The Servicer shall discharge its duties hereunder and under the
Power of Attorney with appropriate skill and care, but shall have no liability
with respect to, and shall not be obligated to indemnify or hold harmless any
party including, without limitation, the Trust or any of its affiliates,
employees, agents or other representatives from or against, any cost, expense,
damage or liability arising out of or otherwise in respect of the performance of
the Services or under the Power of Attorney. It is expressly understood and
agreed by the parties hereto that the Servicer shall not be liable for the
obligations of the Trust other than as provided in this Agreement. Without
limiting the foregoing, the Trust shall indemnify the Servicer, its affiliates,
stockholders, directors, officers, employees, agents and representatives (col
lectively, the "Indemnified Parties") and hold them harmless from and against
-------------------
any and all losses, liabilities, claims, damages and expenses (including
reasonable attorney's fees and expenses) suffered or incurred by or on behalf of
any Indemnified Party arising out of or based upon the defense of any claim or
litigation brought by a third party with respect to the performance by any
<PAGE>
8
Indemnified Party of their obligations under this Agreement or under the Power
of Attorney; provided, however, that the Trust shall not be liable to any
-------- -------
Indemnified Party to the extent that liability of any Indemnified Party arises
primarily from such party's material breach of this Agreement by bad faith,
fraud, willful misconduct or gross negligence.
(b) It is expressly understood and agreed by the parties hereto that
(i) this Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Trustee of the Trust under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it thereby, (ii) each of the representations, undertakings and agreements herein
made on the part of the Trust is made and intended not as a personal
representation, undertaking or agreement by Wilmington Trust Company but is made
and intended for the purpose of binding only the Trust, (iii) except as
Wilmington Trust Company shall otherwise expressly agree, nothing herein
contained shall be construed as creating any liability on Wilmington Trust
Company, individually or personally, to perform any covenant either expressly or
impliedly contained herein, all such liability, if any, being expressly waived
by the Servicer and by any person claiming by, through or under it and (iv)
under no circumstances shall Wilmington Trust Company be personally liable for
the payment of any indebtedness or expense of the Trust or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Trust under this Agreement or the Trust Agreement.
SECTION 4.03. Access to Records and Information. The Trust and the
---------------------------------
Owners of Intellectual Property will (a) permit the Servicer, upon reasonable
request and during normal business hours, access to inspect and make copies of
any of the Trust's or the Owners of Intellectual Property's records and (b)
promptly provide other information reasonably requested by the Servicer in order
to carry out its duties hereunder.
SECTION 4.04 Indemnification. Each Owner of Intellectual Property
---------------
agrees to indemnify and hold harmless the other Owners of Intellectual Property
(and their affiliates, subsidiaries, officers and directors) and the Trust
against and save and hold each of them harmless from any and all losses,
liability, damages and expenses (including reasonable attorneys' fees and
expenses) ("Losses") that may arise in connection with any third party product
------
liability claim that arises in connection with the manufacture, production and
distribution of products or services sold, licensed, sublicensed, distributed,
advertised, provided, and/or marketed with, under or in connection with the
Intellectual Property, by or under the direction and control of such Owner of
Intellectual Property.
SECTION 4.05 Integration; Amendments. This Agreement, the licenses in
-----------------------
perpetuity from the Trust and, as applicable, the Trust Agreement and the
Transfer Agreement contain the complete understanding of the parties with
respect to the subject matter hereof, and supersede all prior oral or written
<PAGE>
9
understandings and agreements relating thereto, and may not be modified,
discharged or terminated except by a written instrument signed by the parties
hereto.
SECTION 4.06 Waivers. No failure or delay on the part of any party in
-------
exercising any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other or further exercise thereof or the exercise
of any other power, right or remedy.
SECTION 4.07 Arbitration. If the parties cannot agree upon any matter
-----------
relating to this Agreement, the dispute shall be settled and determined by an
arbitrator (which may be the Trustee) mutually agreed by the parties (or, if the
parties cannot agree upon an arbitrator within 30 days, an arbitrator selected
by the president of the American Arbitration Association). Such arbitration
shall take place in New York, in accordance with and pursuant to the then
existing rules of the American Arbitration Association.
The arbitrator shall have power to order that any party specifically
perform its obligations under this Agreement. The fees and expenses of the
arbitrator shall be shared equally by the parties to the arbitration. The
parties agree that the arbitrator shall have the power to award attorney's fees
and expenses in any proceeding and that the arbitration award shall be final and
binding upon the parties.
SECTION 4.08 No Joint Ventures. Nothing contained in this Agreement
-----------------
shall be construed to create a relationship of partnership, joint venture or
agency between the parties, except for the agency relationship between the Trust
and the Servicer, and this Agreement shall not confer on any party any power to
obligate or bind any other party in any manner whatsoever, except as
specifically provided herein.
SECTION 4.09 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given when delivered
in person, by facsimile or on the next business day when sent by reputable
overnight courier or on the third succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(i) if to Newco or the Services, to:
HFMI Acquisition Agreement
14103 Denver West Parkway
Golden, Colorado 80401
Attention: Thomas Sprague
Telecopier: (303) 771-4860
<PAGE>
10
and to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Robert M. Hirsh, Esq.
Telecopier: (212) 373-2159
(ii) if to HFMI Trust, to:
HFMI Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust
Administration
Telecopier:
and to:
Richard, Layton & Finger
One Rodney Square
Wilmington, Delaware 19899
Attention: Eric A. Mazie, Esq.
Telecopier: (302) 658-6548
(iii) if to HFMI, to:
Harry's Farmers Market, Inc.
1180 Upper Hembree Road
Roswell, Georgia 30076
Attention: Harry Blazer
Telecopier: (770) 664-4920
and to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: John Latham, Esq.
Telecopier: (404) 881-7913
<PAGE>
11
SECTION 4.10 Headings and Cross-References. The various headings and
-----------------------------
the table of contents in this Agreement are included for convenience only and
shall not affect the meaning or interpretation of any provision of this
Agreement. References in this Agreement to Section names or numbers are to such
Sections of this Agreement.
SECTION 4.11 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability, without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 4.12 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Georgia
applicable to agreements made and to be performed wholly within such State, and
in accordance with the trademark or copyright laws of the United States, as
applicable.
SECTION 4.13 Counterparts. This Agreement may be executed in two or
------------
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which taken together shall constitute one
and the same instrument.
SECTION 4.14. Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, the Trust,
HFMI, and Newco, and their respective Successors (as defined in the Trust
Agreement).
<PAGE>
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers duly authorized as of the date and year
first above written.
HFMI TRUST HARRY'S FARMERS MARKET, INC.
By: WILMINGTON TRUST By:/s/ Harry A. Blazer
COMPANY, not in its -----------------------------
individual capacity Name: Harry A. Blazer
but solely as Trustee, Title: President
By: /s/ Christopher L. Kaiser
------------------------------
Name: Christopher L. Kaiser
Title: Vice President
HMFI ACQUISITION CORPORATION
By: /s/ Saad J. Nadhir
-------------------------------
Name: Saad J. Nadhir
Title: Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that HFMI Trust, a Delaware business
trust (the "Trust") hereby appoints HMFI ACQUISITION CORPORATION ("Newco") and
----- -----
any and all officers thereof as its true and lawful attorney-in-fact, with full
power of substitution, in connection with the maintenance and defense of the
Trust's rights in, to, and under federal, state and foreign patents, trademarks
(registered and unregistered) trademark applications, service marks (registered
and unregistered), service mark applications, trade names, trade name rights and
publicity rights, copyrights and copyright registrations, trade secrets and
know-how and other proprietary rights and information, and any later additions
thereto, that are the subject of the Trust Agreement worldwide (the
"Intellectual Property") with full irrevocable power and authority in the place
- ----------------------
of the Trust and in the name of the Trust or in its own name as nominee for the
Trust, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
foregoing including, without limitation:
(i) the full power to sign its name upon all filings and to do all
things necessary to maintain and register the Intellectual Property with the
United States Patent and Trademark Office or United States Register of
Copyrights and with any other appropriate trademark, copyright or other
governmental offices throughout the world;
(ii) the full power to execute, require execution of or record
requisite confidentiality agreements or otherwise preserve the value or validity
of that portion of the Intellectual Property which requires confidential
treatment;
(iii) the full power to use and require the use of the appropriate
marks indicating registration and/or ownership of copyrights, logos, trade
names, service marks and trademarks included in the Intellectual Property
(iv) to cause the Trust to pay or to pay or discharge taxes and liens
levied or placed on or threatened against the Intellectual Property; and
(v) (A) to commence, prosecute and settle in the name of the Trust
any suits, actions or proceedings at law or in equity in any court of competent
jurisdiction or before any appropriate governmental authority regarding the
ownership, validity or use of the Intellectual Property, or (B) to defend any
suit, action or proceeding brought against or regarding the Intellectual
<PAGE>
2
Property, all in accordance with the Administration and Servicing Agreement
dated as of the date hereof between and among Newco, Harry's Farmers Market,
Inc. and the Trust.
This Power of Attorney is governed by the laws of the State of Georgia
applicable to powers of attorney made and to be exercised wholly within such
State.
Dated: This day of January, 1997
----
HFMI TRUST
By: Wilmington Trust Company, not in its
individual capacity, but solely as Trustee
By: /s/ Christopher L. Kaiser
----------------------------
Name: Christopher L. Kaiser
Title: Vice President
<PAGE>
3
STATE OF Delaware )
------------
: ss.:
COUNTY OF New Castle )
-----------
On the 30th of January, 1997, before me personally came
---- --------
Christopher L. Kaiser, to me personally known and known to me to be the person
- ---------------------
described in and who executed the foregoing instrument as Vice President
--------------
of Wilmington Trust Company, as Trustee of HFMI Trust, who being by me duly
sworn, did depose and say that he resides at Wilmington, Delaware; that he
--------------------
is the Vice President of Wilmington Trust Company, the Trustee of the HFMI
--------------
Trust described in and which executed the foregoing instrument; that the said
instrument was signed on behalf of said HFMI Trust by Wilmington Trust Company,
as Trustee, by order of its Board of Directors; that he signed his name thereto
by like order; and that he acknowledged said instrument to be the free act and
deed of said Trust.
Notary Public
/s/ Kathleen A. Pedelini
KATHLEEN A. PEDELINI
NOTARY PUBLIC
My Commission expires October 31, 1998
<PAGE>
EXHIBIT 10.11
ASSIGNMENT OF INTELLECTUAL PROPERTY
ASSIGNMENT OF INTELLECTUAL PROPERTY dated January 31, 1997, by and between
Harry's Farmers Market, Inc., a Georgia corporation ("Assignor") having its
--------
principal office and place of business at 1180 Upper Hembree Road, Roswell,
Georgia, and HFMI Trust, a Delaware business trust established pursuant to the
Delaware Business Trust Act, as amended ("Assignee"), having its principal
--------
office and place of business in care of Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890.
WHEREAS, Assignor owns all right, title, and interest in and to (i) the
federal, state and foreign patents, trademarks (registered and unregistered)
trademark applications, service marks (registered and unregistered), service
mark applications, trade names, trade name rights and publicity rights,
copyrights and copyright registrations, trade secrets and know-how and other
proprietary rights and information set forth on Schedule 1 annexed hereto, (ii)
all related recordations, registrations or other issued documentation and
applications relating thereto worldwide, including those listed on Schedule 1
annexed hereto (collectively, the "Intellectual Property") and (iii) the
---------------------
goodwill of the business symbolized by the trademarks, service marks, trade
names and logos included in the Intellectual Property;
WHEREAS, Assignee desires to acquire the entire right, title and interest
in and to said Intellectual Property, (including all registrations or other
issued documentation and applications therefor) and the goodwill of the business
symbolized by the trademarks, service marks, trade names and logos included in
the Intellectual Property;
WHEREAS, pursuant to the terms of a Transfer Agreement dated as of the date
hereof between and among Assignor, Assignee and Newco Acquisition Corporation, a
Delaware corporation ("Newco"), Assignor has agreed to transfer, assign, set
-----
over and otherwise convey to Assignee, all right, title and interest of Assignor
worldwide in the Intellectual Property and the goodwill of the business
symbolized by the trademarks, service marks, trade names and logos included in
the Intellectual Property;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Assignor does hereby transfer,
assign and otherwise convey to Assignee, all of Assignor's worldwide right,
title and interest, in and to the following:
1. the Intellectual Property and all rights with respect to renewals and
similar rights; and
<PAGE>
2
2. the goodwill symbolized by and embodied in the trademarks, service
marks, trade names and logos included in the Intellectual Property, and
the goodwill associated with the business conducted under said
trademarks, service marks, trade names and logos included in the
Intellectual Property.
Assignor hereby agrees to promptly execute all papers and to perform such
other proper acts reasonably necessary to secure to Assignee, or to its
successors as assigns, the rights hereby transferred, including but not limited
to Assignor's execution of assignments in recordable form within a reasonable
amount of time after the date hereof in each jurisdiction where trademark,
service mark or copyright registrations or other documentation or applications
may be issued or pending. Further, upon Assignee's request, Assignor agrees to
cooperate fully with Assignee in obtaining assignments in recordable form from
Assignor's predecessors-in-interest in all jurisdictions where such assignments
may be necessary to complete the "chain of title" to Assignee or to its
successors or assigns.
This Assignment of Intellectual Property is governed by the laws of the
State of Georgia applicable to contracts made and performed wholly within the
State, without reference to its conflicts of laws provisions, and the trademark
or copyright laws of the United States, as applicable.
IN WITNESS WHEREOF, Assignor has caused this Assignment of Intellectual
Property to be duly executed by its officers thereunto duly authorized as of
this 31st day of January, 1997.
----
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
------------------------------
Name: Harry A. Blazer
Title: President
<PAGE>
3
Acknowledged and Agreed to:
HFMI TRUST
By: WILMINGTON TRUST COMPANY,
not in its individual capacity,
but solely as Trustee
By: /s/ Christopher L. Kaiser
--------------------------------
Name:
Title:
Witnessed by:
/s/ Paula M. Sulichi
- ---------------------------
/s/ Arlene P. Black
- ---------------------------
<PAGE>
4
STATE OF GA )
--------------
: ss.:
COUNTY OF Fulton )
------------
On the 31st day of January, 1997, before me personally came Harry Blazer,
---- -------------
to me personally known and known to me to be the person described in and
who executed the foregoing instrument as Director of Harry's Farmers Market,
-------- ----------------------
who being by me duly sworn, did depose and say that he resides at
Atlanta, GA; that he is the Director of Harry's Farmer's Market, the
- ----------- -------- -----------------------
corporation described in and which executed the foregoing instrument; that the
said instrument was signed on behalf of said corporation by order of its Board
of Directors; that she signed her name thereto by like order; and that she
acknowledged said instrument to be the free act and deed of said corporation.
/s/ Mary Anne Lamb
------------------------------
Notary Public
[NOTARY SEAL APPEARS HERE]
<PAGE>
5
STATE OF Delaware )
------------
: ss.:
COUNTY OF New Castle )
----------
On the 30th day of January, 1997, before me personally came Christopher L.
---- --------------
Kaiser, to me personally known and known to me to be the person described in and
- ------
who executed the foregoing instrument as Vice President of Wilmington Trust
--------------
Company, not in its individual capacity but solely as Trustee of HFMI Trust, who
being by me duly sworn, did depose and say that he resides at Wilmington
----------
Delaware; that he is the Vice Pres. of Wilmington Trust Company, the Trustee of
- -------- ----------
HFMI Trust described in and which executed the foregoing instrument; that the
said instrument was signed on behalf of said HFMI Trust by Wilmington Trust
Company, as Trustee, by order of its Board of Directors; that he signed his name
thereto by like order; and that he acknowledged said instrument to be the free
act and deed of said Trust.
/s/ Kathleen A. Pedelini
-------------------------
Notary Public
KATHLEEN A. PEDELINI
NOTARY PUBLIC
My Commission Expires October 31, 1998
<PAGE>
EXHIBIT 10.12
CONSULTING SERVICES AGREEMENT
-----------------------------
This Consulting Services Agreement (this "Agreement") is made as of January
31, 1997, between HFMI Acquisition Corporation, a Delaware corporation
("Newco"), Harry's Farmers Market, Inc., a Georgia corporation ("Consultant"),
and Harry A. Blazer, an individual ("HB").
Recitals
--------
WHEREAS, Newco and Consultant have entered into that Acquisition Agreement
of even date herewith (the "Acquisition Agreement"), pursuant to which Newco
will acquire at the closing thereof from Consultant the Worldwide Class
Interests in HFMI Trust, a Delaware business trust (the "Trust"), which will own
certain intellectual property rights previously owned by Consultant.
WHEREAS, the Consultant and HB have agreed to enter into this Agreement
and to provide to Newco certain consulting services and access to personnel,
information, and facilities of the Consultant, and Newco has agreed to consult
with Consultant regarding Consultant's business and to provide access to
information, pursuant to and in accordance with the terms of this Agreement in
order to improve the business of Consultant through the development of an
acceptable business model.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and in the Acquisition Agreement, Newco, Consultant,
and HB agree as follows:
1. Status of the Parties. Consultant and HB acknowledge that each of them
is an independent contractor and is not an agent or employee of Newco, and Newco
acknowledges that it is an independent contractor and not an agent of Consultant
or HB. Neither Consultant nor HB is authorized to act on behalf of Newco, and
Newco is not authorized to act on behalf of Consultant. Neither Consultant nor
HB may enter into any contracts or make any promises or commitments of any kind
whatsoever on behalf of Newco without the express written authorization from an
officer of Newco to do so, and Newco may not enter into any contracts or make
any promises or commitments of any kind whatsoever on behalf of Consultant or HB
without the express written authorization from an officer of Consultant or HB,
as the case may be, to do so.
2. Term. Subject to earlier termination as provided herein, the term of
this Agreement shall commence on the date hereof, and continue until the fifth
anniversary of the date of the Closing of those transactions (the "Closing
Date") set forth in that Transaction Agreement of even date herewith between
Consultant and Newco (the "Transaction Agreement").
3. Consulting Services. Consultant and HB understand and acknowledge that
a primary purpose of this Agreement is to provide to Newco complete access to
all of Consultant's current and after acquired (i) information, (ii) know-how,
(iii) facilities (including, but not limited to, its
<PAGE>
administrative and corporate facilities, retail stores, baking facilities,
production facilities, processing plants, and storage and warehouse facilities
(collectively, the "Facilities")), (iv) personnel, (v) consultants, (vi) vendors
and suppliers and (vii) customers, so that Newco can, through experimentation,
as quickly as possible, improve the business of Consultant through the
development of a business model based on the current businesses of Consultant
and any businesses that Newco may determine are related to the current
businesses of Consultant (collectively, the "Business"), such that the Business
is capable of rapid expansion and replication by Consultant in a manner
acceptable to Consultant in Georgia and Alabama, and by Newco in a manner
acceptable to Newco in all areas outside Georgia and Alabama. Consultant and HB
agree, for the duration of the term of this Agreement, to take all reasonable
actions requested by Newco to fulfill the foregoing primary purpose of this
Agreement, including, but not limited to the following:
(a) Making reasonable changes in the Facilities;
(b) Making reasonable changes in the products, personnel, marketing and
general operations of the Facilities and the Business;
(c) Conducting consumer research with regard to the Business;
(d) Creating new human resource and training structures and models at each
of the Facilities and in each Business;
(e) Creating new organizational structures and models at each of the
Facilities and in each Business;
(f) Creating new accounting and financial structures and models at each of
the Facilities and Business;
(g) Creating new systems at each of the Facilities and within each Business
to create infrastructure to support the Facilities and Business;
(h) Open new Harry's In A Hurry(R) stores (which stores will be owned by
Consultant) in the Atlanta metropolitan area;
(i) Incorporating any reasonable suggestions of Newco in the new stores
opened and operated pursuant to clause (h) above;
(j) Conducting media (print, electronic and otherwise) tests throughout
Georgia and Alabama;
(k) Training all the personnel of Newco;
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(l) Provide consulting advice to Newco on the conceptual design of the
Facilities and opening and operating the Business outside of Georgia and
Alabama;
(m) Documenting and maintaining all of its existing and after-acquired
information and know-how; and
(n) Conducting tests relating to the distribution of the products of the
Business in different channels of distribution, which would include other retail
stores.
4. HB Services. Consultant will make HB available to Newco not less than
40 hours per calendar month through the third anniversary hereof and not less
than 10 hours per calendar month throughout the remainder of the term of this
Agreement to assist Consultant in meeting its obligations to Newco under this
Agreement; provided, however, that in the event Newco assigns this Agreement to
a competitor, HB shall have no obligation to consult with the competitor, unless
Saad Nadhir is personally involved in the management of the competitor or is a
significant shareholder therein.
5. Expenses.
(a) Other than as provided in subparagraph (b) below, the expenditures
to be made by Consultant pursuant to paragraph 3 of this Agreement shall be
funded by a draw down by Consultant on the Development Loan (as defined in the
Transaction Agreement); provided, however, that no such draw down shall occur
unless a budget for such expenditure is proposed by Newco and approved by
Consultant; provided further, that Consultant's approval of such expenditures
shall not be unreasonably withheld, conditioned or delayed. Consultant
acknowledges that such expenditures may result in significant losses occurring
to the Consultant because of the experimental nature of such expenditures.
(b) Newco shall be responsible for all reasonable out-of-pocket
expenses directly associated with the services Consultant renders pursuant to
clause (c) of Section 3 (to the extent it relates to services rendered outside
of Alabama and Georgia) and clauses (k) and (1) of Section 3.
6. Newco Consulting Services. Newco will make available, during the term
of the Agreement, its general business know-how and the information and know-how
it acquires pursuant to Section 3 of this Agreement. Such information and know-
how will include any successfully created business model regarding the
Facilities and the Business. Newco will consult with Consultant and HB not less
than 40 hours (in the aggregate) per calendar month through the third
anniversary hereof and not less than 10 hours per calendar month throughout the
remainder of the term of this Agreement in order to discharge its obligations
under this Section 6. Newco will bear its own costs in rendering such
consulting services to Consultant and HB.
7. Price and Payment. Newco shall pay Consultant a consulting services
fee of $500,000 which shall be payable on the Closing Date.
3
<PAGE>
8. Confidentiality.
(a) As used in this Agreement, the term "Confidential Information"
shall mean trade secrets and know-how and all other confidential or proprietary
information of a party hereto, including, without limitation, any trade secret
which has been (or hereinafter is required by applicable documents to be)
transferred by Consultant to the Trust ("Trust Property").
(b) Each party (the "Receiving Party") shall receive Confidential
Information exclusively owned by any other party hereto (the "Other Party")
shall hold all such Confidential Information in confidence, shall use such
Confidential Information in accordance with the purposes of this Agreement shall
disclose such Confidential Information only to employees and agents who have a
need to know such Confidential Information, whose maintenance of the
confidentiality of such Confidential Information shall be the responsibility of
the Receiving Party. The obligations hereunder to maintain the confidentiality
of Confidential Information shall not expire.
(c) The obligations specified in Section 9.b. shall not apply to any
Confidential Information that (i) is disclosed in a printed publication
available to the public, or is otherwise in the public domain through no act of
the Receiving Party or its employees, agents or other person or entity which has
received such Confidential Information from or through the Receiving Party, (ii)
is approved for release by written authorization of an officer of the Other
Party, or (iii) is required to be disclosed by proper order of a court of
applicable jurisdiction after adequate notice to the Other Party, sufficient to
permit it to seek a protective order therefor, the imposition of which
protective order the Receiving Party agrees to approve and support.
(d) Each Receiving Party (and each employee, agent, or other person or
entity which has received such Confidential Information from or through the
Receiving Party) shall, upon the request of the Other Party, return all
documents and other tangible manifestations of Confidential Information
exclusively owned by the Other Party including all copies and reproductions
thereof.
9. Restrictive Covenant. Commencing on the date hereof and continuing
until the sixth anniversary of the date hereof, Consultant and HB agree not to
own, manage, operate, control, be employed by, provide consulting services to,
participate in, or be connected in any manner with the ownership, management,
operation, or control of any entity that (a) owns or operates within the United
States megastores, supermarkets, or other retail or convenience stores
specializing in (x) perishable food products, including, by way of example and
not by limitation, fresh fruits and vegetables or fresh meats, poultry and
seafood; fresh bakery goods; freshly made ready-to-eat, ready-to-heat and ready-
to-cook prepared foods; and deli, cheese and dairy products; and/or (y)
specialty, hard-to-find, and gourmet nonperishable food products, kitchen-
oriented housewares, floral items, grocery items, natural health and beauty
aids, wines, and imported and domestic beers; or (b) owns or operates outside
the States of Georgia or Alabama a business which is in a line of business the
same or similar to any line of business that is then owned, managed, operated,
controlled or otherwise engaged in by Newco and with respect to which Consultant
is or has services hereunder; provided, however the foregoing shall not (A)
prevent Consultant from operating its
4
<PAGE>
current businesses within the States of Georgia or Alabama, (B) prevent HB from
owning, controlling and being employed by Consultant, (C) prevent Consultant or
HB from providing the services to Newco as contemplated by this Agreement, (D)
prevent Consultant or HB from participating as an investor, officer, or director
in any business venture not covered by the foregoing applicable restrictions, or
(E) prevent Consultant or HB from investing so as to hold less than 2% of the
outstanding shares of any company which is a "reporting company" under the
Securities Exchange Act of 1934, as amended. It is the intention of the parties
that this Section 6 be interpreted so as to be valued under applicable law and,
if required for validity, any court or applicable tribunal may reduce or alter
the geographic scope and duration of this Section 6, by substitution of words or
otherwise, so as to create the broadest permissible protection to Newco.
10. Limitation of Liability. The Consultant and HB acknowledge that in
connection with the provision of services hereunder, Newco will have the access
and the rights, that Newco's activities in exercising such access and other
rights pursuant to this Agreement ("Newco Activities") may result in the
modification, closing, retrofitting and other uses of the Facilities, and
changes in the Consultant's Business, and that Newco's activities may have an
adverse effect on the financial condition and results of operations of the
Consultant. Consultant and HB also acknowledge that Newco has not made any
representation or warranty regarding the outcome of the parties' efforts to
improve Consultant's business through the development of an acceptable business
model. None of Newco, its affiliates or any officer, director, employee, agent
or shareholder of Newco or any of its affiliates shall be liable for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs or expenses ("Losses") of the Consultant, its shareholders,
officers, directors, employees, suppliers, or vendors, or any other person or
entity, in any matter relating to or arising or resulting, directly or
indirectly, out of this Agreement, Newco Activities or the services rendered by
Newco to the Consultant under this Agreement, except to the extent arising from
Newco's willful misconduct. The Consultant, its officers, directors, employees,
agents and HB shall not be liable for any Losses of Newco, its shareholders,
officers, directors, employees, suppliers or vendors, or any other person or
entity, in any matter relating to or arising or resulting, directly or
indirectly, out of the services rendered by the Consultant and HB under this
Agreement, except to the extent arising from the Consultant's or HB's willful
misconduct.
11. General Indemnity. Each party (an "Indemnitor") agrees to indemnify,
pay, and hold the other parties hereto, and the officers, directors, employees,
agents, and affiliates of such other parties (collectively, the "Indemnities"),
harmless from and against any and all Losses (including, without limitation, the
reasonable fees and disbursements of counsel for any of such Indemnitees) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising or resulting, directly or indirectly, out of the
services provided by the Indemnitee to the Indemnitor pursuant to this
Agreement; provided that the Indemnitor shall have no obligation to an
Indemnitee hereunder with respect to Losses arising from the willful misconduct
of such Indemnitee. In addition, the Consultant agrees to indemnify, pay and
hold Newco, and its officers, directors, employees, agents and affiliates,
harmless from and against any and all Losses (including, without limitation, the
reasonable fees and disbursements of counsel for any of such Indemnitees) in any
manner relative to or arising or resulting, directly or indirectly out of Newco
Activities connected
5
<PAGE>
with the business of the Consultant (including the use or operation of the
Facilities by the Consultant or Newco pursuant hereto, any modification,
closing, retrofitting or use of the Facilities resulting from Newco Activities,
or any change in the Consultant's business resulting from Newco Activities
hereunder), provided that the Consultant shall have no obligation to Newco
hereunder with respect to Losses arising from the willful misconduct of Newco.
To the extent that the undertaking to indemnify, pay, and hold harmless set
forth in this section may be unenforceable because it violates any law or public
policy, Indemnitor shall contribute the maximum portion that it is permitted to
pay under applicable law to the payment and satisfaction of all indemnified
liabilities incurred by the Indemnitees or any of them. The provisions of
Section 9 and 10 and this Section 11 shall survive termination of this
Agreement.
12. No Waiver. No delays or omissions by any party in exercising any
right under this Agreement will operate as a waiver of that or any other right.
A waiver or consent given by any party on any one occasion is effective only in
that instance and will not be construed as a bar to or waiver of any right on
any other occasion.
13. Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia applicable to
contracts made and to be performed therein. Any dispute, controversy or claim
arising out of or relating to this Agreement shall be settled by arbitration in
accordance with the then-prevailing Commercial Arbitration Rules of the American
Arbitration Association. Such arbitration shall be held before a panel of three
(3) arbitrators, one selected by Newco, one selected by Consultant and the third
selected by mutual agreement of the first two arbitrators. Each award rendered
by the arbitrators may be entered into by any court of competent jurisdiction.
The determination of the location of the arbitration and which party (or
combination of them) bears the cost and expenses, including reasonable
attorneys' fees, incurred in connection with any such arbitration proceeding
shall be made by the arbitrators. Notwithstanding the foregoing, the parties
hereto recognize that money damages alone would not adequately compensate the
parties hereto in the event of any breach of this Agreement, and they therefore
agree that, in addition to the right of any party to arbitrate claims for money
damages provided in Section 13 hereof , a party shall be entitled to seek
injunctive relief for the enforcement hereof in any court of competent
jurisdiction. However, in no event will any party hereto seek or be liable for
indirect, incidental, consequential, special, speculative, exemplary, or
punitive damages (including, but not limited to, loss of revenue or profit). The
parties also agree that each party hereto shall be entitled to receive written
notice and a reasonable opportunity to cure in the event any other party hereto
alleges that such party has breached this Agreement.
14. Severability. If the scope of any provision contained herein is too
broad to permit enforcement of such provision to its full extent, then such
provision shall be enforced to the maximum extent permitted by law and
Consultant and HB hereby consent and agree that such scope may be modified in
any arbitration or judicial proceeding brought with respect to the enforcement
of such provision. Except as otherwise provided in the previous sentence, if
any provision of this Agreement shall be construed to be illegal or invalid, the
legality or validity of any other provision
6
<PAGE>
hereof shall not be affected thereby, and any illegal or invalid provision of
this Agreement shall be severable, and all other provisions shall remain in full
force and effect.
15. Amendment. This Agreement, and each section hereof, may be amended
only in writing, signed by the party against whom enforcement of any such
amended provision is sought.
16. Headings. Any headings of sections of this Agreement are solely for
the convenience of the parties and are not a part of this Agreement nor are they
to be used in its interpretation.
17. Counterparts. This Agreement may be executed in several counterparts;
each such counterpart shall be considered as an original agreement and all such
executed counterparts shall constitute one Agreement.
18. Notices. Any notice, request, instruction, or other document required
to be given under this Agreement shall be in writing and delivered in person or
by courier, or by facsimile transmission or mailed by certified mail, postage
prepaid, return receipt requested (such mailed notice to be effective on the
date such receipt is acknowledged) as follows:
To Consultant or HB:
1180 Upper Hembree
Roswell, Georgia
Facsimile: 770-664-4920
Attention: Harry A. Blazer
with a copy to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Facsimile: 404-881-7777
Attention: John L. Latham
To Newco:
14103 Denver West Parkway
Golden, Colorado 80401
Attention: Saad J. Nadhir
7
<PAGE>
19. Benefit. This Agreement shall inure to the benefit of and be binding
upon Newco, HB and the Consultant and their respective successors and assigns.
20. Entire Agreement. This Agreement contain the entire agreement between
the parties concerning Consultant's and HB's engagement with Newco, and may not
be modified or rescinded except by written agreement to such effect signed by
both parties.
21. Further Assurances. Newco, Consultant and HB hereby agree to execute
and deliver such other documents and instruments and to take such other actions
as are necessary or desirable in the reasonable opinion of Newco or Consultant
to carry out the transactions contemplated by this Agreement, the Acquisition
Agreement and the Transaction Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
---------------------------------------
/s/ Harry A. Blazer
_______________________________________
Harry A. Blazer
HFMI ACQUISITION CORPORATION
By: /s/ Saad J. Nadhir
---------------------------------------
8
<PAGE>
EXHIBIT 10.13
CONSENT AND NINTH AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS CONSENT AND NINTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of January 31, 1997, is made by and among HARRY'S FARMERS MARKET, INC.,
a Georgia corporation (the "Company"), CREDITANSTALT-BANKVEREIN, a banking
company organized under the laws of Austria (the "Lender"), and CREDITANSTALT-
BANKVEREIN, as successor Agent (the "Agent").
The Lender, NationsBank, N.A. (South), formerly known as NationsBank of
Georgia, National Association ("NationsBank"), the Agent and the Company entered
into the Amended and Restated Credit Agreement dated as of December 30, 1994 (as
amended, the "Credit Agreement") pursuant to which the Lender and NationsBank
provided certain credit facilities to the Company.
The Company and HFMI Acquisition Corporation, a Delaware corporation
("Newco"), have entered into that certain Transaction Agreement (the
"Transaction Agreement"), pursuant to which the Company and Newco have agreed to
enter into certain transactions.
Pursuant to the terms of the Transaction Agreement, the Company and Newco
have entered into that Secured Loan Agreement (the "Newco Loan Agreement"; the
Newco Loan Agreement and the transactions contemplated therein, including the
grant of the Option (defined below), are collectively referred to as the "Loan
Transactions"), pursuant to which Newco has agreed to lend to the Company up to
$20,000,000 (the "Subordinated Loans"), subject to those terms and conditions
set forth in the Newco Loan Agreement. In addition, pursuant to the Newco Loan
Agreement, the Company has granted Newco an option (the "Option") to acquire
500,000 shares of Series B Convertible Preferred Stock, $.01 par value, of the
Company (the "Series B Preferred Stock").
Pursuant to the terms of the Transaction Agreement, the Company has sold
and issued to Newco warrants to purchase up to 2,000,000 shares of Class A
Common Stock of the Company (the "Class A Common Stock"), the terms and
conditions of which are set forth in that warrant attached as Exhibit C to the
Transaction Agreement (the "Newco Warrant") (the issuance and sale of the Newco
Warrant and the issuance of Class A Common Stock upon exercise thereof are
herein sometimes collectively referred to as the "Newco Warrant Transactions").
Pursuant to a Trust Agreement (the "Trust Agreement"), the Company and
Wilmington Trust Company, a Delaware banking corporation ("Trustee"), have
established a trust (the "Trust"). Pursuant to a Transfer Agreement among the
Company, Newco, and the Trust (the "Transfer Agreement"), the Company has
transferred certain intellectual property of the Company to the Trust and the
<PAGE>
Trust has issued to the Company beneficial interests in the Trust, together with
corresponding irrevocable, exclusive, perpetual licenses to the related
intellectual property. Pursuant to an Acquisition Agreement entered into
between the Company and Newco (the "Acquisition Agreement"), the Company has
sold and transferred to Newco certain beneficial interests in the Trust and to
retain certain beneficial interests in the Trust, and the Trust has granted
certain licenses to Newco and the Company (the transactions contemplated by the
Trust Agreement, the Transfer Agreement, and the Acquisition Agreement, and all
related documents, are herein sometimes collectively referred to as the
"Intellectual Property Transactions").
In connection with the foregoing transactions, the Company has used
$13,016,086.48 of the proceeds from the Subordinated Loans and the consideration
from the Intellectual Property Transactions and the Newco Warrant Transactions
to repay in full all of the Obligations owing under the Credit Documents to
NationsBank.
NationsBank has assigned to the Lender all of its Revolving Credit
Commitment and interest in the Revolving Credit Loans. NationsBank has resigned
as Agent under the Credit Agreement, and Creditanstalt-Bankverein has been
appointed successor Agent.
In addition, the Company has designated a new class of Series AA Preferred
Stock, no par value (the "AA Preferred Stock"), and exchanged 1,222,221 shares
of AA Preferred Stock for all of the issued and outstanding shares of Series A
Preferred Stock of the Company, and amended the various agreements between
Fleming and the Investors (as defined in the Credit Agreement), including the
Stockholders' Agreement and the Share and Warrant Purchase Agreements (the
transactions contemplated in connection with the AA Preferred Stock are
collectively referred to as the "Preferred Exchange").
The parties now desire to amend the Credit Agreement to, among other
things: (a) provide for the consummation of the transactions set forth in the
Transaction Agreement including without limitation the Loan Transactions, the
Newco Warrant Transactions, the Intellectual Property Transactions, and all
other transactions contemplated therein and thereby; and (b) amend certain
provision of the Credit Agreement, including certain negative covenants and
certain financial covenants.
In addition, the Company has requested that the Lender (a) consent to the
Preferred Exchange and the transactions contemplated in the Transaction
Agreement, including without limitation, the Loan Transactions, the Newco
Warrant Transactions, the Intellectual Property Transactions, and the
transactions contemplated therein and thereby, (b) amend certain provisions of
the Warrant Agreement, and (c) waive any adjustments to the number of Warrant
Shares (as defined in the Warrant) for which the Warrants may be purchased that
may arise as a result of the transactions contemplated in the Transaction
Agreement, including without limitation, the Loan Transactions, the Newco
Warrant Transactions, the Intellectual Property Transactions, and all
transactions contemplated therein and thereby.
Section 1. Consent and Waiver.
------------------
(a) The Agent and the Lender hereby expressly consent to the consummation
of the Preferred Exchange and the consummation of the transactions contemplated
by the Transaction Agreement, including without limitation, the Loan
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Transactions, the Newco Warrant Transactions, the Intellectual Property
Transactions, and all other transactions contemplated therein and thereby and
hereby expressly waive any and all Defaults and Events of Default arising as a
result of any violation of any covenants set forth in the Credit Agreement
caused by the Loan Transactions, the Newco Warrant Transactions, the
Intellectual Property Transactions, or the Preferred Exchange.
(b) The Agent, as the Secured Party under the Collateral Assignment, hereby
waives the provision of Section 3 of the Collateral Assignment and agrees to
terminate the Collateral Assignment and execute and deliver to the Company, at
the Company's sole cost and expense, all termination statements and other
instruments as the Company may reasonably request to terminate the Agent's
security interest in, and conditional assignment of, the Trademark Collateral
(as defined in the Collateral Assignment).
Section 2. Amendment of Credit Agreement.
-----------------------------
(a) The Credit Agreement is hereby amended by inserting in the proper
alphabetic order in Section 1.1 thereof, the following definitions:
"Acquisition Agreement" shall mean that Acquisition Agreement dated
---------------------
January 31, 1997 between the Company and Newco.
"Intercreditor Agreement" shall mean the Intercreditor Agreement dated
-----------------------
January 31, 1997 between Newco and the Agent, as amended, modified or
supplemented from time to time.
"Newco" shall mean HFMI Acquisition Corporation, a Delaware
-----
corporation, together with its successors and assigns.
"Newco Loan Agreement" shall mean the Secured Loan Agreement dated
--------------------
January 31, 1997 between Newco and the Company, as amended, modified or
supplemented from time to time.
"Newco Warrant" shall mean a warrant dated January 31, 1997 issued to
-------------
Newco to acquire 2,000,000 shares of the Company's Class A Common Stock, subject
to adjustment as set forth therein.
"Ninth Amendment" shall mean the Consent and Ninth Amendment to
---------------
Amended and Restated Credit Agreement dated January 31, 1997 among the Company,
the Lenders and the Agent.
"Pledge Agreements" shall mean the Pledge Agreements between the
-----------------
Company and the Agent, pursuant to which the Company pledges to the Agent for
the benefit of the Lenders all of the outstanding stock of Karalea,
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<PAGE>
Marthasville, Newco and RPI owned by the Company and all beneficial interests of
the Company in the Trust.
"Preferred Stock Exchange Agreement" shall mean the Preferred Stock
----------------------------------
Exchange Agreement, dated as of January 31, 1997, among the Company and the
Investors.
"Series B Preferred Stock" shall mean the Company's Series B
------------------------
Convertible Preferred Stock, $.01 par value.
"Subordinated Loans" means those loans to be made by Newco to the
------------------
Company from time to time pursuant to the terms and conditions set forth in the
Newco Loan Agreement.
"Transaction Agreement" shall mean the Transaction Agreement dated
---------------------
January 31, 1997 between the Company and Newco, as amended, modified or
supplemented from time to time.
"Transfer Agreement" shall mean the Transfer Agreement dated January
------------------
31, 1997 among the Company, Newco and the Trust, as amended, modified or
supplemented from time to time.
"Trust" means that trust established as a trust pursuant to the
-----
Delaware Business Trust Act, as amended, pursuant to the Trust Agreement.
"Trust Agreement" shall mean that Trust Agreement dated January 31,
---------------
1997 between the Company and the Trustee, as amended, modified or supplemented
from time to time.
"Trustee" shall mean Wilmington Trust Company, a Delaware banking
-------
corporation, and any successor Trustee.
(b) The Credit Agreement is hereby further amended by deleting the
definition of "Additional Letters of Credit" Section 1.1 and inserting in lieu
thereof the following:
"Additional Letters of Credit" shall mean those letters of credit
----------------------------
issued from time to time by Creditanstalt-Bankverein for the account of the
Company pursuant to the terms of a reimbursement agreement acceptable to
Creditanstalt-Bankverein.
(c) The Credit Agreement is hereby further amended by adding the
following proviso to the end of the definition of "Affiliate" in Section 1.1:
"; provided, that for purposes hereof, the existence of the Newco Loan
Agreement, the Option (prior to the exercise thereof), the Newco Warrant (prior
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<PAGE>
to the exercise thereof), the Newco License (as defined in the Trust Agreement)
between the Company and Newco, and the Consulting Services Agreement (as defined
in the Transaction Agreement) shall not, by themselves or collectively, evidence
that Newco is controlled by the Company or that the Company is an Affiliate of
Newco."
(d) The Credit Agreement is hereby further amended by deleting the
definition of "Investor Warrant" in Section 1.1 and inserting in lieu thereof
the following:
"Investor Warrant" shall mean one of the Warrants, as such term is
----------------
defined in the Preferred Stock Exchange Agreement, to purchase in the aggregate
412,500 shares of the Company's Class A Common Stock.
(e) The Credit Agreement is hereby further amended by deleting the
definition of "Maturity Date" in Section 1.1 and inserting in lieu thereof the
following:
"Maturity Date" shall mean January 29, 2000."
-------------
(f) The Credit Agreement is hereby further amended by adding the
following subsections (i) and (j) to the definition of "Permitted Liens";
"(i) Liens on the Collateral securing Indebtedness incurred pursuant
to the Newco Loan Agreement, provided that such Liens are subordinated to the
Liens of the Agent under the Credit Documents pursuant to the Intercreditor
Agreement; and
(j) Liens on the cash collateral securing the Letter of Credit."
(g) The Credit Agreement is hereby further amended by deleting the
definition of "Preferred Stock" in Section 1.1 and inserting in lieu thereof the
following:
"Preferred Stock" shall mean the Company's Series AA Preferred Stock."
---------------
(h) The Credit Agreement is hereby further amended by deleting the
definition of "Security Documents" from Section 1.1 and replacing it with the
following:
"Security Documents" shall mean, collectively, the Security
------------------
Agreements, the Existing Mortgages, the Mortgage Modifications required pursuant
to Section 5.1, the Life Insurance Assignment, the Pledge Agreements and any
other security documents executed and delivered to the Agent by the Company or
any Permitted Subsidiary."
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(i) The Credit Agreement is hereby further amended by deleting the
definition of "Share and Warrant Purchase Agreement" from Section 1.1 and
inserting in lieu thereof the following:
"Share and Warrant Purchase Agreement" shall mean one of the Share and
------------------------------------
Warrant Purchase Agreements of even date herewith with the Company and one or
more Investors, pursuant to which the Company issued the Investor Warrants and
an aggregate of 1,222,221 shares of its Preferred Stock."
(j) The Credit Agreement is hereby further amended by deleting the
definition of Warrant Agreement from Section 1.1 and inserting in lieu thereof
the following:
"Warrant Agreement" shall mean the Warrant Agreement dated December 30,
-----------------
1994, as amended and restated as of May 8, 1996, and as further amended on
January 31, 1997, among the Company, and Creditanstalt-Bankverein, pursuant to
which the Company issued to Creditanstalt-Bankverein Warrants to purchase an
aggregate of 216,000 shares of the Company's Class A Common Stock."
(k) The Credit Agreement is hereby further amended by deleting the
definition of "Wal-Mart Store" in Section 1.1 in its entirety.
(l) The Credit Agreement is hereby further amended by deleting the
definition of "Available Revolving Credit Commitment" from Section 2.1 and
inserting in lieu thereof the following:
"Available Revolving Credit Commitment" shall mean, on any date of
-------------------------------------
determination thereof, the aggregate Revolving Credit Commitments in effect on
such date minus (i) the aggregate outstanding principal amount of Revolving
-----
Credit Loans on such date; and (ii) the undrawn stated amount of all Additional
Letters of Credit."
(m) The Credit Agreement is hereby further amended by deleting the
definition of "Disposition" from Section 2.15 and inserting in lieu thereof the
following:
"Disposition" shall mean any sale, assignment, transfer or other
-----------
disposition of any property (whether now owned or hereafter acquired) of the
Company or any of its Subsidiaries other than (i) inventory in the ordinary
course of business, (ii) the transfer, assignment, and contribution by the
Company to the Trust pursuant to the Transfer Agreement of all of its right
title and interest in and to the Intellectual Property (as defined in the Trust
6
<PAGE>
Agreement) now owned or acquired in the future and (iii) the transfer by the
Company to Newco pursuant to the Acquisition Agreement of the Worldwide Class
Owner Certificate (as defined in the Acquisition Agreement)."
(n) The Credit Agreement is hereby further amended by deleting the last
sentence of Section 2.4 and inserting in lieu thereof the following:
"2.4 BORROWINGS
Except as provided in Section 2.17 or Section 2.18. hereof, the Company
shall give the Agent (which shall promptly notify the Lenders) notice of each
borrowing hereunder as provided in Section 3.5, which notice when given shall be
irrevocable. Not later than 12:00 noon (Atlanta time) on the date specified for
each borrowing hereunder, each Lender shall make available the amount of the
Loan to be made by it on such date to the Agent, at the account of the Agent
designated for receipt of such amounts (the "Agent's AccountAgent's Account"),
------------------------------
in immediately available funds, for the account of the Company. The amounts so
received by the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in the Disbursement Account. "Disbursement Account"
shall mean the account maintained by the Company with NationsBank, in Atlanta,
Georgia, for the receipt of Loan proceeds, or such replacement account therefor
as may be acceptable to the Agent."
(o) The Credit Agreement is hereby further amended by deleting the
definitions of "Applicable Margin", "Eurodollar Base Rate" and "Prime Rate" set
forth in Section 2.5 and inserting in lieu thereof the following:
"Applicable Margin" shall mean, (a) in the case of Base Rate Loans,
-----------------
1.50% per annum, and (b) in the case of Eurodollar Rate Loans, 3.50% per annum.
The foregoing to the contrary notwithstanding, upon the occurrence of an Event
of Default and during its continuance, the Applicable Margin shall automatically
increase to 3.00% per annum for Base Rate Loans and to 4.50% per annum for
Eurodollar Rate Loans.
"Eurodollar Base Rate" shall mean, when used with respect to an
--------------------
Interest Period for a Eurodollar Rate Loan, the quotient of the offered rate
quoted by Creditanstalt-Bankverein in the interbank Eurodollar market in New
York City, New York or London, England on or about 11:00 a.m. (New York or
London time, as the case may be) two Business Days prior to such Interest Period
for U.S. dollar deposits of an aggregate amount comparable to the principal
7
<PAGE>
amount of the Eurodollar Rate Loan to which the Eurodollar Base Rate is to be
applicable and for a period comparable to such Interest Period.
"Prime Rate" shall mean the rate of interest announced by
----------
Creditanstalt-Bankverein from time to time at its principal office in Greenwich,
Connecticut as its prime rate for domestic (United States) commercial loans. The
Prime Rate is not necessarily intended to be the lowest rate of interest charged
by Creditanstalt-Bankverein in connection with extensions of credit."
(p) The Credit Agreement is hereby further amended by deleting Section 2.9
and inserting in lieu thereof the following:
"2.9 FEES
Unused Facility Fee. The Company shall pay to the Agent for the
-------------------
account of each Lender a commitment fee on the daily average unused amount of
such Lender's Revolving Credit Commitment, for the period from and including the
Closing Date to but not including the Maturity Date. Accrued commitment fees
shall be payable quarterly in arrears on the first day of each April, July,
October and January prior to the Maturity Date and on the earlier of the date
the Commitments are terminated in full and the Maturity Date. Payments shall be
computed in accordance with Section 3.3. Such fee shall accrue at the rate of
0.50% per annum. For purposes of calculating this fee, until such time as each
Lender has purchased its portion of outstanding Additional Letters of Credit
pursuant to Section 3.9 hereof, the stated and undrawn portion of all
outstanding Additional Letters of Credit shall be considered amounts outstanding
under the Revolving Credit Commitments of each Lender on a pro rata basis in
accordance with their respective Commitments.
Facility Fee. The Company shall pay to the Agent for the account of
------------
each Lender a fee equal to 0.10% of the aggregate amount of Loans and unused
Commitments outstanding on each anniversary of the Closing Date prior to the
Maturity Date. Such fee shall be due and payable on or before the fifth day
after each such anniversary."
(q) The Credit Agreement is hereby further amended by deleting Section
2.16(b) in its entirety and inserting in lieu thereof the following:
"(B) INTENTIONALLY OMITTED."
8
<PAGE>
(r) The Credit Agreement is hereby further amended by deleting Section 2.18
in its entirety and inserting in lieu thereof the following:
"2.18 INTENTIONALLY OMITTED."
(s) The Credit Agreement is hereby further amended by deleting Section 5.3
in its entirety and inserting in lieu thereof the following:
"5.3 INTENTIONALLY OMITTED."
(t) The Credit Agreement is hereby further amended by deleting Section 5.4
in its entirety and inserting in lieu thereof the following:
"5.4 INTENTIONALLY OMITTED."
(u) The Credit Agreement is hereby further amended by adding new subsection
(n) to Section 7.1 as follows:
"(n) simultaneously with the delivery to Newco, copies of all
financial statements and certificates delivered to Newco under Section 7.1 of
the Newco Loan Agreement."
(v) The Credit Agreement is hereby further amended by adding the following
new sentence at the end of Section 7.4:
"In the event of any termination or notice of non-payment by any
insurer with respect to any policy or any lapse in the coverage thereunder, the
Company shall cause such insurer to give prompt written notice to Johanna
Connor, Senior Vice President, Creditanstalt-Bankverein, Two Greenwich Plaza,
Greenwich, Connecticut 06830 (or such other address as to which the Agent may
notify the Company in writing) of the occurrence of such termination, nonpayment
or lapse."
(w) The Credit Agreement is hereby further amended by adding the following
new sentence at the end of Section 7.11:
"In the event of the payment in full of RPI's obligations to Nationwide
under the Nationwide Loan Agreement, or in the event that at any time the
Company is no longer prohibited from granting the Agent a Lien on the real and
personal property of RPI (the "RPI Property"), the Company shall deliver to the
Agent, promptly after any such event (and in any event within 30 days
thereafter), each of the following: (a) a guaranty from RPI substantially in the
9
<PAGE>
form of Exhibit D and a Security Agreement substantially in the form of Exhibit
------- - -------
C; (b) a Mortgage from RPI to the Agent, in form acceptable to the Agent and
- -
granting the Agent a Lien on the RPI Property consisting of real estate which is
senior to all other Liens thereon (other than any Lien of Nationwide); and
(c) such title commitments/policies, surveys, environmental reports and other
documents with respect thereto as the Agent may reasonably require."
(x) The Credit Agreement is hereby further amended by deleting subsection
(ii) of Section 8.1 and inserting in lieu thereof the following:
"(ii) the acquisition of any business, assets, or Investments, except
for purchases of inventory and supplies to be used in the ordinary course of
business, investments permitted under Section 8.4, and Capital Expenditures not
otherwise prohibited under Section 8.6;"
(y) The Credit Agreement is hereby further amended by deleting subsection
(iv) of Section 8.3 and inserting in lieu thereof the following:
"(iv) Indebtedness to Newco in an aggregate principal amount not to
exceed $20,000,000 created under the Newco Loan Agreement and related documents
which is subordinate to the Obligations pursuant to the Intercreditor
Agreement;"
(z) The Credit Agreement is further amended by adding new subsections (d),
(e) and (f) to Section 8.4 as follows:
"(d) the ownership of the Worldwide Class Owner Certificate and the
Georgia Class Owner Certificate (as such terms are defined in the Acquisition
Agreement);
(e) the ownership of the capital stock of Newco by the Company or its
Subsidiaries; and
(f) the Guarantee by Marthasville, Karalea and any other Permitted
Subsidiary of the Company, of the Indebtedness to Newco created under the Newco
Loan Agreement and related documents."
(aa) The Credit Agreement is further amended by deleting Section 8.5
and inserting in lieu thereof the following:
"8.5 RESTRICTED PAYMENTS AND RESTRICTED PURCHASES
Directly or indirectly declare or make any Restricted Payment or
Restricted Purchase; provided, however, that so long as no Event of Default then
-------- -------
exists and no
10
<PAGE>
Default would be caused thereby, the Company may declare and pay with respect to
its capital stock dividends payable in shares of capital stock of the Company
(other than Redeemable Stock of the Company); provided, however, that nothing in
-------- -------
this Section shall prevent the Company or any of its Subsidiaries from prepaying
or redeeming Indebtedness in connection with any refinancing of such
Indebtedness to the extent such refinancing is not prohibited by this Agreement.
As used herein, the following terms shall have the following meanings
set forth below.
'Fleming' shall mean Fleming, as such term is defined in the
-------
Stockholders' Agreement.
'Stockholders' Agreement' shall mean the Amended and Restated
-----------------------
Stockholders' Agreement dated as of January 31, 1997 among the Company, Blazer
and Fleming, as the same shall exist on the date hereof.
'Restricted Payment' shall mean (a) any direct or indirect
------------------
distribution, dividend or other payment on account of any capital stock or other
equity securities of the Company or any of its Subsidiaries, other than
dividends or other distributions to the Company by any of its Subsidiaries or,
in the case of an indirect Subsidiary of the Company, to its parent that is also
a Subsidiary of the Company or (b) any prepayment, redemption or sinking fund in
respect of principal, premium, or interest on Indebtedness of the Company or any
of its Subsidiaries other than (i) Indebtedness arising hereunder or (ii)
Indebtedness arising under the Newco Loan Agreement and related documents which
may then be prepaid or redeemed in accordance with the terms of the
Intercreditor Agreement.
'Restricted Purchase' shall mean any payment on account of the
-------------------
purchase, redemption or other acquisition or retirement for value (other than
that in accordance with scheduled payments of principal) of (a) any shares of
capital stock or other equity securities of the Company, or (b) any Indebtedness
of the Company or any of its Subsidiaries other than (i) Indebtedness arising
hereunder or (ii) Indebtedness arising under the Newco Loan Agreement and
related documents which may then be purchased, redeemed, acquired or retired in
accordance with the terms of the Intercreditor Agreement.
11
<PAGE>
'Redeemable Stock' shall mean any capital stock that by its terms (or
----------------
by the terms of any security into which it is convertible or for which it is
exchangeable or any other agreement) or upon the happening of any event matures
or is or will become mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of holder thereof, in
whole or in part, or is exchangeable for or convertible into a security of a
Person other than the issuer of such capital stock or into Indebtedness."
(bb) The Credit Agreement is further amended by deleting subsections
(a) and (b) of Section 8.6 in their entirety, and relettering subsection (c) of
Section 8.6 as subsection (a).
(cc) The Credit Agreement is hereby further amended by deleting
Section 8.7 in its entirety and inserting in lieu thereof the following:
"8.7 EXECUTION AND MODIFICATIONS OF CERTAIN DOCUMENTS
Amend its certificate of incorporation or by-laws in a manner adverse
to the Lenders; or amend, modify, cancel, terminate, waive any default under or
breach of, in any manner whatsoever, any Material Contract other than in the
ordinary course of business; or enter into any new agreement that is
inconsistent with the obligations of the Company or any Subsidiary under any
Credit Document. Notwithstanding the foregoing, the Company will not amend the
Stockholders' Agreement, the Lease, the Newco Loan Agreement or the Nationwide
Loan Agreement without the consent of the Required Lenders; provided, that, no
such consent shall be required for any amendment of the Newco Loan Agreement if
such amendment (a) would not increase the collateral or principal indebtedness
subject to the Newco Loan Agreement or increase the rate of interest payable
thereon, (b) would not shorten the maturity of any scheduled payment
under the Newco Loan Agreement, (c) would not grant any lien on or security
interest in any asset of Borrower or its Affiliates, as security for the
Indebtedness under the Newco Loan Agreement, in which the Agent does not have a
lien or security interest, and (d) would not otherwise be adverse to the
Lenders."
(dd) The Credit Agreement is further amended by adding new subsections (i),
(j), (k) and (l) to Section 8.8 as follows:
"(i) the Company may issue shares of its Series B Preferred Stock upon
exercise of the Option set forth in the Newco Loan Agreement and subject to the
adjustment as provided therein;
12
<PAGE>
(j) the Company may issue shares of its Class A Common Stock to Newco,
or its successors or assigns, upon conversion of shares of its Series B
Preferred Stock in accordance with the provisions for conversion contained in
its articles of incorporation;
(k) the Company may issue shares of its Class A Common Stock upon
exercise of the Newco Warrant; and
(l) the Company may consummate the Preferred Exchange."
(ee) The Credit Agreement is hereby further amended to delete Section
8.12 in its entirety and inserting in lieu thereof the following:
"8.12 TRANSACTIONS WITH AFFILIATES
Except for the transactions described in Schedule 6.22 and those
transactions contemplated pursuant to the Trust Agreement, enter into any
transaction or series of transactions, whether or not related or in the ordinary
course of business, with any Affiliate of the Company, other than pursuant to
the reasonable requirements of the Company's or such Subsidiary's business and
either (i) on terms and conditions no less favorable to the Company than would
be obtainable by the Company at the time in a comparable arm's-length
transaction with a Person not an Affiliate of the Company, or (ii) if such
transaction or series of transactions involves the payment or receipt of not
more than $1,000,000 in the aggregate, after approval by a majority of the
disinterested members of the Board of Directors of the Company as being in the
best interest of the Company taking into account all facts and circumstances.
(ff) The Credit Agreement is hereby further amended by adding the
following new Section 8.17:
"8.17 OPERATING LEASES
Enter into any lease which would cause the annual Operating Lease
Obligations of the Company and its Subsidiaries to exceed $2,000,000 with
respect to personal property leases entered into after the date of the Ninth
Amendment."
(gg) The Credit Agreement is hereby further amended by deleting Section 9.2
in its entirety and inserting in lieu thereof the following:
"9.2 INTENTIONALLY OMITTED"
13
<PAGE>
(hh) The Credit Agreement is hereby further amended by deleting Section 9.3
in its entirety and inserting in lieu thereof the following:
"9.3 INTEREST COVERAGE RATIO
Cause the Interest Coverage Ratio for each period of four consecutive
fiscal quarters ending at the end of each of the following fiscal quarters to be
at least equal to the following respective ratios:
FISCAL QUARTERS RATIO
--------------- ---------
Each fiscal quarter of fiscal year 1998 1.50:1.00
Each fiscal quarter of fiscal year 1999 1.75:1.00
Each fiscal quarter thereafter through the 2.00:1.00
Maturity Date
The term 'Interest Coverage Ratio' shall mean, for any period, the ratio of
EBITDA of the Company and its Subsidiaries for such period to Interest Expense
of the Company and its Subsidiaries, for such period, in each case determined on
a consolidated basis."
(ii) The Credit Agreement is hereby further amended by
deleting Section 9.4 in its entirety and inserting in lieu thereof the
following:
"9.4 MAINTENANCE OF TANGIBLE NET WORTH
Cause the Tangible Net Worth of the Company and its Subsidiaries at
all times to be at least equal to $30,000,000."
(jj) The Credit Agreement is hereby further amended by deleting the
definition of "Tangible Net Worth" from Section 9.7 and inserting in lieu
thereof the following:
"Tangible Net Worth" shall mean, as applied to any Person, the Net
------------------
Worth of such Person at the time in question, after (a) deducting therefrom the
amount of all intangible items reflected therein, including all intangible
expansion costs, all unamortized debt discount and expense, unamortized research
and development expense, unamortized deferred charges, good will, patents,
trademarks, service marks, trade names, copyrights, unamortized excess cost of
investment in Subsidiaries over equity at dates of acquisition, and all similar
items which should properly be treated as intangibles in accordance with GAAP,
14
<PAGE>
and (b) adding thereto (i) the outstanding principal balance from time to time
of the Refinancing Loan (as defined in the Newco Loan Agreement) made to the
Company on the date of the Ninth Amendment under the Newco Loan Agreement and
related agreements (provided such Indebtedness is subject to the terms of the
Intercreditor Agreement), and (ii) to the extent not included in the calculation
of Net Worth, all capital attributable to the issued and outstanding shares of
the preferred stock of the Company.
(kk) The Credit Agreement is hereby further amended by adding the following
new subsection (c) to Section 10.14:
"(c) There shall occur a Public Market Event. 'Public Market Event'
-------------------
shall mean any program of acquisition by the Company of its own Class A Common
Stock, initiation of a corporate reorganization, recapitalization, or
undertaking, a consolidation or merger or authorizing, consenting to, or taking
any action which would have the effect of:
(i) removing the Company from registration with the Securities and
Exchange Commission under the Securities Exchange Act with respect to the
Company's Class A Common Stock,
(ii) requiring the Company to make a filing under Section 13(e)
of the Securities Exchange Act,
(iii) reducing substantially or eliminating the public market
for shares of Class A Common Stock of the Company,
(iv) causing a delisting of the Company's Class A Common Stock as a
National market Security on The NASDAQ Stock market (unless such stock is
delisted as a result of being listed on a national securities exchange), or
(v) if any shares of the Company's Class A Common Stock are at any
time listed on a national securities exchange, causing a delisting of such stock
from such exchange."
(ll) The Credit Agreement is hereby further amended by adding the
following new Section 11.13:
"11.13 RIGHTS REGARDING CERTAIN AMENDMENTS
Notwithstanding anything contained herein to the contrary, each of the
Lenders agrees that, in the event the Agent receives a notice from Newco
pursuant to Section 13(b) of the Intercreditor Agreement, the Agent may, without
15
<PAGE>
the consent of any of the Lenders, void any amendment to this Agreement (or any
portion of such amendment) which contravenes, or which Newco alleges as
contravening, the restrictions set forth in said Section 13(b)."
(mm) The Credit Agreement is hereby further amended by deleting the address
for notices to the Agent set forth in Section 12.2 and inserting in lieu thereof
the following:
Creditanstalt-Bankverein
Two Greenwich Plaza
Greenwich, Connecticut 06830
Attn.: Lisa Bruno
Facsimile: (203) 851-1234
with copies to:
Creditanstalt-Bankverein
2 Ravinia Drive
Suite 1680
Atlanta, Georgia 30346
Attn.: Robert M. Biringer
Joseph P. Longosz
Facsimile: (770) 390-1851
and
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attn.: Hazen H. Dempster
Facsimile: (404) 885-3900
(nn) The Credit Agreement is hereby further amended by deleting
Schedule I attached thereto and inserting in lieu thereof the Schedule I
attached hereto.
Section 3. Representations. The Company further represents that:
---------------
(a) Authorization. Each of the Company, Karalea and Marthasville (the
-------------
"Loan Parties") has the right and power, and has taken all necessary action to
authorize it, to execute and deliver this Amendment (in the case of the Company)
and each of the other documents and agreements contemplated hereby to which it
is a party (together with this Amendment, the "Amendment Documents"), and to
perform its obligations under the Credit Documents to which it is a party, as
amended by the Amendment Documents, in accordance with their respective terms.
Each of the Amendment Documents has been duly executed and delivered by the duly
authorized officers of the applicable Loan Parties, and each of the Amendment
Documents and the Credit Documents, as amended by the Amendment Documents, is a
16
<PAGE>
legal, valid and binding obligation of the Loan Parties party thereto
enforceable against the Loan Parties in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting generally the enforcement of creditors' rights.
(b) Compliance of Loan Documents with Laws, etc. The execution and
-------------------------------------------
delivery of the Amendment Documents, and the performance of the Credit
Documents, as amended by the Amendment Documents, in accordance with their
respective terms, and the borrowings thereunder, do not and will not, by the
passage of time, the giving of notice or otherwise: (i) require any approval
from any Governmental Agency or violate any applicable law relating to the
Company or any other Loan Party; (ii) conflict with, result in a breach of or
constitute a default under the articles of incorporation or by-laws of the
Company or any other Loan Party, or any indenture, agreement or other instrument
to which the Company or any other Loan Party is a party or by which it or any of
its properties may be bound; or (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Company or any other Loan Party other than in favor of
the Agent.
(c) No Default. No Default or Event of Defaults exists as of the date
----------
hereof and, after giving effect to this Amendment and the transactions
contemplated hereby, no Default or Event of Default will occur or exist.
Section 4. Reaffirmation. The Company hereby reaffirms all
-------------
representations and warranties made by the Company to the Lenders and the Agent
in the Credit Agreement on and as of the date hereof with the same force and
effect as if such representations and warranties were set forth in this
Amendment in full.
Section 5. Conditions Precedent. It is a condition precedent
--------------------
to the effectiveness of this Amendment and each of the consents, waivers and
amendments set forth herein that the Company deliver to the Agent each of the
following, each of which shall be satisfactory in form and substance to the
Agent:
(a) a fully-executed copy of this Amendment;
(b) a fully-executed copy of a Revolving Credit Note payable to the
order of Creditanstalt-Bankverein in the amount of $12,000,000;
(c) a fully-executed copy of the Intercreditor Agreement;
(d) a fully-executed copy of an assignment of License Agreement dated
of even date herewith between the Company and the Trust;
(e) a fully-executed copy of amendments to all existing Mortgages for
the Obligations, reflecting the amendments set forth herein, together with
appropriate title endorsements with respect thereto;
17
<PAGE>
(f) a fully-executed Pledge Agreement executed by the Company in favor
of the Agent for the benefit of the Lenders, pledging the stock/beneficial
interest of Karalea, Marthasville, Newco and the Trust owned by the Company,
together with all stock and ownership certificates subject thereto accompanied
by duly executed blank stock or transfer powers;
(g) a signed opinion of counsel to the Company, Karalea and
Marthasville with respect to such matters as the Agent may request;
(h) a certificate executed by the chief executive officer and the
chief financial officer of the Company, stating that (a) on such date, and after
giving effect to the transactions contemplated by this Amendment, no Default or
Event of Default has occurred and is continuing; (b) no material adverse change
in the financial condition or operations of the business of the Company or any
of its Subsidiaries or the projected cash flow of the Company and its
Subsidiaries has occurred; and (c) the representations and warranties set forth
in Sections 3 and 4 hereof are true and correct in all material respects on and
as of such date with the same effect as though made on and as of such date;
(i) copies of all consents, approvals, authorizations, registrations
or filings required to be made or obtained by the Company and its Subsidiaries
in connection with the execution and delivery of this Amendment and the
consummation of the transactions contemplated hereby or thereby;
(j) copies certified by the Secretaries of the Company, Karalea and
Marthasville of all corporate or other necessary action taken by the Company,
Karalea and Marthasville to authorize the execution, delivery and performance of
the transactions contemplated by this Amendment;
(k) copies of the articles of incorporation (certified as of a recent
date by the Secretary of State of Georgia) and bylaws (certified by the
Secretaries of the Company, Karalea and Marthasville) of the Company, Karalea
and Marthasville as in effect on the date hereof;
(l) certificates of incumbency and specimen signatures with respect to
each of the officers of the Company, Karalea and Marthasville who are authorized
to execute and deliver all documents contemplated by this Amendment;
(m) certificates evidencing the good standing of the Company,
Karalea and Marthasville in Georgia;
(n) a fully executed Amendment to Warrant Agreement;
(o) assignment by NationsBank to Creditanstalt of Warrants dated
December 30, 1994 and exercisable for 72,000 aggregate shares of the Company's
Class A Common Stock, as such number is subject to adjustment as set forth
therein, at an exercise price of $3.00 per share;
18
<PAGE>
(p) fully executed copies of the following documents, each in
form acceptable to the Agent:
(i) Certificate of Designation for Series AA Preferred Stock;
(ii) Preferred Stock Exchange Agreement;
(iii) Amended and Restated Stockholders Agreement;
(iv) Amendment to Warrant Certificate (Fleming);
(v) Amendment to Registration Rights Agreement;
(vi) Transaction Agreement;
(vii) Newco Loan Agreement;
(viii) Trust Agreement;
(ix) Transfer Agreement;
(x) Acquisition Agreement; and
(xi) Such opinion letters (or copies thereof permitting the
Agent to rely thereon) delivered in connection with the
documents listed in this clause (p);
(q) evidence of (i) the Company's receipt of $12,000,000 in loan proceeds
from Newco as the initial advance under the Newco Loan Agreement and a
$3,000,000 payment from Newco as consideration for the consummation of the
transactions contemplated by the Intellectual Property Transactions and the
Newco Warrant Transactions, (ii) the application of such proceeds and payment to
the payment in full of all Obligations owing to NationsBank, (iii) the
resignation of NationsBank as Agent and the appointment of Creditanstalt-
Bankverein as successor Agent, and (iv) Newco's minimum capitalization of
$20,000,000; and
(r) such other documents or instruments as a Lender or the Agent may
request.
Section 6. References to the Credit Agreement and the Other Credit
-------------------------------------------------------
Documents. Each reference to the Credit Agreement and any of the Credit
- ---------
Documents shall be deemed to be a reference to the Credit Agreement as amended
by this Amendment, and as each may from time to time be further amended,
supplemented, restated or otherwise modified in the future by one or more other
written amendments or supplemental or modification agreements entered into
pursuant to the applicable provisions of the Credit Agreement.
Section 7. References to the Warrant Agreement. Each reference to the
-----------------------------------
Warrant Agreement shall be deemed to be a reference to the Warrant Agreement as
amended by this Amendment, and as it may from time to time be further amended,
supplemented, restated or otherwise modified in the future by one or more other
written amendments or supplemental or modification agreements entered into
pursuant to the applicable provisions of the Warrant Agreement.
Section 8. Expenses. Pursuant to Section 12.3 of the Credit Agreement,
--------
the Company shall reimburse the Agent and the Lenders upon demand for all costs
and expenses (including attorneys' fees) incurred by the Agent or the Lenders in
the preparation, negotiation and execution of this Amendment and the other
agreements and documents executed and delivered in connection herewith.
19
<PAGE>
Section 9. Benefits. This Agreement shall be binding upon and shall
--------
inure to the benefit of the parties hereto and their respective successors and
assigns.
Section 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 11. Effect. Except as expressly herein amended, the terms and
------
conditions of the Credit Agreement and the other Credit Documents, the Warrant
Agreement, and the Warrants shall remain in full force and effect.
Section 12. Counterparts. This Amendment may be executed in any number
------------
of counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns.
Section 13. Definitions. All terms defined in the Credit Agreement
-----------
which are used herein shall have the meanings defined in the Credit Agreement,
unless specifically defined otherwise herein.
Section 14. Further Assurances. The Company agrees to take such
------------------
additional acts and execute such additional documents and agreements as the
Agent and the Lenders may reasonably request in order to evidence the amendments
contained herein and contemplated hereby.
(Signatures begin on following page)
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set forth their hands in one of
more counterparts as of the 31st day of January, 1997.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
----------------------------------
Name: Harry A. Blazer
--------------------------------
Title: President
-------------------------------
Attest: /s/ Barbara N. Worrell
-----------------------------
Name: Barbara N. Worrell
-------------------------------
Title: Assistant Secretary
------------------------------
[CORPORATE SEAL]
CREDITANSTALT-BANKVEREIN, as Lender and Agent
By: /s/ Robert M. Biringer
----------------------------------
Name: Robert M. Biringer
--------------------------------
Title: Executive Vice-President
-------------------------------
By: /s/
----------------------------------
Name:
--------------------------------
Title: Vice President
-------------------------------
21
<PAGE>
SCHEDULE I
Creditanstalt-Bankverein
- ------------------------
Revolving Credit Commitment..................$12,000,000
22
<PAGE>
ACKNOWLEDGEMENT AND CONSENT OF THE GUARANTORS
Each of Marthasville Trading Company and Karalea, Inc. (collectively,
the "Guarantors") hereby consents to the execution and delivery of the foregoing
Consent and Ninth Amendment to Amended and Restated Credit Agreement (the
"Amendment") and each of the documents and agreements contemplated thereby (the
"Amendment Documents"), and to the performance by the Company of all of its
agreements and obligations under the Amendment and the Amendment Documents (as
defined in the Amendment). All capitalized terms not otherwise defined herein
shall have the meanings set forth in the Credit Agreement. Each of the
Guarantors further affirms that neither the Amendment (nor Amendment Documents)
nor the performance of the Credit Agreement and the other Credit Documents, as
amended to date, shall limit, restrict extinguish or otherwise impair its
liability to the Agent or the Lenders pursuant to its respective Guaranty or
Security Agreement, whether such obligations are now existing or hereafter
arise. Each Guarantor acknowledges that all of the terms and conditions
contained in such Guarantor's respective Guaranty and Security Agreement shall
continue in full force and effect.
Dated as of the 31st day of January, 1997.
MARTHASVILLE TRADING COMPANY
By: /s/ Harry A. Blazer
----------------------------------
Name: Harry A. Blazer
--------------------------------
Title: President
-------------------------------
KARALEA, INC.
By: /s/ Harry A. Blazer
----------------------------------
Name: Harry A. Blazer
--------------------------------
Title: President
-------------------------------
23
<PAGE>
EXHIBIT 10.14
CONDITIONAL ASSIGNMENT AND SECURITY AGREEMENT
THIS CONDITIONAL ASSIGNMENT AND SECURITY AGREEMENT (the "Agreement")
is made as of the 31st day of January, 1997, between HARRY'S FARMERS MARKET,
INC., a Georgia corporation (the "Assignor"), and CREDITANSTALT-BANKVEREIN , as
successor Agent (the "Assignee").
WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement dated as of December 30, 1994 (as amended, supplemented, restated or
otherwise modified from time to time in accordance with its terms, the "Credit
Agreement") by and among the Assignor, the Lenders named therein (the "Lenders")
and the Assignee, the Lenders have made available to the Assignor certain
financial accommodations;
WHEREAS, pursuant to the Trust Agreement dated as of the date hereof
(the "Trust Agreement") between Assignor and Wilmington Trust Company, a
Delaware banking corporation, as Trustee, Assignor has established HFMI Trust, a
Delaware business trust ("HFMI Trust"), pursuant to the Delaware Business Trust
Act, as amended;
WHEREAS, pursuant to the Transfer Agreement dated as of the date
hereof (the "Transfer Agreement") between and among HFMI Acquisition
Corporation, a Delaware corporation ("Newco"), Assignor and HFMI Trust, Assignor
agreed to transfer to HFMI Trust, as more fully described therein and in the
Assignment of Intellectual Property annexed thereto as Exhibit A, (a) all right,
title and interest worldwide in and to the trademarks, service marks, trade
names, logos, trade secrets, copyrights and know how, (b) any state or federal
applications or registrations therefor, and (c) Assignor's common law rights or
other rights derived from its use or pertaining thereto, all as set forth on
Exhibit D to the Trust Agreement, which Exhibit may be updated from time to
time, and the goodwill associated therewith (collectively, the "Intellectual
Property");
WHEREAS, pursuant to the Trust Agreement, HFMI Trust shall issue to
Assignor on the date hereof the Worldwide Class Owner Certificate (as defined in
the Trust Agreement) representing the Worldwide Class Intellectual Property (as
defined in the Trust Agreement) and the Georgia Class Owner Certificate (as
defined in the Trust Agreement) representing the Georgia Class Intellectual
Property (as defined in the Trust Agreement), together with the corresponding
irrevocable, exclusive, perpetual licenses to the Worldwide Class Intellectual
Property and the Georgia Class Intellectual Property;
WHEREAS, pursuant to the Acquisition Agreement dated as of the date
hereof (the "Acquisition Agreement") between Newco and Assignor, Assignor has
agreed to transfer to Newco the Worldwide Class Owner Certificate, together with
the corresponding irrevocable, exclusive, perpetual license to the Worldwide
Class Intellectual Property;
WHEREAS, pursuant to the Administration and Servicing Agreement dated
as of the date hereof (the "Administration and Servicing Agreement") between and
among HFMI Trust, Newco and Assignor, Newco, as Servicer as defined thereunder,
has agreed to perform certain services for and on behalf of HFMI Trust with
respect to certain matters involving the Intellectual Property;
<PAGE>
WHEREAS, pursuant to the HFMI License Agreement dated as of the date
hereof (the "License Agreement"), HFMI granted to Assignor an irrevocable,
exclusive, perpetual, royalty-free, fully paid up license with respect to the
Georgia Class Intellectual Property set forth on the attached Schedule B as
----------
amended from time to time;
WHEREAS, Assignor desires to enter into the transactions contemplated
by that certain Consent and Ninth Amendment to Amended and Restated Credit
Agreement dated as of the date hereof (the "Amendment") by and among Assignor,
the Lenders and Assignee;
WHEREAS, it is a condition precedent to the effectiveness of the
Amendment that Assignor execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the premises, the Assignor hereby
agrees with the Assignee as follows:
1. Grant of Security Interest.
To secure the complete and timely payment and performance of all
Obligations under and as defined in the Credit Agreement, the Assignor hereby
grants, assigns and conveys to the Assignee a security interest in its entire
right, title and interest in and under the License Agreement.
2. Representations and Warranties.
The Assignor covenants and warrants that:
(a) The License Agreement is subsisting and has not been adjudged
invalid or unenforceable, in whole or in part, in the United States of America
(the "U.S.") or the respective states thereof;
(b) The License Agreement is valid and enforceable in the U.S. and
the respective states thereof, that such License Agreement has been recorded in
the United States Patent and Trademark Office against all applications and
registrations which are the subject of the License Agreement and that all claims
by others to rights in the License Agreement of which the Assignor is aware are
noted on Schedule A, attached hereto and by reference made a part hereof;
(c) Except as noted on Schedule A, the Assignor is the sole and
----------
exclusive owner of the entire and unencumbered right, title and interest in and
to the License Agreement, free and clear of any liens, charges and encumbrances,
including, without limitation, sub-licenses, and covenants by the Assignor not
to sue third persons, other than the grant of the security interest set forth in
Section 1 hereof;
(d) The Assignor has and will comply with all of the terms and
conditions of the License Agreement;
-2-
<PAGE>
(e) The Assignor has the unqualified right to enter into this
Agreement and to perform its terms; and
(f) Until all of the Obligations shall have been satisfied in
full, Assignor will not enter into any agreement which is inconsistent with the
Assignor's obligations under this Agreement, without the Assignee's prior
written consent.
3. Covenants of Assignor.
(a) The Assignor covenants as follows: (i) that it will maintain the
high standard of quality which has become associated with the Georgia Class
Intellectual Property; (ii) that the Assignee from time to time and upon
reasonable request shall have the right to inspect samples of the HFMI Products
(as defined in the License Agreement) and the premises at which the HFMI
Products are produced; and (iii) that the Assignee shall have the right to
prevent use of the Georgia Class Intellectual Property on HFMI Products which
are not of high quality, all so as to preserve the goodwill symbolized by the
Georgia Class Intellectual Property and to preserve the License Agreement.
(b) The Assignor further agrees that: (i) unless the Assignor shall
have previously determined that use of the Georgia Class Intellectual Property
is no longer desirable in the conduct of the business of the Assignor and that
the loss thereof will not have a Material Adverse Effect (as defined in the
Credit Agreement) (in which event the Assignor shall notify the Assignee in
writing of such determination prior to abandoning any such Trademark), it will
not abandon the Georgia Intellectual Property; (ii) the Assignor shall give the
Assignee written notice, and a complete copy, of any sublicense of the Georgia
Class Intellectual Property; and (iii) all uses of the Georgia Class
Intellectual Property by it or its permitted sublicensees will include such
notices of registration as are required or authorized from time to time under
applicable law.
(c) With respect to the Georgia Class Intellectual Property, Assignor
agrees to assist and instruct Newco, as Servicer under the Administration and
Servicing Agreement, to take all necessary steps, including, without limitation,
in the U.S. Patent and Trademark Office or in any court, to (i) maintain the
Georgia Class Intellectual Property, and (ii) pursue each such application for
trademark registration, now or hereafter included in the Georgia Class
Intellectual Property, including, without reservation, the filing of responses
to office actions issued by the Patent and Trademark Office, the filing of
applications for renewal, the filing of affidavits under Sections 8 and 15 of
the United States Trademark Act, and the participation in opposition,
cancellation and infringement and misappropriation proceedings, unless the
Assignor shall have previously determined that such use or the pursuit or
maintenance thereof is no longer desirable in the conduct of the business of the
Assignor and that the loss thereof will not have a Material Adverse Effect (in
which event the Assignor shall notify the Assignee in writing of such
determination prior to any such action). Any expenses incurred in connection
with such activities shall be borne by the Assignor.
-3-
<PAGE>
4. Remedies Upon Default; Power of Attorney
(a) If any Event of Default under the Credit Agreement shall have
occurred and be continuing, or if the Assignor fails to perform any agreement or
to meet any of the obligations to the Assignee hereunder, all right, title and
interest in and to the License Agreement shall be automatically granted,
assigned, conveyed and delivered to Assignee or its designee, and Assignor
hereby irrevocably constitutes and appoints Assignee and any officer, agent or
employee thereof with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Assignor and in the name of Assignor or Assignee's own name or the name
of Assignee's designee, all acts of said attorney being hereby ratified and
confirmed, except to the extent any of the same constitute gross negligence or
willful misconduct, such power being coupled with an interest is irrevocable,
upon the occurrence and during the continuance of an Event of Default: (i) to
complete, date, execute and provide notice to HFMI Trust, or cause to be filed,
executed or delivered any and all documents and instruments which may be
necessary or desirable to accomplish the purpose of the Assignment; (ii) to use,
license or sublicense the Georgia Class Intellectual Property and to collect
proceeds from the manufacture, distribution, sale, promotion, advertisement,
provision and/or marketing of the HFMI Products or the Georgia Class
Intellectual Property; (iii) to convey in any transaction authorized by the
Credit Agreement, any of the Assignor's rights in the License Agreement to any
purchaser thereof; (iv) to make payment or to discharge taxes or liens levied or
placed upon or threatened against any goods covered by the License Agreement,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by Assignee in its sole discretion, and such payments made by
Assignee to become the obligations of Assignor to Assignee, due and payable
immediately without demand. Assignee's authority hereunder shall include,
without limitation, the authority to endorse and negotiate any checks or
instruments constituting proceeds of any HFMI Products in the name of Assignor,
execute and give receipt for any certificate of ownership or any document
(constituting the Georgia Class Intellectual Property), sign Assignor's name on
all financing statements or any other documents necessary or appropriate by
Assignee to preserve, protect or perfect the security interest in any of the
Georgia Class Intellectual Property which are the subject of the License
Agreement (to the extent permitted by applicable law)and to file the same,
prepare, file and sign Assignor's name on any notice of Lien, and prepare, file
and sign Assignor's name on a proof of claim in bankruptcy or similar document
against any customer of Assignor with respect to any claim of Assignor
comprising any part of the License Agreement, and to take any other actions
arising from or incident to the powers granted to Assignee in the Credit
Agreement.
(b) Assignor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue of this power of attorney. This power of attorney
is a power coupled with an interest and shall be irrevocable.
(c) In addition to the foregoing, upon the occurrence and during the
continuance of an Event of Default, Assignee shall have all rights and remedies
of a secured party under the UCC and as provided under the Credit Agreement and
as otherwise available under law and equity.
-4-
<PAGE>
5. Termination of Agreement.
At such time as the Assignor shall completely satisfy all of the
Obligations, the Assignee shall execute and deliver to the Assignor all deeds,
assignments and other instruments as may be necessary or proper to re-vest in
the Assignor unencumbered title to the License Agreement, subject to any
disposition thereof which may have been made by the Assignee pursuant hereto.
6. Limitation of Liability and Indemnification.
The Assignor hereby releases the Assignee from, and agrees to hold the
Assignee free and harmless from and against, any claims arising out of any
action taken or omitted to be taken with respect to the License Agreement
(except to the extent of the Assignee's gross negligence or willful misconduct),
and the Assignor agrees to indemnify and hold harmless the Assignee from and
against, any and all claims, demands, suits, losses, damages or other expenses
(including reasonable attorneys' fees actually incurred) arising from or in any
way related to the License Agreement.
7. Waiver and Amendment.
(a) No course of dealing between the Assignor and the Assignee nor any
failure to exercise, nor any delay in exercising, on the part of the Assignee,
any right, power or privilege hereunder or thereunder shall preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege.
(b) This Agreement is subject to modification only by a writing signed
by the parties.
8. Cumulative Rights.
All of the Assignee's rights and remedies with respect to the License
Agreement or Georgia Class Intellectual Property, whether established hereby or
under the Credit Agreement, or by any other agreements or by law, shall be
cumulative and may be exercised singularly or concurrently.
9. Severability.
The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid and unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof in such jurisdiction, and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of this Agreement in any jurisdiction.
10. Survival.
The benefits and burdens of this Agreement shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
parties.
-5-
<PAGE>
11. Counterparts.
This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
12. Choice of Law.
The validity, construction and enforcement of this Agreement, and the
determination of the rights and duties of the parties shall be governed by the
laws of the State of Georgia regardless of any choice of law or other provision
that would result in the application of the laws of any other jurisdiction.
[Remainder of Page Intentionally Left Blank]
-6-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement under
seal as of the day and year first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
----------------------------------
Name: Harry A. Blazer
Title: President
Attest:
By: /s/ Barbara N. Worrell
-----------------------
Name: Barbara N. Worrell
Title: Asst. Secretary
CREDITANSTALT-BANKVEREIN,
as Agent
By: /s/ Robert M. Biringer
----------------------------------
Name: Robert M. Biringer
Title: Executive Vice President
By: /s/ Joseph P. Longoss
----------------------------------
Name: Joseph P. Longoss
Title: Vice President
-7-
<PAGE>
SCHEDULE A
None
-8-
<PAGE>
SCHEDULE B
TRADEMARK COLLATERAL
<TABLE>
<CAPTION>
Registration or Registration or
Trademark Application Number Filing Date Status
--------- ------------------ ----------- ------
<S> <C> <C> <C>
HARRY'S FARMERS MARKET (stylized) 1,854,765 09/20/94 Registered
GRAINGER COUNTY HOME
GROWN TOMATOES (Stylized) 1,883,811 03/14/95 Registered
HARRY'S IN A HURRY 1,850,126 08/16/94 Registered
HARRY'S 1,929,015 10/24/95 Registered
MARTHASVILLE CREAMERY
& DESIGN 74/476,219 01/04/94 Abandoned
MARTHASVILLE CREAMERY
& DESIGN 1,871,456 01/03/95 Registered
BEAR DANCE AND DESIGN 1,943,178 12/19/95 Registered
HARRY'S OLD FASHIONED
LAYER CAKES & DESIGN 1,883,775 03/14/95 Registered
</TABLE>
-9-
<PAGE>
EXHIBIT 10.15
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT is made this 31st day of January, 1997 by and
among CREDITANSTALT-BANKVEREIN, an Austrian banking corporation
("Creditanstalt"), as the successor agent under the Credit Agreement hereinafter
referred to (in such capacity, the "Agent"); and HFMI ACQUISITION CORPORATION, a
Delaware corporation ("Subordinate Lender").
W I T N E S S E T H:
-------------------
WHEREAS, the lenders (the "Senior Lenders") under a certain Amended and
Restated Credit Agreement, dated as of December 30, 1994, as amended (as
heretofore, now or hereafter amended, modified, restated or refinanced, the
"Senior Credit Agreement") by and among Harry's Farmers Market, Inc., a Georgia
corporation ("Borrower"), the Senior Lenders and the Agent, have agreed to
extend certain financial accommodations to Borrower, pursuant thereto, and have
secured the payment of all "Obligations" of Borrower to the Senior Lenders
arising pursuant to, and as such term is defined in, the Senior Credit Agreement
(herein collectively referred to as the "Senior Indebtedness") by retaining from
Borrower and all of its Subsidiaries (as such term is defined in the Senior
Credit Agreement) other than Roman Properties, Inc. a security interest in
substantially all of the personal property of Borrower and such Subsidiaries
pursuant to the "Security Documents," as such term is defined in the Senior
Credit Agreement; and
WHEREAS, Borrower and/or its Subsidiaries further have executed in favor
of Agent certain deeds to secure debt (herein collectively referred to as the
"Senior Deeds"; the Senior Credit Agreement and the Senior Deeds, together with
all related documentation, all as in effect from time to time, are hereinafter
referred to as the "Senior Loan Documents") with respect to their owned real
property and the improvements thereon, situated in Cobb, Fulton and Gwinnett
Counties, Georgia (herein collectively called the "Premises"), granting security
title to such Premises as additional security for the payment and performance of
the Senior Indebtedness and the Senior Credit Agreement; and
WHEREAS, Subordinate Lender has agreed to extend certain financial
accommodations to Borrower pursuant to a Secured Loan Agreement of even date
herewith between Subordinate Lender and Borrower (the "Subordinate Loan
Agreement"), and has secured the payment of all indebtedness, obligations,
liabilities of the Borrower to the Subordinate Lender arising out of the
Subordinated Loan Documents (as hereinafter defined), whether now existing or
hereafter arising, direct or indirect, absolute or contingent, joint and/or
several, arising by operation of law or otherwise (herein collectively called
the "Subordinated Debt") by receiving from Borrower and its Subsidiaries (other
than RPI) a security interest in substantially all of their respective personal
property pursuant to the Subordinate Loan Agreement; and
WHEREAS, Borrower and/or such Subsidiaries further have executed or
agreed to execute in favor of Subordinate Lender certain deeds to secure debt
(herein collectively referred to as the "Subordinate Deeds"; the Subordinate
Loan Agreement and the Subordinate Deeds, together with all related
documentation, all as in effect from time to time, are hereinafter referred to
as the "Subordinate Loan Documents"), granting security title to the Premises as
additional security for the payment and performance of the Subordinated Debt and
the Subordinate Loan Agreement;
WHEREAS, as a result of the Senior Loan Documents and the Subordinate
Loan Documents, Agent and Subordinate each hold or will hold security interests
in substantially all of the personal property of the Borrower and certain of its
Subsidiaries (such interests being hereinafter collectively referred to as
"Security Interests" and, individually, as a "Security Interest") and hold
<PAGE>
security title to the Premises (such interests being hereinafter referred to
collectively as "Liens" and individually as a "Lien"); and
WHEREAS, Agent and Subordinate Lender wish to enter into this Agreement
for the purpose of setting forth (i) the relative priorities of their respective
Liens in the Premises and respective Security Interests in the personal property
of the Borrower and such Subsidiaries, and (ii) certain other agreements between
them with respect to their respective agreements with the Borrower and its
Subsidiaries;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and conditions herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Subordinate Lender and Agent, on behalf of the Senior Lenders, agree as follows:
1. Debt Subordination. Except as set forth in Section 4 hereof,
------------------
Subordinate Lender will not ask for, demand, sue for, take or receive from the
Borrower, by setoff or in any other manner, the whole or any part of the
Subordinated Debt, whether principal or interest, unless and until the Senior
Indebtedness shall have been fully paid and satisfied and all financing
arrangements between the Senior Lenders and the Borrower have been terminated in
writing by Agent and/or the Senior Lenders.
2. Lien Subordination.
------------------
(a) Agent and Subordinate Lender agree at all times, whether before,
after or during the pendency of any bankruptcy, reorganization or other
insolvency proceeding and notwithstanding the priorities which would ordinarily
result from the order of granting of any Lien or Security Interest, or the order
of filing or recording of any deed to secure debt or financing statements or any
other matter, Agent's Security Interests in all the personal property of
Borrower and its Subsidiaries (the "Collateral") and Agent's Lien on the
Premises shall constitute a first priority Lien on and Security Interest in such
property and Subordinate Lender's Liens and Security Interests in the Premises
and such property shall constitute a second priority Lien on and Security
Interest therein.
(b) Subordinate Lender agrees that it will not ask for, demand, sue
for, take, receive, or possess from Borrower or any of its Subsidiaries, by
setoff or in any other manner, the whole or any part of the Collateral or the
Premises, or foreclose or otherwise realize upon the whole or any part of the
Collateral or the Premises, whether by judicial action or under power of sale,
by self-help repossession or otherwise, unless and until all of the Senior
Indebtedness has been paid in full and all financing arrangements between the
Senior Lenders and the Borrower have been terminated in writing by Agent and/or
the Senior Lenders.
(c) Subordinate Lender agrees that, upon any sale or other disposition
of all or any of the Collateral or the Premises, if the Agent agrees to release
its Security Interest in any such Collateral or its Lien in such Premises, or if
the net cash proceeds of such sale or disposition are being applied to the
payment of the Senior Indebtedness, Subordinated Lender shall be deemed to have
consented to such sale or other disposition and agrees to release its Security
Interest in any such Collateral and/or its Lien in any such Premises.
Subordinate Lender hereby grants to the Agent and each Senior Lender an
irrevocable power of attorney to execute and deliver any such release required
of Subordinate Lender hereunder.
2
<PAGE>
(d) Subordinate Lender hereby (i) consents to the granting of a
Security Interest by Borrower in the HFMI License Agreement dated of even date
herewith between HFMI Trust and Borrower (the "License") and the Georgia Class
Ownership Certificates (the "Certificates"), as such term is defined in the
Trust Agreement dated of even date herewith by and among Borrower, Subordinate
Lender and Wilmington Trust Company (the "Trust Agreement"), (ii) consents to
any Transfer (as such term is defined in the License) of the License and the
Certificates made by the Agent in exercise of its remedies in respect of the
License and the Certificates or made by the Borrower if the proceeds from such
Transfer are used to permanently reduce the Senior Indebtedness and (iii) waives
its Call Option (as such term is defined in the Trust Agreement) (A) so long as
the Senior Indebtedness remains unpaid, the Senior Credit Agreement has not been
terminated, and the Senior Indebtedness has not been purchased by Subordinate
Lender pursuant to Section 7(b) or Section 8 hereof and (B) in connection with
or following any Transfer described in clause (ii) above.
3. Subrogation. Except as set forth in Section 4 hereof, Subordinate
-----------
Lender also agrees that, regardless of whether the Senior Indebtedness is
secured or unsecured, the Agent and the Senior Lenders shall be subrogated to
Subordinate Lender with respect to Subordinate Lender's claims against Borrower
and Subordinate Lenders' rights, liens and security interests, if any, in the
Collateral or the Premises and the proceeds thereof until all of the Senior
Indebtedness of Borrower to the Agent and the Senior Lenders shall have been
paid and fully satisfied and all financing arrangements between the Senior
Lenders and the Borrower have been terminated in writing by Agent and/or the
Senior Lenders.
4. Permitted Transactions. Notwithstanding anything to the contrary set
----------------------
forth herein:
(a) Borrower may make, and Subordinate Lender may accept, the regularly
scheduled payments of interest provided for in the Subordinated Loan Agreement
(without giving effect to any amendment or modification thereof which would have
the effect of increasing any such payment or accelerating the maturity thereof);
provided, however, that:
- -------- -------
(i) No payment may be made by Borrower on account of the interest on the
Subordinated Debt (A) upon the maturity of any Senior Indebtedness of Borrower
by lapse of time, acceleration (unless waived) or otherwise, unless and until
all principal of, premium, if any, and interest on such Senior Indebtedness are
first paid in full (or such payment is duly provided for), or (B) in the event
of default in the payment of any principal of, premium, if any, or interest on
any Senior Indebtedness of Borrower when it becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise (a
"Payment Default"), unless and until such Payment Default has been cured or
waived or otherwise has ceased to exist.
(ii) Upon (A) the happening of an event of default (other than a Payment
Default) that permits, or would permit, with (w) the passage or time, (x) the
giving of notice, (y) the making of any payment of the Subordinated Debt then
required to be made, or (z) any combination thereof (collectively, a "Non-
Payment Default"), the Agent immediately to accelerate its maturity and (B)
written notice of such Non-Payment Default given to Borrower and the Subordinate
Lender by the Agent (a "Payment Notice"), then, unless and until such Non-
3
<PAGE>
Payment Default has been cured or waived or otherwise has ceased to exist, no
payment by set-off or otherwise) may be made by or on behalf of Borrower on
account of the interest on the Subordinated Debt. Notwithstanding the
foregoing, unless (1) the Senior Indebtedness exists has been declared due and
payable in its entirety within 179 days after the Payment Notice is delivered as
set forth above (the "Payment Blockage Period"), and (2) such declaration has
not been rescinded or waived, at the end of the Payment Blockage Period,
Borrower shall be required to pay all sums not paid to the Subordinate Lender
during the Payment Blockage Period due to the foregoing prohibitions which were
scheduled to be payable during the Blockage Period and to resume all other
payments as and when due on the Subordinated Debt. More than one Payment Notice
may be given in any 365-day period, provided, however, that in no event,
-------- -------
however, may the total number of days during which any Payment Blockage Period
or Payment Blockage periods are in effect exceed 179 days in the aggregate
during any consecutive 365-day period.
(b) The aggregate principal amount of Subordinated Debt may be reduced as
a result of Subordinate Lender contributing such Subordinated Debt to the
capital of Borrower in payment of the purchase price for shares of Series B
Preferred Stock (as such term is defined in the Senior Credit Agreement) issued
to Subordinate Lender as contemplated by Section 3.9 of the Subordinate Loan
Agreement.
5. Priority on Distribution of Proceeds. In the event of any
------------------------------------
distribution, division or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the assets
of Borrower or the products or proceeds thereof, to the creditors of Borrower or
any of its Subsidiaries or readjustment of the obligations and indebtedness of
Borrower or any of its Subsidiaries, whether by reason of liquidation,
bankruptcy, arrangement, receivership, assignment for the benefit of creditors
or any other action or proceeding involving the readjustment of all or any of
the indebtedness or obligations of Borrower or any of its Subsidiaries, or the
application of the assets of Borrower or any such Subsidiary to the payment or
liquidation thereof, or the dissolution or other winding up of Borrower's or
such Subsidiary's business, or upon the sale of all or substantially all of
Borrower's or any such Subsidiary's business, the distributions of proceeds of
the assets of Borrower or such Subsidiary shall be made first to the Agent for
application to the Senior Indebtedness and, following the payment of the Senior
Indebtedness in full, then the Subordinated Debt.
6. Grant of Authority to the Agent. In order to enable the Agent to
-------------------------------
enforce its rights hereunder in any such action or proceeding, the Agent is
hereby irrevocably authorized and empowered, in its discretion, to: (a) make and
present for and on behalf of Subordinate Lender such proofs of claims against
Borrower on account of the Subordinated Debt as the Agent may deem expedient or
proper and to receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
to apply the same on account of any of the Senior Indebtedness; (b) to demand,
sue for, collect and receive every such payment or distribution and give
acquittance therefor; and (c) to file claims and take such other acts and
commence such other proceedings, in the Agent's own name or in the name of
Subordinate Lender, any Senior Lender or otherwise, as the Agent may deem
necessary or advisable for the enforcement of this Agreement. Subordinate
Lender shall execute and deliver to the Agent such powers of attorney,
assignments or other instruments or documents, as may be requested by the Agent
in order to enable the Agent to enforce any and all claims upon or with respect
to any or all of the Subordinated Debt and to collect and receive any and all
payments or distributions which may be payable or deliverable at any time upon
or with respect to the Subordinated Debt, all for benefit of the Senior Lenders.
7. Notice of Default; Right to Cure, Negotiate.
-------------------------------------------
4
<PAGE>
(a) Generally. Agent agrees to give to the Subordinate Lender copies
---------
of any written notices of default which may be given under or pursuant to the
terms of any of the Senior Loan Documents, which the Agent gives Borrower,
hereafter (herein called a "Notice of Default") either concurrently with, or as
soon as practicable after, the giving of any such notice to Borrower;
(b) Specific Cure Right as to Senior Indebtedness. Agent further
---------------------------------------------
agrees, in connection with the giving of any Notice of Default to Subordinate
Lender pursuant to subsection (a) hereof, before taking any enforcement action
with respect to its Security Interest in the Collateral or with respect to its
Lien on the Premises (other than as may be deemed necessary or advisable by
Agent to perfect, protect or preserve such Security Interest or Lien), to permit
Subordinate Lender, within a period not to exceed the longer of (x) 10 days from
its receipt of such Notice of Acceleration or (y) any cure period provided in
the Senior Loan Documents with respect thereto, either to (i) cure, on behalf of
Borrower, the default or defaults in consequence of which the Agent and the
Senior Lenders have elected to take the actions described in such Notice of
Default, and, should Subordinate Lender, within such cure period, cure such
default or defaults to the satisfaction and the Agent and the Senior Lenders,
Agent agrees with Subordinate Lender to reinstate the Senior Loan Documents
effective upon such cure (to the extent no other defaults then exist thereunder)
and not take any enforcement actions with respect to the Premises or the
Collateral which, in the absence of such cure by Subordinate Lender, otherwise
then would be available to Agent or (ii) purchase the Senior Indebtedness, for
an amount equal to the then outstanding principal balance of the Senior
Indebtedness, all accrued interest, fees and charges thereon, and all costs
incurred to date of such purchase by the Agent or the Senior Lenders which are
reimbursable by the Borrower under the Senior Loan Documents, upon payment of
which amount the Agent and the Senior Lenders forthwith shall transfer, without
recourse, warranty or representation, and deliver to the Subordinate Lender, the
Senior Loan Documents pertaining to the Senior Indebtedness. For purposes of
calculating the principal, accrued interest, fees, charges and unreimbursed cost
outstanding under the Senior Loan Documents, the purchase of the Senior
Indebtedness shall be treated as if it were a repayment in full of the Senior
Indebtedness.
(c) Prior to any Transfer (as such term is defined in the License) of
the License or the Certificates made by the Agent in exercise of its remedies in
respect of the License, Agent agrees to give Subordinate Lender a fifteen (15)
day period during which Subordinate Lender shall have the right to negotiate
with the Agent and the Senior Lenders for purchase by Subordinate Lender of the
License and Certificates and Agent agrees to negotiate in good faith with
Subordinate Lender in connection therewith; provided, however, that if by the
-------- -------
end of such fifteen (15) day period Agent and Subordinate Lender have not been
able to reach agreement on the terms of any such sale, Agent shall be free to
Transfer the License to any person or entity and on such terms and conditions as
the Agent and the Senior Lenders deem appropriate. In connection with any
negotiation undertaken pursuant to the foregoing sentence, the Subordinate
Lender acknowledges and agrees that the availability of the License is likely to
enhance the value of the Collateral and the Premises and that the Agent and the
Senior Lenders may negotiate for any purchase of the License by Subordinate
Lender negotiated pursuant to this Section 7(c) to also include the purchase by
Subordinate Lender of some or all of the Collateral and/or the Premises, as the
Agent and the Senior Lenders deem appropriate. Upon the Transfer of the License
and the Certificates to any person or entity other than Subordinate Lender, the
Agent shall require the transferee to acknowledge in writing that it is bound by
the terms of the License, except to the extent expressly waived by Subordinate
Lender pursuant to this Agreement.
8. Purchase Option Upon Change of Control. Upon the occurrence of a
--------------------------------------
"Change of Control" which triggers the "Call Option," as such terms are defined
5
<PAGE>
in the Trust Agreement, Subordinate Lender shall have the option, within thirty
(30) days thereafter, to purchase the Senior Indebtedness, for an amount equal
to the then outstanding principal balance of the Senior Indebtedness, all
accrued interest, fees and charges thereon, and all costs incurred to date of
such purchase by the Agent or the Senior Lenders which are reimbursable by the
Borrower under the Senior Loan Documents, upon payment of which amount the Agent
and the Senior Lenders forthwith shall transfer, without recourse, warranty or
representation, and deliver to the purchasing party, the Senior Loan Documents
pertaining to the Senior Indebtedness. For purposes of calculating the
principal, accrued interest, fees, charges and unreimbursed cost outstanding
under the Senior Loan Documents, the purchase of the Senior Indebtedness shall
be treated as if it were a repayment in full of the Senior Indebtedness.
9. Receipt of Moneys. Except as provided in Section 4 hereof, should any
-----------------
payment or distribution or security or instrument or proceeds thereof be
received by Subordinate Lender upon or with respect to the Subordinated Debt
(other than shares of Borrower's Series B Preferred Stock) prior to the
satisfaction of all of the Senior Indebtedness owing to the Agent and the Senior
Lenders and termination in writing by the Agent and the Senior Lenders of all
financing arrangements between Borrower and the Senior Lenders, the Subordinate
Lender shall receive and hold the same in trust, as trustee, for the benefit of
the Agent and shall forthwith deliver the same to Agent in precisely the form
received (except for endorsement or assignment by Subordinate Lender where
necessary), for application on any of the Senior Indebtedness, due or not due,
and, until so delivered, the same shall be held in trust by Subordinate Lender
as the property of the Agent. In the event of the failure of Subordinate Lender
to make any such endorsement or assignment to the Agent, the Agent, or any of
its officers or employees, is hereby irrevocably authorized to make the same.
10. Instrument Legend. Any instruments evidencing any of the
-----------------
Subordinated Debt, or any portion thereof, including, without limitation, the
Subordinated Note, will, on the date hereof or promptly hereafter, be inscribed
with a legend conspicuously indicating that payment thereof is subordinated to
the claims of the Agent and the Senior Lenders pursuant to the terms of this
Agreement. Any instrument evidencing any of the Subordinated Debt, or any
portion thereof, which is hereafter executed by Borrower, will, on the date
thereof, be inscribed with the aforesaid legend.
11. Transfer of Claims. Subordinate Lender agrees not to assign or
------------------
transfer to others any claims relating to the Subordinated Debt while any of the
Senior Indebtedness remains unpaid unless such assignment or transfer is made
expressly subject to this Agreement.
12. Term. This Agreement shall constitute a continuing agreement of
----
subordination, and the Senior Lenders may continue, without notice to
Subordinate Lender, to lend monies, extend credit and make other accommodations
to or for the account of Borrower on the faith hereof, and this Agreement shall
be irrevocable by Subordinate Lender until all Senior Indebtedness shall have
been paid and fully satisfied, and all financing arrangements between the
Borrower and the Senior Lenders have been terminated in writing by the Agent
and/or the Senior Lenders.
13. Additional Agreements Among Agent, Senior Lenders and Borrower.
--------------------------------------------------------------
(a) Subject to subsection (b) below, the Agent and/or the Senior
Lenders, at any time and from time to time, may enter into such agreement or
agreements with Borrower as the Agent or the Senior Lenders may deem proper,
extending the time of payment of or renewing or otherwise amending or altering
the terms of all or any of the Senior Indebtedness or affecting the security
6
<PAGE>
underlying any or all of the Senior Indebtedness, or may exchange, sell,
release, surrender or otherwise deal with any such security, without in any way
impairing or affecting this Agreement hereby.
(b) The Agent agrees that it shall not, without the consent of the
Subordinate Lender, amend the Senior Loan Agreement (i) to increase the
aggregate principal amount of the Senior Indebtedness above $13,500,000; (ii) to
amend the provisions of Sections 9.3 (Interest Coverage Ratio) or 9.4 (Tangible
Net Worth) to require a higher level of financial performance by the Borrower
during any period than such Sections require on the date hereof; (iii) to amend
the provisions of Section 8.7 (Operating Leases) to reduce the operating leases
that the Borrower may enter into below the level permitted to the Borrower by
such covenant on the date hereof (iv) or amend the Senior Loan Agreement to
include a covenant expressly limiting capital expenditures. If notwithstanding
the foregoing Borrower, the Agent and Senior Lenders so amend the Senior Loan
Agreement without first obtaining the consent of the Subordinate Lender, such
amendment shall not be a breach of this Agreement unless (A) Subordinate Lender
notifies the Agent of such breach prior to the end of the earliest of (x)
fifteen (15) days after the Subordinate Lender learns of such amendment, (y)
fifteen (15) days after the filing of the Borrower's first quarterly report on
Form 10-Q or annual report on Form 10-K after the date of such amendment or (z)
fifteen (15) days after the filing of any report by the Borrower on Form 8-K
which discloses such amendment and (B) such breach is not cured by the Agent
and/or the Senior Lenders within (60) days after the date the Agent receives
such notice (which cure may be effected by voiding the offending amendment). In
the event any such breach is not cured in period specified in clause (B) above,
Subordinate Lender shall have a claim against Agent for any damages suffered by
it as a result of such amendment but such breach shall not impair the
subordination provisions and the other obligations of Subordinate Lender
hereunder.
14. Subordinate Lender's Waivers. All of the Senior Indebtedness shall be
----------------------------
deemed to have been made or incurred in reliance upon this Agreement, and
Subordinate Lender expressly waives all notice of the acceptance by the Agent or
the Senior Lenders of the subordination and other provisions of this Agreement,
all other notices whatsoever, and reliance by the Agent or the Senior Lenders
upon the subordination and other agreements as herein provided. Subordinate
Lender agrees that: (a) neither the Agent nor any Senior Lender has made any
warranties or representations with respect to the due execution, legality,
validity, completeness or enforceability of the Senior Credit Agreement or the
other Security Documents (as such term is defined in the Senior Credit
Agreement), or the collectibility of the Senior Indebtedness; (b) the Agent and
the Senior Lenders shall be entitled to manage and supervise their loans to the
Borrower in accordance with their usual practices, modified from time to time as
they deem appropriate under the circumstances, without regard to the existence
of any rights that Subordinate Lender may now or hereafter have in or to any of
the assets of the Borrower; and (c) neither the Agent nor any Senior Lender
shall have any liability to Subordinate Lender for, and Subordinate Lender
waives any claim which he may now or hereafter have against the Agent or any
Senior Lender arising out of, any and all actions which the Agent or such Senior
Lender, in good faith, takes or omits to take (including, without limitation,
actions with respect to the creation, perfection or continuation of the Liens in
the Premises or the Security Interests in the Collateral, actions with respect
to the occurrence of an Event of Default, actions with respect to the
foreclosure upon, sale of, release of, depreciation of or failure to realize
upon, any of the Collateral or Premises and actions with respect to the
collection of any claim for all or any part of the Senior Indebtedness from any
account debtor, guarantor or any other party) with respect to the Loan Agreement
or the other Loan Documents or to the collection of the Senior Indebtedness of
Borrower to the Senior Lender or the valuation, use, protection or release of
the Collateral.
7
<PAGE>
15. Agent's and Senior Lenders' Waivers. No waiver shall be deemed to be
-----------------------------------
made by the Agent or any Senior Lender of any of its rights hereunder, unless
the same shall be in writing signed by the Agent or such Senior Lender, and each
waiver, if any, shall be a waiver only with respect to the specific instance
involved and shall in no way impair the rights of the Agent or such Senior
Lender or the obligations of Subordinate Lender to the Agent and the Senior
Lenders in any other respect at any other time.
16. Application of Payments. The Subordinate Lender hereby agrees that
-----------------------
all payments received by the Agent or the Senior Lenders from Borrower may be
applied and reapplied, in whole or in part, to any of the Senior Indebtedness,
as the Senior Lenders, in their sole discretion, deem appropriate.
17. Representations and Warranties. Subordinate Lender hereby represents
------------------------------
and warrants to the Agent and the Senior Lenders as follows:
(a) Subordinate Lender has all requisite power and authority to
execute, deliver and perform this Agreement and without other or further action
or approval of any kind;
(b) This Agreement constitutes the valid and legally binding
obligation of Subordinate Lender, enforceable in accordance with its terms
(except that enforceability may be limited by bankruptcy, insolvency and other
laws affecting creditors' rights generally), and no consent or approval of any
other party and no consent, license, approval or authorization of any
governmental authority, bureau or agency is required in connection with the
execution, delivery, performance, validity and enforceability of this Agreement.
18. Notices. Any notices required to be given hereunder shall be sent by
-------
first class certified mail, postage prepaid, return receipt requested, by
facsimile or delivered by hand, and shall be deemed to have been made when
received. Notices to Agent shall be addressed to Agent at:
Creditanstalt-Bankverein
Two Greenwich Plaza
Greenwich, Connecticut 06830
Attention: Lisa Bruno
Facsimile: (203) 851-1234
with a copies to: Creditanstalt-Bankverein
2 Ravinia Drive
Suite 1680
Atlanta, Georgia 30346
Attn: Robert M. Biringer
Joseph P. Longosz
Facsimile: (770) 390-1851
and
8
<PAGE>
Troutman Sanders LLP
600 Peachtree Street, N.W.
Suite 5200
Atlanta, Georgia 30308-2216
Attn: Hazen H. Dempster
Facsimile: (404) 885-3900
notices to Subordinate Lender shall be addressed to Subordinate Lender at:
HFMI Acquisition Corporation
14103 Denver West Parkway
Golden, Colorado 80401
Attention: Saad J. Nadhir
Facsimile: (303) 216-5550
19. Relationship of Parties. This Agreement is entered into solely for
-----------------------
the purposes set forth above, and, except as expressly provided otherwise
herein, no party assumes any responsibility to the other to advise the other of
information known to such party regarding the financial condition of the
Borrower, or regarding the Collateral or the Premises, or of any other
circumstances bearing upon the risk of nonpayment of the obligations of Borrower
under the Senior Loan Documents or the Subordinate Loan Documents, respectively.
Each party shall be responsible for managing its relationship with Borrower, and
no party shall be deemed the agent of any other party for any purpose. Agent may
alter, amend, supplement, release, discharge or otherwise modify any terms of
the Senior Loan Documents without notice to or consent of the Subordinate
Lender.
20. Refinancing of Senior Credit Agreement. In the event that the
--------------------------------------
Borrower incurs indebtedness, the proceeds of which are use to repay the Senior
Indebtedness in full (the "Refinancing Indebtedness"), the Subordinate Lender
agrees, upon the request of the holder of the Refinancing Indebtedness, to enter
into a replacement intercreditor agreement, on the same terms and conditions as
this Agreement (a "Replacement Intercreditor Agreement"), with the holder(s) of
such refinancing Indebtedness or their representative. Upon the execution and
delivery of any such Replacement Intercreditor Agreement, any reference in the
Subordinate Loan Documents to this Agreement shall be deemed to refer to such
Replacement Intercreditor Agreement.
21. Parties. This Agreement shall be binding upon, and shall inure to the
-------
benefit of, the parties and their respective successors and assigns.
22. Third Party Beneficiaries. Nothing contained in this Agreement shall
-------------------------
be deemed to indicate that this Agreement has been entered into for the benefit
of any person other than the Senior Lenders and the parties hereto.
23. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
SUBORDINATE LENDER HEREBY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY
NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR THE PURPOSES OF ALL LEGAL
9
<PAGE>
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT; AND (B) IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT TO BRING PROCEEDINGS
AGAINST SUBORDINATE LENDER IN THE COURTS OF ANY OTHER JURISDICTION.
24. Waiver of Jury Trial. AFTER REVIEWING THIS PROVISION SPECIFICALLY WITH
--------------------
ITS RESPECTIVE COUNSEL, SUBORDINATE LENDER AND AGENT HEREBY KNOWINGLY,
INTELLIGENTLY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LEGAL PROCEEDING BASED ON OR ARISING OUT OF, UNDER, IN
CONNECTION WITH, OR RELATING TO THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF SUBORDINATE
LENDER OR THE AGENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SENIOR
LENDERS TO MAKE THE LOANS TO BORROWER.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CREDITANSTALT-BANKVEREIN
By: /s/ Robert M. Biringer
------------------------------
Robert M. Biringer
Executive Vice President
By: /s/ Joseph P. Longosz
------------------------------
Joseph P. Longosz
Vice President
HFMI ACQUISITION CORPORATION
By: /s/
-----------------------------
Name:
Title:
11
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT
----------------------------
The undersigned, Harry's Farmers Market, Inc., a Georgia corporation
("Borrower"), hereby accepts and acknowledges receipt of a copy of the foregoing
Intercreditor Agreement and consents to and agrees to be bound by all provisions
thereof, including, without limitation the agreements between Agent and
Subordinate Lender with respect to the payment by each to the others of certain
proceeds derived from the liquidation of the Collateral and the Premises.
Without limiting the generality of the foregoing, Borrower agrees that, (a) in
the event of any transfer of the License by Borrower made in reliance upon the
provisions of Section 2(d)(ii) of the foregoing Intercreditor Agreement,
Borrower will comply with the provisions of Section 7(c) as if Borrower were the
Agent and (b) in the event the Agent receives a notice from Subordinate Lender
pursuant to Section 13(b) of the foregoing Intercreditor Agreement, Borrower
agrees that Agent may, without Borrower's consent, void any amendment or portion
thereof which contravenes, or which Subordinate Lender alleges as contravening,
the restrictions set forth in said Section 13(b).
Capitalized terms used in this Acknowledgment and Agreement without
definition have the meanings specified in the foregoing Intercreditor Agreement
unless the context otherwise requires.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
-------------------------------
Name: Harry A. Blazer
Title: President
[CORPORATE SEAL]
12
<PAGE>
EXHIBIT 10.16
FIRST AMENDMENT
TO
AMENDED AND RESTATED WARRANT AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED WARRANT AGREEMENT (this
"Amendment") is dated as of January 31, 1997 by and among HARRY'S FARMERS
MARKET, INC., a Georgia corporation (the "Company") and CREDITANSTALT-
BANKVEREIN, a banking company organized under the laws of Austria
("Creditanstalt").
Creditanstalt and NationsBank, N.A. (South) (f/k/a as NationsBank of
Georgia, National Association) ("NationsBank") (Creditanstalt and NationsBank
are collectively referred to herein as the "Lenders") and the Company entered
into the Amended and Restated Credit Agreement dated as of December 30, 1994 (as
amended, the "Credit Agreement") pursuant to which the Lenders provided certain
credit facilities to the Company.
In order to induce the Lenders to enter into the Credit Agreement, the
Company entered into an Amended and Restated Warrant Agreement with the Lenders
(the "Warrant Agreement") and issued to the Lenders certain warrants to purchase
up to 360,000 shares of Class A Common Stock of the Company (the "Warrants").
The Company and HFMI Acquisition Corporation, a Delaware corporation
("Newco"), intend to enter into that certain Transaction Agreement (the
"Transaction Agreement"), pursuant to which the Company and Newco will agree to
enter into certain transactions.
Pursuant to the terms of the Transaction Agreement, the Company and Newco
intend to enter into that Secured Loan Agreement (the "Secured Loan Agreement"
and the transactions contemplated therein, including the Option (defined below)
are collectively referred to as the "Loan Transactions"), pursuant to which
Newco will agree to lend to the Company up to $20,000,000 (the "Subordinated
Loans"), subject to those terms and conditions set forth in the Secured Loan
Agreement. In addition, pursuant to the Secured Loan Agreement, Newco will be
granted an option (the "Option") to acquire 500,000 shares of Series B Preferred
Stock, no par value, of the Company (the "Series B Preferred Stock").
Pursuant to the terms of the Transaction Agreement, the Company intends to
sell and issue to Newco warrants to purchase up to 2,000,000 shares of Class A
Common Stock, the terms and conditions of which are set forth in that warrant
attached as Exhibit C to the Transaction Agreement (the "Newco Warrant") (the
issuance and sale of the Newco Warrant and the issuance of Class A Common Stock
upon exercise thereof are herein sometimes collectively referred to the "Newco
Warrant Transactions").
<PAGE>
Pursuant to a Trust Agreement (the "Trust Agreement"), the Company and
Wilmington Trust Company, a Delaware banking corporation ("Trustee"), intend to
establish a trust (the "Trust"). Pursuant to a Transfer Agreement among the
Company, Newco, and the Trust (the "Transfer Agreement"), the Company intends to
transfer certain intellectual property of the Company to the Trust and the Trust
shall issue to the Company beneficial interests in the Trust, together with
corresponding irrevocable, exclusive, perpetual licenses to the related
intellectual property. Pursuant to an Acquisition Agreement to be entered into
between the Company and Newco (the "Acquisition Agreement"), the Company will
agree to sell and transfer to Newco certain beneficial interests in the Trust
and to retain certain beneficial interests in the Trust, and the Trust will
grant certain licenses to Newco and the Company (the transactions contemplated
by the Trust Agreement, the Transfer Agreement, and the Acquisition Agreement,
and all related documents, are herein sometimes collectively referred to as the
"Intellectual Property Transactions").
In connection with the foregoing transactions, the Company intends to use
$12,000,000 of the proceeds from the Subordinated Loans to repay $12,000,000 in
principal amount of the Indebtedness under the Credit Documents owed to the
Lenders.
In addition, the Company intends to designate a new class of Series AA
Preferred Stock, no par value (the "AA Preferred Stock"), and exchange 1,222,221
shares of AA Preferred Stock for all of the shares of existing Preferred Stock
of the Company, and to amend the various agreements between Fleming and the
Investors, including the Stockholders' Agreement and the Share and Warrant
Purchase Agreements (the transactions contemplated in connection with the AA
Preferred Stock are collectively referred to as the "Preferred Exchange").
In connection with the foregoing transactions, NationsBank has assigned its
Warrants to Creditanstalt for reissuance and/or returned its Warrants to the
Company for cancellation.
The parties now desire to amend certain provisions of the Warrant Agreement
and waive any adjustments to the number of Warrant Shares (as defined in the
Warrant) for which the Warrants may be exercised that may arise as a result of
the transactions contemplated in the Transaction Agreement, including without
limitation, the Loan Transactions, the Newco Warrant Transactions, the
Intellectual Property Transactions, and all transactions contemplated therein
and thereby.
NOW, THEREFORE, in consideration of these premises, the terms and
conditions herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Amendment, unless otherwise
-----------
defined herein, terms defined in the Warrant Agreement shall have the meaning
set forth therein when used herein.
2
<PAGE>
Section 2. Warrant Put Option. Section 11 of the Warrant Agreement is
------------------
hereby deleted in its entirety.
Section 3. Exhibit A. The Warrant Agreement is hereby further amended by
---------
deleting Exhibit A thereto in its entirety and by substituting therefore a new
Exhibit A in the form attached as Exhibit A hereto.
Section 4. Waiver of Certain Anti-Dilution Adjustments. Creditanstalt
-------------------------------------------
hereby agrees to waive any anti-dilution adjustments to the Conversion Price
provided for in Section 5 of each of the Warrant Certificates that may arise as
a result of the consummation of the Preferred Exchange or the consummation of
the transactions set forth in the Transaction Agreement, including the Loan
Transactions, the Newco Warrant Transactions, the Intellectual Property
Transaction, and any subsequent transactions contemplated therein or thereby
(including without limitation, (i) the issuance of the AA Preferred Stock issued
by the Company pursuant to the Preferred Stock Exchange Agreement dated the date
hereof, (ii) the issuance of Class A Common Stock upon conversion of the AA
Preferred Stock, (iii) the issuance of the Option to purchase Series B Preferred
Stock contemplated by the Transaction Agreement dated the date hereof, (iv) the
issuance of the Series B Preferred Stock pursuant to the Option, (v) the
issuance of Class A Common Stock upon conversion of the Series B Preferred
Stock, (vi) the issuance of the Warrants (as such term is defined in the
Transaction Agreement (the "New Warrants"), and (vii) the issuance of Class A
Common Stock upon exercise of the New Warrants).
Section 5. Reaffirmation. The Company hereby reaffirms to Creditanstalt
-------------
all representations and warranties made by the Company to the Lenders in the
Warrant Agreement (other than the representation set forth in Section 4.1
thereof) on and as of the date hereof with the same force and effect as if such
representations and warranties were set forth in this Amendment in full.
Section 6. Expenses. The Company agrees to pay, immediately upon demand
--------
by Creditanstalt, all costs, expenses, attorneys' fees, and other charges and
expenses incurred by Creditanstalt in connection with the negotiation,
preparation, execution and delivery of this Amendment and any other instrument,
document, agreement or amendment executed in connection with this Amendment.
Section 7. References to the Warrant Agreement. Each reference to the
-----------------------------------
Warrant Agreement shall be deemed to be a reference to the Warrant Agreement as
amended by this Amendment, and as it may from time to time be further amended,
supplemented, restated or otherwise modified in the future by one or more other
written amendments or supplemental or modification agreements entered into
pursuant to the applicable provisions of the Warrant Agreement.
3
<PAGE>
Section 8. Limitation of Amendment. Except as expressly set forth herein,
-----------------------
this Amendment shall not be deemed to waive, amend or modify any term or
condition of the Warrant Agreement, each of which is hereby ratified and
reaffirmed and shall remain in full force and effect, nor to serve as a consent
to any matter prohibited by the terms and conditions thereof.
Section 9. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns.
Section 10. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date and year first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
------------------------------
Harry A. Blazer, President
Authorized Officer
Attest: /s/ Barbara N. Worrell
--------------------------
Name: Barbara N. Worrell
----------------------------
Title: Asst. Secretary
---------------------------
[CORPORATE SEAL]
CREDITANSTALT-BANKVEREIN, as a Lender
By: /s/
------------------------------
Name:
----------------------------
Title:
---------------------------
By: /s/
------------------------------
Name:
----------------------------
Title:
---------------------------
4
<PAGE>
EXHIBIT A
AMENDED AND RESTATED WARRANT CERTIFICATE
----------------------------------------
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR THE CLASS A COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND NEITHER MAY BE
SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES LAW UNLESS AN EXEMPTION FROM REGISTRATION IS THEN
AVAILABLE.
WARRANT TO PURCHASE CLASS A COMMON STOCK
OF
HARRY'S FARMERS MARKET, INC.
Date: May 8, 1996
This is to certify that, FOR VALUE RECEIVED, the registered holder hereof,
CREDITANSTALT-BANKVEREIN ("Creditanstalt", and together with any successors and
-------------
assigns hereunder, the "Holder" or the "Holders"), is entitled to purchase,
------ -------
subject to the provisions of this Warrant Certificate, from HARRY'S FARMERS
MARKET, INC., a Georgia corporation (the "Company"), 48,000 shares (as such
-------
number may be adjusted in accordance with Section 5 hereof) of the Company's
Class A Common Stock, no par value per share (such class of stock, together with
any capital stock of the Company into which such class of stock shall be
converted, being referred to herein as "Stock"), at $3.00 per share (as such
-----
number may be adjusted in accordance with Section 5 hereof) (the "Exercise
--------
Price"). The number of shares of Stock to be received upon the exercise of this
Warrant and the Exercise Price shall be adjusted from time to time as
hereinafter set forth. The shares of Stock or other securities or property
deliverable upon such exercise, as adjusted from time to time, are hereinafter
sometimes referred to as "Warrant Shares."
--------------
This Amended and Restated Warrant Certificate (this "Warrant Certificate")
amends and restates the Warrant Certificate (the "Warrants", which term includes
--------
all Warrants issued in substitution therefor) originally issued in connection
with the amendment and restatement on May 8, 1996 of the Warrant Agreement dated
as of December 30, 1994 (as amended, restated, supplemented or otherwise
modified from time to time, the "Warrant Agreement"). The Warrants so issued in
-----------------
connection with such amendment and restatement evidence rights to purchase an
aggregate of 120,000 Warrant Shares at the Exercise Price. This Warrant is
subject to the provisions, and is entitled to the benefits, of the Warrant
Agreement.
<PAGE>
Section 1. Exercise of Warrant.
-------------------
1.1. Manner of Exercise. (a) This Warrant may be exercised by the Holder,
------------------
in whole or in part, at any time or from time to time through and including the
sixth (6th) anniversary of the date hereof (the "Expiration Date") during normal
---------------
business hours on any Business Day (as defined in the Warrant Agreement) by
surrender of this Warrant, together with the form of subscription duly executed
by such Holder in substantially the form attached as Annex A hereto, to the
Company at its office designated pursuant to Section 7.1 of the Warrant
Agreement (or, if such exercise is in connection with an underwritten public
offering of Warrant Shares subject to this Warrant, at the location at which the
underwriting agreement requires that such Warrant Shares be delivered).
(b) Payment of the Exercise Price for the Warrant Shares, if required,
shall be made, at the option of the Holder by certified or bank check or wire
transfer payable to the order of the Company, in any case, in an amount equal to
(A) the number of Warrant Shares specified in such form of subscription,
multiplied by (B) the then current Exercise Price. The Holder shall thereupon
be entitled to receive the number of Warrant Shares specified in such form of
subscription (plus cash in lieu of any fractional share as provided in Section
1.3 hereof).
(c) In lieu of exercising Warrants pursuant to the immediately preceding
clause (a), the Holder shall have the right to require the Company to convert
the Warrants, in whole or in part and at any time or times (the "Conversion
Right"), into Warrant Shares, by surrendering to the Company the Warrant
Certificate evidencing the Warrants to be converted, accompanied by a conversion
notice duly executed by the Holder substantially in the form of Annex C hereto.
Upon exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any Exercise Price) that number of Warrant
- --------
Shares which is equal to the quotient obtained by dividing (x) the value of the
number of Warrants being converted at the time the Conversion Right is exercised
(determined by subtracting the aggregate Exercise Price for all such Warrants
immediately prior to the exercise of the Conversion Right from the aggregate
current Market Price of that number of Warrant Shares purchasable upon exercise
of such Warrants immediately prior to the exercise of the Conversion Right
(taking into account all applicable adjustments pursuant to Section 5 hereof))
by (y) the Market Price of one share of Stock immediately prior to the exercise
of the Conversion Right. Any references in this Warrant Certificate or the
Warrant Agreement to the "exercise" of any Warrants, and the use of the term
"exercise" herein and thereon, shall be deemed to include (without limitation)
any exercise of the Conversion Right.
1.2. Effective Date. Each exercise of this Warrant pursuant to Section 1.1
--------------
hereof shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant is surrendered to the Company
as provided in Section 1.1 hereof (except that if such exercise is in connection
with an underwritten public offering of Warrant Shares subject to this Warrant,
then such exercise shall be deemed to have been effected upon such surrender of
this Warrant). On each such day that an exercise of this Warrant is deemed
effected, the person or persons in whose name or names any certificate or
certificates for Warrant Shares are issuable upon such exercise (as provided in
Section 1.3 hereof) shall be deemed to have become the Holder or Holders of
record thereof.
A-2
<PAGE>
1.3. Warrant Share Certificates, Cash for Fractional Warrant Shares and
------------------------------------------------------------------
Reissuance of Warrants. As promptly as practicable after the exercise of this
- ----------------------
Warrant, in whole or in part, and in any event within five (5) Business Days
thereafter (unless such exercise shall be in connection with a public offering
of Warrant Shares subject to this Warrant, in which event concurrently with such
exercise), the Company at its expense (including the payment by it of any
applicable issue, stamp or other taxes) will cause to be issued in the name of
and delivered to the Holder or, subject to Section 6 of the Warrant Agreement,
such other person as the Holder may direct:
(a) a certificate or certificates for the number of Warrant Shares to which
the Holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which the Holder would otherwise be entitled, cash in an
amount equal to the same fraction of the Market Price (as defined in Section
5.1 hereof) per Warrant Share on the effective date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants,
substantially identical hereto, representing the rights formerly represented
by this Warrant which have not expired or been exercised.
1.4. Acknowledgment of Obligation. The Company will, at the time of or at
----------------------------
any time after each exercise of this Warrant, upon the request of the Holder
hereof or of any Warrant Shares issued upon such exercise, acknowledge in
writing its continuing obligation to afford to such Holder all rights
(including, without limitation, any rights to registration of any such Warrant
Shares pursuant to the Registration Rights Annex of the Warrant Agreement (the
"Registration Rights Agreement")) to which such Holder shall continue to be
entitled under this Warrant Certificate, the Warrant Agreement and the
Registration Rights Agreement; provided, that if any such Holder shall fail to
--------
make any such request, the failure shall not affect the continuing obligation of
the Company to afford such rights to such Holder.
1.5. Conditional Exercise. Notwithstanding any other provision hereof, if
--------------------
any exercise of any portion of this Warrant is to be made in connection with a
public offering of Warrant Shares or any transaction described in Section 5.9
hereof, the exercise of any portion of this Warrant may, at the election of the
Holder, be conditioned upon the consummation of the public offering or such
transaction, in which case such exercise shall not be deemed to be effective
until the consummation of such public offering or transaction.
Section 2. Reservation of Shares.
---------------------
The Company shall at all times after the date hereof and until the
Expiration Date reserve for issuance and delivery upon exercise of this Warrant
the number of Warrant Shares as shall be required for issuance and delivery upon
exercise in full of this Warrant.
A-3
<PAGE>
Section 3. Transfer, Exchange, Assignment or Loss of Warrant.
-------------------------------------------------
3.1. Transfer. This Warrant may be assigned in whole or in part or
--------
transferred in whole or in part; subject, however, to compliance with the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Act").
3.2. Procedure for Assignment or Transfer. Any assignment or transfer
------------------------------------
hereunder shall be made by surrender of this Warrant to the Company at its
office designated pursuant to Section 7.1 of the Warrant Agreement, together
with the form of assignment duly executed by the Holder in substantially the
form attached as Annex B hereto and funds sufficient to pay any required
transfer tax. In such event the Company shall, without charge, execute and
deliver a new Warrant or Warrants substantially identical hereto in the name of
the assignee or assignees named in such instrument of assignment and designate
the assignee or assignees as the registered holder or holders on the Company's
records and this Warrant shall promptly be cancelled. This Warrant may be
divided or combined with other Warrants which carry the same rights upon
presentation thereof at the principal office of the Company together with a
written notice signed by the holder thereof, specifying the names and
denominations in which new Warrants are to be issued.
3.3. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company
--------------------------------------
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification to the Company or (in the case of mutilation)
presentation of this Warrant for surrender and cancellation, the Company will
execute and deliver a new Warrant identical hereto and any such lost, stolen,
destroyed or mutilated Warrant shall thereupon become void.
Section 4. Warrant Certificate Holder Not Deemed a Stockholder.
---------------------------------------------------
Except as otherwise provided herein, the Holders shall not, solely because
of holding this Warrant, be entitled to vote, receive dividends or be deemed the
holder of Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holders, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matters submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger,
conveyance or otherwise), or to receive notice of meetings or other actions
affecting stockholders, or to receive dividend or subscription rights, or
otherwise, until this Warrant shall have been exercised in accordance with the
provisions hereof.
Section 5. Anti-Dilution.
-------------
The number of Warrant Shares for which this Warrant is exercisable and/or
the Exercise Price at which such Warrant Shares may be purchased upon exercise
of this Warrant shall be subject to adjustment from time to time as set forth in
A-4
<PAGE>
this Section 5. The Company shall give the Holders notice of any event described
below which requires an adjustment pursuant to this Section 5 at the time of
such event.
5.1. Special Definitions. For purposes of this Section 5 the following
-------------------
terms shall have the following meanings:
"Additional Shares of Stock" shall mean all shares of Stock issued by the
--------------------------
Company after the date hereof, other than (i) the Stock to be issued upon
exercise of any Warrants at any time issued in connection with the Warrant
Agreement, (ii) the Stock to be issued upon conversion of the Preferred Stock ,
(iii) the Stock to be issued upon exercise of the Preferred Stock Warrants; (iv)
the Stock to be issued upon exercise of the Performance Warrants, (v) 200,000
shares of Stock to be issued pursuant to the Company's 1996 Directors Stock
Option Plan, (vi) 475,000 shares of Stock to be issued pursuant to the Company's
Management Incentive Plan and (vii) 300,000 shares of Stock issued or to be
issued pursuant to the Company's 1996 Employee Stock Purchase Plan.
"Convertible Securities" shall mean evidences of indebtedness, shares of
----------------------
Preferred Stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Stock, either immediately or upon the occurrence of a
specified date or a specified event, other than the Preferred Stock issued
pursuant to the Share and Warrant Purchase Agreements dated December 30, 1994
between the Company, Robert Fleming Nominees Ltd., and certain other investors
(such Agreements to be referred to herein collectively as the "Purchase
--------
Agreements" and Robert Fleming Nominees Ltd. and such other investors to be
- ----------
referred to herein collectively as the "Purchasers".
----------
"Market Price" shall mean, in respect of any share of Stock on the date of
------------
determination thereof, the average of the closing prices of sales of the Stock
on all principal United States securities exchanges on which the Stock may at
the time be listed, or, if there shall have been no sales on any such exchange
on any relevant day, the last trading price of such Stock on such day, or if
there is no such price, the average of the bid and asked prices at the end of
such day on the Nasdaq Stock Market, in each such case averaged for a period of
twenty (20) consecutive business days prior to the day as of which "Market
Price" is being determined. Notwithstanding the foregoing, with respect to the
issuance of Stock by the Company in an underwritten public offering, the Market
Price shall be the per share purchase price paid by the underwriters. If at any
time the Stock is not listed on any exchange or the Nasdaq Stock Market, the
"Market Price" shall be deemed to be the fair market value thereof determined by
an investment banking firm of nationally recognized standing selected by the
Board of Directors of the Company and acceptable to a majority of the Holders,
as of the most recent practicable date as of which the determination is to be
made, taking into account the value of the Company as a going concern, and
without taking into account any lack of liquidity of the Stock or any discount
for a minority interest.
"Performance Warrants" shall mean those performance warrants for 61,111
--------------------
shares of Stock issued on December 30, 1994 to the Purchasers (as defined
below).
A-5
<PAGE>
"Preferred Stock" shall mean those shares of the Company's Series A
---------------
Redeemable Convertible Preferred Stock with a stated value of $9.00 per share.
"Preferred Stock Warrants" shall mean those warrants originally issued in
------------------------
connection with the issue and sale by the Company of its Preferred Stock
pursuant to the Purchase Agreements.
5.2. Stock Dividends, Subdivisions and Combinations.
----------------------------------------------
If at any time the Company shall:
(i) take a record of the holders of its Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution of, Additional
Shares of Stock,
(ii) subdivide its outstanding shares of Stock into a larger number of
shares of Stock, or
(iii) combine its outstanding shares of Stock into a smaller number of
shares of Stock,
then (I) the Warrant Shares for which this Warrant is exercisable immediately
after the occurrence of any such event shall be adjusted to equal the number of
shares of Stock which a record holder of the same number of shares of Stock for
which this Warrant is exercisable immediately prior to the occurrence of such
event would own or be entitled to receive after the happening of such event, and
(II) the Exercise Price shall be adjusted to equal (x) the Exercise Price
multiplied by the Warrant Shares for which this Warrant is exercisable
immediately prior to the adjustment divided by (y) the Warrant Shares for which
this Warrant is exercisable immediately after such adjustment.
5.3. Certain other Distributions. (a) Except as provided in Section 5.3(b),
---------------------------
if at any time the Company shall take a record of the holders of its Stock for
the purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its Stock or any
other securities or property of any nature whatsoever (other than cash or
Additional Shares of Stock), or
(iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any share of its Stock or any other securities
or property of any nature whatsoever (other than cash or Additional Shares of
Stock),
then, (I) the Warrant Shares for which this Warrant is exercisable shall be
adjusted to equal the product of the Warrant Shares for which this Warrant is
exercisable immediately prior to such adjustment multiplied by a fraction (x)
A-6
<PAGE>
the numerator of which shall be the Market Price per share of Stock at the date
of taking such record and (y) the denominator of which shall be such Market
Price per share of Stock minus the amount allocable to one share of Stock of any
such cash so distributable and of the fair value (as determined in good faith by
the Board of Directors of the Company) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription or purchase rights so distributable, and (II) the Exercise Price
shall be adjusted to equal (x) the Exercise Price multiplied by the Warrant
Shares for which this Warrant is exercisable immediately prior to the adjustment
divided by (y) the Warrant Shares for which this Warrant is exercisable
immediately after such adjustment. A reclassification of the Stock (other than
a change in par value, or from par value to no par value or from no par value to
par value) into shares of Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the Holders of its Stock of such shares
of such other class of stock within the meaning of this Section 5.3 and, if the
outstanding shares of the Stock shall be changed into a larger or smaller number
of shares of the Stock as part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
shares of the Stock within the meaning of Section 5.2.
(b) If at any time the Company shall take a record of the holders of its
Stock for the purpose of entitling them to receive any cash dividend or other
distribution of property of any nature whatsoever (other than Additional Shares
of Stock), and the amount of such cash dividend and the fair market value of any
property so distributed, when added to the amount of cash dividends paid and the
fair market value of any property so distributed during the twelve (12) months
prior to the date of such dividend or distribution, exceeds five percent (5%) of
the aggregate Market Price of the Stock of all of the Company's Stock then
outstanding on the Business Day immediately preceding the record date for such
dividend or distribution, the Holders of the Warrant shall be entitled to
participate in such dividend or distribution as if the Holder had already
exercised this Warrant in full, and such Holder shall receive, at the time such
dividend is paid or such property is distributed, the same kind and per-share
amount of cash or other property as is distributed to the holders of the
Company's Stock.
5.4. Issuance of Additional Shares of Stock. If at any time the Company
--------------------------------------
shall (except as hereinafter provided) issue or sell any Additional Shares of
Stock either (A) in exchange for consideration in an amount per Additional Share
of Stock less than the Exercise Price in effect immediately prior to such
issuance or sale of Additional Shares of Stock or (B) in exchange for
consideration in an amount per Additional Share of Stock less than the Market
Price in effect immediately prior to such issuance or sale of Additional Shares
of Stock, then the Exercise Price as to the Warrant Shares for which this
Warrant is exercisable immediately prior to such adjustment shall be adjusted to
equal the price determined by multiplying the Exercise Price by a fraction, of
which
(x) the numerator shall be (1) the number of shares of Stock
outstanding immediately prior to such issuance or sale of Additional
Shares of Stock plus (2) the number of shares of Stock which the
aggregate amount of consideration, if any, received by the Company for
the total number of such Additional Shares of Stock so issued or sold
A-7
<PAGE>
would purchase at the greater of (I) the Market Price in effect
immediately prior to such issuance or sale of Additional Shares of Stock
or (II) the Exercise Price in effect immediately prior to such issuance
or sale of Additional Shares of Stock and
(y) the denominator shall be the number of shares of Stock
outstanding immediately after such issuance or sale of Additional Shares
of Stock;
provided, however, that such adjustment shall be made only if the Exercise Price
determined from such adjustment shall be less than the Exercise Price in effect
immediately prior to the issuance of such Additional Shares of Stock. The
provisions of this Section 5.4 shall not apply to any issuance of Additional
Shares of Common Stock for which an adjustment is provided under Section 5.2 or
5.3.
5.5. Issuance of Warrants or Other Rights. If at any time the Company
------------------------------------
shall take a record of the holders of its Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any warrants or other rights to subscribe for or purchase any
Additional Shares of Stock or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
consideration received for such warrants or other rights or such Convertible
Securities shall be less than the Exercise Price or the Market Price in effect
immediately prior to the time of such issue or sale, then the Exercise Price
shall be adjusted as provided in Section 5.4. No further adjustments of the
Exercise Price shall be made upon the actual issue of such Stock or of such
Convertible Securities upon exercise of such warrants or other rights or upon
the actual issue of such Stock upon such conversion or exchange of such
Convertible Securities.
5.6. Issuance of Convertible Securities. If at any time the Company shall
----------------------------------
take a record of the holders of its Stock for the purpose of entitling them to
receive a distribution of, or shall in any manner (whether directly or by
assumption in a merger in which the Company is the surviving corporation) issue
or sell, any Convertible Securities, whether or not the rights to convert
thereunder are immediately exercisable, and the consideration received for such
stock shall be less than the Exercise Price or the Market Price in effect
immediately prior to the time of such issue or sale, then the Exercise Price
shall be adjusted as provided in Section 5.4. No adjustment of the Exercise
Price shall be made under this Section 5.6 upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 5.5. No further adjustments of the Exercise Price shall be
made upon the actual issue of such Stock upon conversion of such Convertible
Securities and, if any issue or sale of such Convertible Securities is made upon
exercise of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Exercise Price have been or
are to be made pursuant to other provisions of this Section 5, no further
adjustments of the Exercise Price shall be made by reason of such issue or sale.
5.7. Antidilution Adjustments Under Other Securities. Without limiting any
-----------------------------------------------
other rights available hereunder to the Holders of the Warrants, if there is an
antidilution adjustment (i) under any Convertible Securities, whether issued
A-8
<PAGE>
prior to or after the date hereof or (ii) under any rights, options or warrants
to purchase Additional Shares of Stock, whether issued prior to or after the
date hereof which, in either case, results in a reduction in the exercise or
purchase price with respect to such security or rights or results in an increase
in the number of Additional Shares of Stock obtainable under such Convertible
Security, right, option or warrant, then an adjustment shall be made to the
Exercise Price hereunder. Any such adjustment pursuant to this Section 5.7
shall be whichever of the following results in a lower Exercise Price: (A) a
reduction in the Exercise Price equal to the percentage reduction in such
exercise or purchase price with respect to such Convertible Security, right,
option or warrant or (B) a reduction in the Exercise Price which will result in
the same percentage increase in the number of Warrant Shares available hereunder
as the percentage increase in the number of Additional Shares of Stock available
under such Convertible Security, right, option or warrant. Any such adjustment
under this Section 5.7 shall only be made if it would result in a lower Exercise
Price than that which would be determined pursuant to any other antidilution
adjustment otherwise required hereunder as a result of the event or circumstance
which triggered the adjustment to such Convertible Security, right, option or
warrant, and if an adjustment is made pursuant to this Section 5.7, such other
antidilution adjustment otherwise required hereunder shall not be made as a
result of such event or circumstance.
5.8. Other Provisions Applicable to Adjustments under this Section. The
-------------------------------------------------------------
following provisions shall be applicable to the making of adjustments of the
Warrant Shares for which this Warrant is exercisable and the Exercise Price at
which such Warrant Shares may be purchased upon exercise of this Warrant
provided for in this Section 5:
(a) Computation of Consideration. To the extent that any Additional Shares
----------------------------
of Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any Additional Shares of Stock or any Convertible
Securities shall be issued for cash consideration, the consideration received
by the Company therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Stock or Convertible
Securities are offered by the Company for subscription, the subscription
price, or, if such Additional Shares of Stock or Convertible Securities are
sold to underwriters or dealers for public offering without a subscription
offering, the public offering price (in any such case subtracting any amounts
paid or receivable for accrued interest or accrued dividends and any
compensation, discounts or expenses paid or incurred by the Company for and in
the underwriting of, or otherwise in connection with, the issuance thereof).
To the extent that such issuance shall be for a consideration other than cash,
then except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of
Directors of the Company. In case any Additional Shares of Stock or any
Convertible Securities or any warrants or other rights to subscribe for or
purchase such Additional Shares of Stock or Convertible Securities shall be
issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be the
fair value, as determined in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board in good faith shall determine to be attributable to
such Additional Shares of Stock, Convertible Securities, warrants or other
A-9
<PAGE>
rights, as the case may be. The consideration for any Additional Shares of
Stock issuable pursuant to any warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for
issuing such warrants or other rights plus the additional consideration
payable to the Company upon exercise of such warrants or other rights. The
consideration for any Additional Shares of Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received by the
Company for issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the Company
in respect of the subscription for or purchase of such Convertible Securities,
plus the additional consideration, if any, payable to the Company upon the
exercise of the right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Stock or Convertible Securities in payment or satisfaction of any dividends
upon any class of stock other than Stock, the Company shall be deemed to have
received for such Additional Shares of Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this Section
---------------------------
5 shall be made whenever and as often as any event requiring an adjustment
shall occur, except that any adjustment of the Warrant Shares for which this
Warrant is exercisable that would otherwise be required may be postponed
(except in the case of a subdivision or combination of shares of the Stock, as
provided for in Section 5.2) up to, but not beyond the date of exercise if
such adjustment either by itself or with other adjustments not previously made
adds or subtracts less than l% of the shares of the Stock for which this
Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except
as aforesaid) which is postponed shall be carried forward and made as soon as
such adjustment, together with other adjustments required by this Section 5
and not previously made, would result in a minimum adjustment or on the date
of exercise. For the purpose of any adjustment, any event shall be deemed to
have occurred at the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this Section 5,
--------------------
fractional interests in the Stock shall be taken into account to the nearest
1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a record of
----------------------------
the holders of the Stock for the purpose of entitling them to receive a dividend
or distribution or subscription or purchase rights and shall, thereafter and
before the distribution to stockholders thereof, legally abandon its plan to pay
or deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
A-10
<PAGE>
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(e) Challenge to Good Faith Determination. Whenever the Board of
-------------------------------------
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 5, such determination may be
challenged in good faith by a Holder and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by the Company
and acceptable to such Holder. The fees of such investment banker shall be
borne by the Holder if the Company's calculation is determined to be correct and
otherwise by the Company.
(f) Escrow of Property. If the Company shall take a record of the holders
------------------
of its Stock for the purpose of entitling them to receive any distribution of
any kind of property whatsoever, but prior to the payment of such distribution
the Holder exercises this Warrant, upon payment of the Exercise Price, such
property shall be held in escrow for the Holder by the Company to be issued to
the Holder upon the occurrence of such distribution and to the extent such
distribution actually takes place. Notwithstanding any other provision to the
contrary herein, if the distribution for which such record was taken fails to
occur or is rescinded, then such escrowed property shall be returned to the
Company.
5.9. Reorganization, Reclassification, Merger or Consolidation. If the
---------------------------------------------------------
Company shall at any time reorganize or reclassify the outstanding shares of
Stock (other than a change in par value, or from no par value to par value, or
from par value to no par value, or as a result of a subdivision or combination)
or consolidate with or merge into another corporation (where the Company is not
the continuing corporation after such merger or consolidation), the Holders
shall thereafter be entitled to receive upon exercise of this Warrant in whole
or in part, the same kind and number of shares of stock and other securities,
cash or other property (and upon the same terms and with the same rights) as
would have been distributed to the Holder upon such reorganization,
reclassification, consolidation or merger had the Holder exercised this Warrant
immediately prior to such reorganization, reclassification, consolidation or
merger (subject to subsequent adjustments under Section 5 hereof). The Holders
shall pay upon such exercise the Exercise Price that otherwise would have been
payable pursuant to the terms of this Warrant. If any such reorganization,
reclassification, consolidation or merger results in a cash distribution in
excess of the Exercise Price provided by this Warrant, a Holder may, at the
Holder's option, exercise this Warrant without making payment of the Exercise
Price, and in such case the Company shall, upon distribution to the Holder,
consider the Exercise Price to have been paid in full, and in making settlement
to the Holder, shall deduct an amount equal to the Exercise Price from the
amount payable to the Holder. Notwithstanding anything herein to the contrary,
the Company will not effect any such reorganization, reclassification, merger or
consolidation unless prior to the consummation thereof, the corporation who may
be required to deliver any stock, securities or other assets upon the exercise
of this Warrant shall agree by an instrument in writing to deliver such stock,
cash, securities or other assets to the Holder. A sale, transfer or lease of
all or substantially all of the assets of the Company to another person shall be
deemed a reorganization, reclassification, consolidation or merger for the
foregoing purposes.
5.10. Exceptions to Adjustment of Exercise Price and/or Warrant Shares.
----------------------------------------------------------------
Anything herein to the contrary notwithstanding, the Company shall not make any
adjustment of the Exercise Price or the Warrant Shares issuable upon the
exercise of this Warrant in the case of (i) the issuance of the Warrants or any
other Warrants at any time issued in connection with the Warrant Agreement or
the issuance of shares of the Stock upon exercise of any such Warrants, (ii) the
issuance of shares of Stock to holders of the Company's Preferred Stock upon
conversion of all or any portion of their shares of Preferred Stock, (iii) the
issuance of the Preferred Stock Warrants or the issuance of the shares of Stock
A-11
<PAGE>
upon exercise of such Preferred Stock Warrants or (iv) the issuance of the
Performance Warrants or the issuance of the shares of Stock upon exercise of
such Performance Warrants.
5.11. Chief Financial Officer's Opinion. Upon each adjustment of the
---------------------------------
Exercise Price and upon each change in the Warrant Shares issuable upon the
exercise of this Warrant, and in the event of any change in the rights of a
Holder by reason of other events herein set forth, then and in each such case,
the Company will promptly obtain an opinion of the chief financial officer of
the Company, stating the adjusted Exercise Price and the new Warrant Shares so
issuable, or specifying the other shares of the Stock, securities or assets and
the amount thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company will promptly mail a copy of such
opinion to the Holders. If a Holder disagrees with such calculation, the
Company agrees to obtain within thirty (30) business days an opinion of a firm
of independent certified public accountants selected by the Company's Board of
Directors and acceptable to such Holder to review such calculation and the
opinion of such firm of independent certified public accountants shall be final
and binding on the parties and shall be conclusive evidence of the correctness
of the computation with respect to any such adjustment of the Exercise Price and
any such change in the number of Warrant Shares so issuable. The fees of such
accountants shall be borne by the Holder if the Company's calculation is
determined by such accountants to be correct and otherwise by the Company.
5.12. Company to Prevent Dilution. In case at any time or from time to
---------------------------
time conditions arise by reason of action taken by the Company, which in the
good faith opinion of its Board of Directors or a majority of the Holders are
not adequately covered by the provisions of this Section 5, and which might
materially and adversely affect the exercise rights of the Holders, the Board of
Directors of the Company shall appoint such firm of independent certified public
accountants acceptable to a majority of the Holders, which shall give their
opinion upon the adjustment, if any, on a basis consistent with the standards
established in the other provisions of this Section 5, necessary with respect to
the Exercise Price, so as to preserve, without dilution (other than as
specifically contemplated by this Warrant), the exercise rights of the Holders.
Upon receipt of such opinion, the Board of Directors of the Company shall
forthwith make the adjustments described therein.
Section 6. Character of Shares of Stock.
----------------------------
All shares of the Stock issuable upon the exercise of this Warrant shall,
when issued to a Holder, be duly authorized, validly issued, fully paid and
nonassessable, free and clear of any lien or encumbrance and without any
preemptive rights.
Section 7. Notice to Holder.
----------------
So long as this Warrant shall be outstanding, (i) if the Company shall pay
any dividend or make any distribution upon the Stock otherwise than in cash,
(ii) if the Company shall offer to the holders of Stock, for subscription or
purchase by them, any shares of any class of stock of the Company or any other
rights or (iii) if there shall be any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
A-12
<PAGE>
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company, voluntary or
involuntary dissolution, liquidation or winding up of the Company, then in any
such event, the Company shall cause to be mailed by certified mail to each
Holder, at least 30 days prior to the event described above, a notice containing
a brief description of the proposed action and stating the date or expected date
on which a record is to be taken for the purpose of such dividend, distribution
or rights, or the date or expected date such reclassification, reorganization,
consolidation, merger, conveyance, lease or transfer, dissolution, liquidation
or winding up shall take place or be voted upon by holders of the Stock of
record, and the date or expected date as of which the holders of Stock of record
shall be entitled to exchange their shares of Stock for securities or other
property deliverable upon any such event.
Section 8. Disposition of Warrant Shares.
-----------------------------
The stock certificates of the Company that will evidence the Warrant Shares
or any other security issued or issuable upon exercise of this Warrant will be
imprinted with a conspicuous legend in substantially the following form:
The securities represented by this Certificate have not been registered under
the Securities Act of 1933 (the "Act") or any applicable state securities laws
and may not be sold, pledged, hypothecated, donated or otherwise transferred
(whether or not for consideration) unless registered under the Act and any
applicable state securities laws or in a transaction exempt from such
registrations.
Except as provided in the Registration Rights Agreement, the Company does not
agree to register any of the Warrant Shares for distribution in accordance with
the provisions of the Act or any applicable state securities laws, and the
Company has not agreed to comply with any exemption from registration under the
Act or any applicable state securities laws for the resale of the Warrant
Shares. Hence, it is the understanding of the Holder that by virtue of the
provisions of certain rules respecting "restricted securities" promulgated by
---------------------
the Securities and Exchange Commission, the Warrant Shares may be required to be
held indefinitely, unless and until registered under the Act and any applicable
state securities laws unless an exemption from such registration is available,
in which case the Holders may still be limited as to the number of Warrant
Shares that may be sold.
Section 9. Governing Law.
-------------
This Warrant shall be construed in accordance with the laws of the State of
Georgia applicable to contracts executed and to be performed wholly within such
state without regard to any conflicts of laws principles.
Section 10. Notice.
------
Any notice, demand, document or other communication given or delivered
hereunder shall be in writing, and may be (i) personally delivered, (ii) given
or made by United States registered or certified mail, return receipt requested,
postage prepaid, or (iii) given or made by overnight courier, delivery charges
prepaid, addressed as follows:
A-13
<PAGE>
If to the Company: Harry's Farmers Market, Inc.
- ------------------
1180 Upper Hembree Road
Roswell, GA 30076
Attention: Chief Financial Officer
With a Copy to: Nelson, Mullins, Riley & Scarborough, L.L.P
- ---------------
400 Colony Square, Suite 2200
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Attention: John Latham, Esq.
If to Creditanstalt: Creditanstalt-Bankverein
- --------------------
2 Greenwich Plaza, 4/th/ Floor
Greenwich, Connecticut 06830
Attention: Dennis O'Dowd
With a Copy to: Creditanstalt-Bankverein
- ---------------
Two Ravinia Drive, N.E.
Suite 1680
Atlanta, Georgia 30346
Attention: Robert M. Biringer and Joseph Longosz
With a Copy to: Troutman Sanders
- --------------
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308
Attention: Hazen Dempster, Esq.
The Company and the Holder shall each have the right to designate a different
address for itself by notice similarly given. All such notices, demands,
documents or other communication will be deemed to be delivered (i) upon
receipt, if personally delivered, (ii) on the third full Business Day following
the day of mailing, if sent by United States registered or certified mail and
(iii) on the Business Day following the date it was sent, if sent by overnight
courier.
Section 11. Remedies.
--------
The Company stipulates that the remedies at law of the Holder in the event
of any default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will not be
adequate, and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise, in addition to any
other remedies which may be available at law or in equity.
A-14
<PAGE>
Section 12. Company Will Avoid Certain Actions.
----------------------------------
The Company will not, by amendment of its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger, issue or
sale of securities or otherwise, avoid or take any action which would have the
effect of avoiding the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all of the provisions of this Warrant Certificate
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Warrant Certificate against dilution
or other impairment, and in particular, will not cause the par value, if any, of
any share of Stock, to be or become greater than the then effective Exercise
Price.
Section 13. Company Will Not Close Books.
----------------------------
The Company will at no time close its transfer books against the transfer
of this Warrant or of any shares of Stock issued or issuable upon the exercise
of this Warrant in any manner which interferes with the timely exercise of this
Warrant.
Section 14. Successors and Assigns.
----------------------
This Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of the Holders hereof. The provisions of this Warrant are intended to be for
the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder.
Section 15. Amendment.
---------
This Warrant Certificate may be modified or amended and any provision
hereof may be waived by a writing executed by the Company and holders of
Warrants representing a majority of the Warrant Shares obtainable upon exercise
of the Warrants.
Section 16. Headings.
--------
Section headings in this Warrant are for reference only and shall not
affect the meaning or construction of any of the provisions hereof.
[Signature on following page]
A-15
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
HARRY'S FARMERS MARKET, INC.
By: _____________________________
Name:
Title:
A-16
<PAGE>
ANNEX A
FORM OF SUBSCRIPTION
--------------------
(To be executed only upon exercise of the Warrant in whole or in part)
To HARRY'S FARMERS MARKET, INC.
The undersigned registered holder of the accompanying Warrant hereby
irrevocably exercises such Warrant or portion thereof for, and purchases
thereunder, _______/1/ Warrant Shares (as defined in such Warrant) and herewith
makes payment therefor of $________. The undersigned requests that the
certificates for such Warrant Shares be issued in the name of, and delivered to
________________________________, whose address is
_________________________________.
Dated:
________________________________
(Name must conform to name of holder as specified on
the face of the Warrant)
_________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
/1/ Insert the number of Warrant Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of this Warrant, to
the holder surrendering the same.
A-17
<PAGE>
ANNEX B
FORM OF ASSIGNMENT
------------------
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto _______________________________ [Name] of ____________________[Address] the
right represented by the within Warrant to purchase _________ shares of Class A
Common Stock of HARRY'S FARMERS MARKET, INC. to which the within Warrant
relates, and appoints _____________ Attorney to transfer such right on the books
of HARRY'S FARMERS MARKET, INC. with full power of substitution in the premises.
Dated: ________________
________________________________
(Name must conform to name of holder as specified on
the face of the Warrant)
_________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
Signed in the presence of:
________________________
A-18
<PAGE>
ANNEX C
FORM OF CONVERSION NOTICE
-------------------------
(To be executed only upon conversion of the Warrant in whole or in part)
To HARRY'S FARMERS MARKET, INC.
The undersigned registered holder of the accompanying Warrant hereby
irrevocably elects to exercise its right to convert such Warrant or portion
thereof into _______/2/ Warrant Shares (as defined in such Warrant). The
undersigned requests that the certificates for such Warrant Shares be issued in
the name of, and delivered to ______________________________, whose address is
_________________________________.
Dated:
________________________________
(Name must conform to name of holder as specified on
the face of the Warrant)
_________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
- --------------
/2/ Insert the number of Warrant Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of this Warrant, to
the holder surrendering the same.
A-19
<PAGE>
EXHIBIT 10.17
WHEN RECORDED, PLEASE RETURN TO: RE: DEED TO SECURE DEBT AND
- -------------------------------- SECURITY AGREEMENT DATED
TROUTMAN SANDERS LLP JULY 31, 1991 FROM HARRY'S
600 PEACHTREE STREET, N.E. FARMERS MARKET, LTD. TO
SUITE 5200 THE CITIZENS AND SOUTHERN
ATLANTA, GEORGIA 30308-2216 NATIONAL BANK RECORDED IN
ATTN: HAZEN H. DEMPSTER, ESQ. DEED BOOK 6682, PAGE 95,
GWINNETT COUNTY, GEORGIA
RECORDS AND IN DEED BOOK
14446, PAGE 201, FULTON
COUNTY, GEORGIA RECORDS
FOURTH MODIFICATION
-------------------
OF DEED TO SECURE DEBT
----------------------
AND SECURITY AGREEMENT
----------------------
THIS FOURTH MODIFICATION OF DEED TO SECURE DEBT AND SECURITY AGREEMENT
(the "Modification") is made and entered into as of January 31, 1997, by and
among HARRY'S FARMERS MARKET, INC., a Georgia corporation ("Grantor"), having a
mailing address of 1180 Upper Hembree Road, Roswell, Georgia 30076; and
CREDITANSTALT-BANKVEREIN, in its individual capacity and as successor Agent
("New Grantee"), having a mailing address of Two Greenwich Plaza, Greenwich,
Connecticut 08630 with a copy to Two Ravinia Drive, Suite 1680, Atlanta, Georgia
30346.
W I T N E S S E T H
WHEREAS, NationsBank of Georgia, National Association in its
individual capacity ("NationsBank") and Harry's Farmers Market, Ltd. ("Harry's
Partnership"), a Georgia limited partnership and predecessor of Grantor, entered
into a Revolving Credit and Term Loan Agreement dated as of July 31, 1991 (as
amended, supplemented, restated or otherwise modified from time to time, the
"NationsBank Loan Agreement"), pursuant to which NationsBank extended to Harry's
Partnership a revolving credit facility, which has been terminated, and a
$10,500,000 term loan (the "Term Loan"), evidenced by that certain Term Note
dated July 31, 1991 (the "Term Note"), executed by Harry's Partnership in favor
of NationsBank in the original principal amount of $10,500,000; and
WHEREAS, on July 31, 1991, Harry's Partnership made and granted in
favor of NationsBank, N.A. (South), f/k/a NationsBank of Georgia, National
Association, f/k/a The Citizens and Southern National Bank ("Original Grantee")
a certain Deed to Secure Debt and Security Agreement recorded in Deed Book 6682,
page 95, Gwinnett County, Georgia records and in Deed Book 14446, page 201,
Fulton County, Georgia records (as amended as hereinafter set forth, the "Deed
to Secure Debt") covering certain property located in Land Lots 550 and 553 of
the 1st District, 2nd Section of Fulton County, Georgia, and in Land Lot 209 of
<PAGE>
the 6th District of Gwinnett County, Georgia and more particularly described in
the Deed to Secure Debt (the "Property"); and,
WHEREAS, the Deed to Secure Debt was amended as of March 30, 1992 by
that certain First Modification of Deed to Secure Debt and Security Agreement
recorded in Book 7670, page 24 and re-recorded in Book 9835, page 31, Gwinnett
County, Georgia records, and recorded in Book 15653, page 346 and re-recorded in
Book 17772, page 179, Fulton County, Georgia records; and
WHEREAS, Harry's Partnership conveyed the Property to Grantor by deeds
dated as of March 31, 1993; and
WHEREAS, in connection with the transfer of the Property from Harry's
Partnership to Grantor, Grantor assumed all obligations of the loan secured by
the Deed to Secure Debt as set forth in that certain Loan Assumption Agreement
dated as of March 31, 1993 by and between Grantor and Original Grantee; and
WHEREAS, the Deed to Secure Debt was further amended as of November
19, 1993 by that certain Second Modification of Deed to Secure Debt and Security
Agreement recorded in Book 9835, page 23, Gwinnett County, Georgia records and
Book 17409, page 118, Fulton County, Georgia records; and
WHEREAS, the Deed to Secure Debt secured financing from Original
Grantee and other lenders pursuant to that certain Credit Agreement dated as of
November 19, 1993 (the "1993 Credit Agreement") entered into by and among
Grantor, as Borrower, NationsBank of Georgia, National Association, as Agent
(the "Original Agent") and the financial institutions from time to time parties
thereto; and
WHEREAS, in connection with the execution and delivery of the 1993
Credit Agreement, the parties thereto, NationsBank, Grantor and its subsidiaries
entered into an Intercreditor Agreement dated as of November 19, 1993 (the
"Intercreditor Agreement") in order to establish, among other things, the
relative rights of the Original Agent and lenders (including without limitation
New Grantee) under the 1993 Credit Agreement, on the one hand, and NationsBank,
on the other; and
WHEREAS, certain other real and personal property also secures the
indebtedness described in the Deed to Secure Debt; and
WHEREAS, Grantor, Borrower, the Original Agent and certain lenders
(including without limitation New Grantee) entered into a Credit Agreement dated
as of December 30, 1994 (as amended from time to time the "1994 Credit
Agreement") which (i) amended and restated the 1993 Credit Agreement, the
NationsBank Loan Agreement and certain other agreements ancillary thereto and
(ii) modified the indebtedness described in the Deed to Secure Debt by
consolidating, extending and refinancing the indebtedness of Grantor under the
2
<PAGE>
1993 Credit Agreement and the NationsBank Loan Agreement (as so consolidated,
extended and refinanced, the "Indebtedness"); and
WHEREAS, pursuant to that certain Assignment of Deed to Secure Debt
and Security Agreement, dated of even date herewith, recorded in Deed Book
_____, page ___, Gwinnett County, Georgia records and in Deed Book ______, page
____, Fulton County, Georgia records, Original Grantee has assigned all of its
right, title and interest in the Deed to Secure Debt to New Grantee; and
WHEREAS, simultaneously herewith, Grantor and New Grantee are entering
into that certain Consent and Ninth Amendment to Amended and Restated Credit
Agreement (the "Ninth Amendment") whereby the amount of the Indebtedness is
being decreased to $12,000,000.00; and
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms as set forth in the 1994
Credit Agreement; and
WHEREAS, Grantor and New Grantee desire to modify the Deed to Secure
Debt as more particularly hereinafter set forth;
NOW THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Grantor and New Grantee have agreed and do
hereby agree as follows:
1. INDEBTEDNESS. The term "Credit Agreement" as used in the Deed to
------------
Secure Debt shall hereafter mean and be deemed to be the 1994 Credit Agreement
(as hereinabove defined), and not the 1993 Credit Agreement. In addition:
Paragraph 1(a)(i) of the Third Modification of Deed to Secure Debt is
deleted in its entirety and is hereby amended to read as follows:
"(i) all obligations of Grantor to the Agent, or to any Lender,
as such term is defined in the Credit Agreement dated as December 30,
1994, as amended from time to time including those certain promissory
notes (as amended, restated, supplemented, replaced or otherwise
modified from time to time, the "Notes") to be issued thereunder from
Grantor to any Lender, such obligations being in the maximum aggregate
principal amount of Twelve Million Dollars ($12,000,000.00),
including, but not limited to, the payment of all principal thereof
and interest on the Loans (as defined in the Credit Agreement), which
amounts may, subject to any restrictions set forth in the Credit
Agreement, be borrowed and repaid and reborrowed under such Notes and
Credit Agreement and any and all other indebtedness now owing or which
may hereafter be owing by Grantor to Grantee however incurred, direct
or indirect and however evidenced;"
3
<PAGE>
2. MATURITY DATE. The final payment date of the Credit Agreement as
-------------
modified and the Notes to be issued thereunder and secured by the Deed to Secure
Debt shall be on or before January 29, 2000 (the "Maturity Date").
3. INTANGIBLE RECORDING TAX. No Georgia Intangible Recording Tax is due
------------------------
and owing upon the recordation of this Modification as the maximum amount of
intangible tax has previously been paid on the recording of the Deed to Secure
Debt and as the Maturity Date for the monies to be advanced hereunder is less
than three years from the date hereof.
4. NO NOVATION. This Modification is not a novation of the Deed to
-----------
Secure Debt or any other Loan Documents, and is not intended by the parties to
be a novation of the Deed to Secure Debt or any other Loan Documents.
5. NO OFFSETS OR DEFENSES. Grantor hereby acknowledges, confirms and
----------------------
warrants to Grantee that as of the date hereof, Grantor neither has nor claims
any offset, defense, claim, right of set-off or counterclaim against Original
Grantee or New Grantee under, arising out of or in connection with this
Modification, the Deed to Secure Debt or any other Loan Document or with respect
to any of the indebtedness evidenced or secured thereby or with respect to the
Property. In addition, Grantor covenants and agrees with New Grantee that if
any offset, defense, claim, right of set-off or counterclaim exists, Grantor
hereby irrevocably and expressly waives the right to assert such matter.
6. SUCCESSORS AND ASSIGNS. This Modification shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors, successors in title and permitted assigns.
[Remainder of Page Intentionally Left Blank]
4
<PAGE>
IN WITNESS WHEREOF, this Fourth Modification and Deed to Secure Debt has
been duly executed and sealed by the parties the day and year first above
written.
GRANTOR:
Signed, sealed and delivered as to
Grantor in the presence of: HARRY'S FARMERS MARKET,
INC., a Georgia corporation
/s/ Barbara N. Worrell
- ------------------------------
Unofficial Witness By: /s/ Harry A. Blazer
--------------------------------
/s/ R. S. Porter Name: Harry A. Blazer
- ------------------------------ Title: President
Notary Public
Attest: /s/ Barbara N. Worrell
---------------------------
My Commission Expires: Name: Barbara N. Worrell
Title: Asst. Secretary
Notary Public DeKalb County, Georgia
My Commission Expires May 1, 1999
- ------------------------------ (CORPORATE SEAL)
(AFFIX NOTARY SEAL)
NEW GRANTEE:
Signed, sealed and delivered as to
New Grantee in the presence of: CREDITANSTALT-BANKVEREIN
/s/
- --------------------------------
Unofficial Witness By: /s/
-------------------------------
Name:
Title: Executive Vice President
/s/
- --------------------------------
Notary Public
Attest: /s/ Scott Ray
--------------------------
- -------------------------------- Name: Scott Ray
My Commission Expires: Title: Sr. Associate
- -------------------------------- (BANK SEAL)
(AFFIX NOTARY SEAL)
<PAGE>
EXHIBIT 10.18
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of January 31, 1997 by and HARRY'S FARMER'S
MARKET, INC., a Georgia corporation (the "Pledgor") and CREDITANSTALT-
BANKVEREIN, as successor Agent (the "Pledgee").
WHEREAS, pursuant to that certain Amended and Restated Credit Agreement
dated as of December 30, 1994 (as amended, supplemented, restated or otherwise
modified from time to time in accordance with its terms, the "Credit Agreement")
by and among the Pledgor, the Lenders named therein (the "Lenders") and the
Pledgee, the Lenders have made available to the Pledgor certain financial
accommodations; and
WHEREAS, the Pledgor desires to enter into the transactions contemplated by
that certain Consent and Ninth Amendment to Amended and Restated Credit
Agreement dated as of the date hereof (the "Amendment") by and among the
Pledgor, the Lenders and the Agent;
WHEREAS, it is a condition precedent to the effectiveness of the Amendment
that the Pledgor execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1 PLEDGE. The Pledgor hereby pledges, hypothecates, assigns,
------
transfers, sets over and delivers unto the Pledgee for the benefit of the
Lenders, and grants to the Pledgee for the benefit of the Lenders a security
interest in, all of the Pledgor's right, title and interest in, to and under the
following (collectively, the "Pledged Collateral"): (a) all of the common stock,
shares, equity interest, ownership interest, beneficial interest and other
securities (collectively, "Securities") of Karalea, Inc., a Georgia corporation
("Karalea"), Marthasville Trading Company ("Marthasville"), a Georgia
corporation, and HFMI Acquisition Corporation, a Delaware corporation, the HFMI
Trust ("Newco"; Karalea, Marthasville, Newco and the HFMI Trust are collectively
referred to as the "Issuers" and individually referred to as an "Issuer") and as
more particularly described on Schedule 1 attached hereto; (b) any additional
Securities of the Issuers as may from time to time be issued to the Pledgor or
otherwise acquired by the Pledgor; (c) any cash or additional Securities or
other property at any time and from time to time receivable or otherwise
distributable in respect of, in exchange for, or in substitution of, any of the
property referred to in any of the immediately preceding clauses (a) and (b);
and (d) any and all products and proceeds of any of the foregoing, together with
and all other rights, titles, interests, powers, privileges and preferences
pertaining to said property. As used herein, "HFMI Trust" shall mean the trust
----------
established pursuant to the Trust Agreement dated as of even date herewith
between Pledgor and Wilmington Trust Company, as trustee, with respect to
certain intellectual property described therein.
SECTION 2 OBLIGATIONS SECURED. This Agreement is made, and the security
-------------------
interest created hereby is granted to the Pledgee for the benefit of the
Lenders, to secure the prompt performance and payment in full of the following
<PAGE>
(collectively, the "Secured Obligations"): (a) all Obligations and (b) any
reasonable costs or expenses incurred by the Pledgee or Pledgee's counsel in
connection with the realization of the security for which this Agreement
provides, including, without limitation, any reasonable costs or expenses of any
proceedings to which this Agreement may give rise.
SECTION 3 REPRESENTATIONS AND WARRANTIES. The Pledgor hereby represents
------------------------------
and warrants to the Pledgee and the Lenders as follows:
(a) Validly Issued, etc. All of the outstanding stock and ownership
--------------------
certificates of each Issuer has been validly issued and are fully paid and
nonassessable.
(b) Title and Liens. The Pledgor is, and will at all times continue to be,
---------------
the legal and beneficial owner of the Pledged Collateral and none of the Pledged
Collateral is subject to any Lien other than Permitted Liens. No financing
statement under the Uniform Commercial Code of any jurisdiction which names the
Pledgor as debtor or covers any of the Pledged Collateral, or any other notice
filed in the public records indicating the existence of a Lien thereon, has been
filed and is still effective in any state or other jurisdiction, other than
Uniform Commercial Code financing statements filed in favor of the Pledgee, and
the Pledgor has not signed any such financing statement or notice or any
security agreement authorizing the filing of any such financing statement or
notice, other than Uniform Commercial Code financing statements filed in favor
of the Pledgee.
(c) Authority, etc. The Pledgor (i) has the power and authority to pledge
--------------
the Collateral in the manner hereby done or contemplated and (ii) will defend
its title or interest thereto or therein against any and all Liens (other than
the Lien created by this Agreement and Permitted Liens), however arising, of all
persons.
(d) No Approval. No consent or approval of any Governmental Agency or any
-----------
securities exchange was or is necessary to the validity of the pledge effected
hereby.
(e) Outstanding Shares. The Securities of Karalea, Marthasville and Newco
------------------
pledged by the Pledgor hereunder constitute the percentages of the issued and
outstanding stock of the Issuers set forth on Schedule 1 attached hereto. The
Securities of the HFMI Trust pledged by the Pledgor hereunder constitute all of
the Georgia Class Owner Certificates.
SECTION 4 NO LIENS; NO SALE OF PLEDGED COLLATERAL. The Pledgor hereby
---------------------------------------
unconditionally covenants and agrees that it will not create, assume, incur or
permit or suffer to exist or to be created, assumed or incurred, any Lien on any
of the Pledged Collateral (or any interest therein), other than Permitted Liens,
and will not, without the prior written consent of the Pledgee, sell, lease,
assign, transfer or otherwise dispose of all or any portion of the Pledged
Collateral (or any interest therein).
SECTION 5 ADDITIONAL SHARES.
-----------------
(a) During the period this Agreement is in effect, the Pledgor shall not
permit Karalea or Marthasville to issue any additional shares of capital stock
or other equity securities or interests to any Person other than the Pledgor.
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<PAGE>
Further, the Pledgor shall not permit Karalea or Marthasville to amend or modify
its articles or certificate of incorporation in a manner which would affect the
voting, liquidation, preference or other rights of a holder of the shares of
stock pledged hereunder.
(b) The Pledgor agrees that, until this Agreement has terminated in
accordance with its terms, any additional Securities of an Issuer at any time
issued to the Pledgor or otherwise acquired by the Pledgor shall be promptly
delivered or otherwise transferred to the Pledgee as additional Pledged
Collateral and shall be subject to the Lien of, and the terms and conditions of,
this Agreement.
SECTION 6 VOTING RIGHTS; DIVIDENDS, ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be continuing:
(i) the Pledgor shall be entitled to exercise any and all voting
and/or consensual rights and powers accruing to an owner of the Pledged
Collateral or any part thereof for any purpose not inconsistent with the
terms and conditions of this Agreement or any agreement giving rise to or
otherwise relating to any of the Secured Obligations; provided, however,
that the Pledgor shall not exercise, or refrain from exercising, any such
right or power if any such action would have a materially adverse effect on
the value of such Pledged Collateral in the judgment of the Pledgee;
(ii) the Pledgor shall be entitled to retain and use any and all cash
dividends paid on the Pledged Collateral, but any and all stock and/or
liquidating dividends, other distributions in property, return of capital
or other distributions made on or in respect of Pledged Securities, whether
resulting from a subdivision, combination or reclassification of
outstanding Securities of an Issuer which are pledged hereunder or received
in exchange for Pledged Collateral or any part thereof or as a result of
any merger, consolidation, acquisition or other exchange of assets or on
the liquidation, whether voluntary or involuntary, of an Issuer, or
otherwise, shall be and become part of the Pledged Collateral pledged
hereunder and, if received by the Pledgor, shall forthwith be delivered to
the Pledgee to be held as collateral subject to the terms and conditions of
this Agreement.
The Pledgee agrees to execute and deliver to the Pledgor, or cause to be
executed and delivered to the Pledgor, as appropriate, at the sole cost and
expense of the Pledgor, all such proxies, powers of attorney, dividend orders
and other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and/or consensual rights and powers
which Pledgor is entitled to exercise pursuant to clause (i) above and/or to
receive the dividends which Pledgor is authorized to retain pursuant to clause
(ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of the Pledgor to exercise the voting and/or consensual rights and
powers which Pledgor is entitled to exercise pursuant to subsection (a)(i) above
and/or to receive the dividends which Pledgor is authorized to receive and
retain pursuant to subsection (a)(ii) above shall cease, and all such rights
thereupon shall become immediately vested in the Pledgee, which shall have, to
the extent permitted by law, the sole and exclusive right and authority to
-3-
<PAGE>
exercise such voting and/or consensual rights and powers which the Pledgor shall
otherwise be entitled to exercise pursuant to subsection (a)(i) above and/or to
receive and retain the dividends which the Pledgor shall otherwise be authorized
to retain pursuant to subsection (a)(ii) above. Any and all money and other
property paid over to or received by the Pledgee pursuant to the provisions of
this subsection (b) shall be retained by the Pledgee as additional collateral
hereunder and shall be applied in accordance with the provisions of Section 8.
If the Pledgor shall receive any dividends or other property which it is not
entitled to receive under this Section, the Pledgor shall hold the same in trust
for the Pledgee, without commingling the same with other funds or property of or
held by the Pledgor, and shall promptly deliver the same to the Pledgee upon
receipt by the Pledgor in the identical form received, together with any
necessary endorsements.
SECTION 8 REMEDIES UPON DEFAULT.
---------------------
(a) In addition to any right or remedy that the Pledgee may have under the
Credit Agreement, the other Credit Documents or otherwise under applicable law,
if an Event of Default shall have occurred, the Pledgee may exercise any and all
the rights and remedies of a secured party under the UCC and may otherwise sell,
assign, transfer, endorse and deliver the whole or, from time to time, any part
of the Pledged Collateral at a public or private sale or on any securities
exchange, for cash, upon credit or for other property, for immediate or future
delivery, and for such price or prices and on such terms as the Pledgee in its
discretion shall deem appropriate. The Pledgee shall be authorized at any sale
(if it deems it advisable to do so) to restrict the prospective bidders or
purchasers to Persons who will represent and agree that they are purchasing the
Pledged Collateral for their own account in compliance with the Securities Act
and upon consummation of any such sale the Pledgee shall have the right to
assign, transfer, endorse and deliver to the purchaser or purchasers thereof the
Pledged Collateral so sold. Each purchaser at any sale of Pledged Collateral
shall take and hold the property sold absolutely free from any claim or right on
the part of the Pledgor, and the Pledgor hereby waives (to the fullest extent
permitted by applicable law) all rights of redemption, stay and/or appraisal
which the Pledgor now has or may at any time in the future have under any
applicable law now existing or hereafter enacted. The Pledgor agrees that, to
the extent notice of sale shall be required by applicable law, at least ten
days' prior written notice to the Pledgor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification, but notice given in any other reasonable manner or at
any other reasonable time shall constitute reasonable notification. Such
notice, in case of public sale, shall state the time and place for such sale,
and, in the case of sale on a securities exchange, shall state the exchange on
which such sale is to be made and the day on which the Pledged Collateral, or
portion thereof, will first be offered for sale at such exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Pledgee may fix and shall state in the notice
or publication (if any) of such sale. At any such sale, the Pledged Collateral,
or portion thereof to be sold, may be sold in one lot as an entirety or in
separate parcels, as the Pledgee may determine in its sole and absolute
discretion. The Pledgee shall not be obligated to make any sale of the Pledged
Collateral if it shall determine not to do so regardless of the fact that notice
of sale of the Pledged Collateral may have been given. The Pledgee may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case the sale of all or any part of the
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<PAGE>
Pledged Collateral is made on credit or for future delivery, the Pledged
Collateral so sold may be retained by the Pledgee until the sale price is paid
by the purchaser or purchasers thereof, but the Pledgee shall not incur any
liability to the Pledgor in case any such purchaser or purchasers shall fail to
take up and pay for the Pledged Collateral so sold and, in case of any such
failure, such Pledged Collateral may be sold again upon like notice. At any
public sale made pursuant to this Agreement, each of the Pledgee and the
Lenders, to the extent permitted by applicable law, may bid for or purchase,
free from any right of redemption, stay and/or appraisal on the part of the
Pledgor (all said rights being also hereby waived and released to the extent
permitted by applicable law), any part of or all the Pledged Collateral offered
for sale and may make payment on account thereof by using any claim then due and
payable to the Pledgee or the Lenders from the Pledgor as a credit against the
purchase price, and the Pledgee and the Lenders may, upon compliance with the
terms of sale and to the extent permitted by applicable law, hold, retain and
dispose of such property without further accountability to the Pledgor therefor.
For purposes hereof, a written agreement to purchase all or any part of the
Pledged Collateral shall be treated as a sale thereof; the Pledgee shall be free
to carry out such sale pursuant to such agreement and the Pledgor shall not be
entitled to the return of any Pledged Collateral subject thereto,
notwithstanding the fact that after the Pledgee shall have entered into such an
agreement all Events of Default may have been remedied or the Secured
Obligations may have been paid in full as herein
provided. The Pledgor hereby waives any right to require any marshaling of
assets and any similar right.
(b) In addition to exercising the power of sale herein conferred upon it,
the Pledgee shall also have the option to proceed by suit or suits at law or in
equity to foreclose this Agreement and sell the Pledged Collateral or any
portion thereof pursuant to judgment or decree of a court or courts having
competent jurisdiction.
(c) The rights and remedies of the Pledgee under this Agreement are
cumulative and not exclusive of any rights or remedies which it would otherwise
have.
SECTION 9 APPLICATION OF PROCEEDS OF SALE AND CASH. The proceeds of any
----------------------------------------
sale of the whole or any part of the Pledged Collateral, together with any other
moneys held by the Pledgee under the provisions of this Agreement, shall be
applied by the Pledgee in the following order:
(a) First: to the payment of all costs and expenses incurred in connection
with such sale or other realization, including reasonable attorneys' fees
incurred if the Pledgee endeavored to collect the Secured Obligations by or
through an attorney at law;
(b) Second: to the payment of the interest due upon any of the Secured
Obligations, in any order which the Lenders may elect;
(c) Third: to the payment of the principal due upon any of the Secured
Obligations in any order which the Lenders may elect; and
(d) Fourth: the balance (if any) of such proceeds shall be paid to the
Pledgor or to whomsoever may be legally entitled thereto.
The Pledgor shall remain liable and will pay, on demand, any deficiency
remaining in respect of the Secured Obligations.
-5-
<PAGE>
SECTION 10 PLEDGEE APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
----------------------------------
constitutes and appoints the Pledgee as the attorney-in-fact of the Pledgor with
full power of substitution either in the Pledgee's name or in the name of the
Pledgor to do any of the following: (a) to perform any obligation of the Pledgor
hereunder in the Pledgor's name or otherwise; (b) to ask for, demand, sue for,
collect, receive, receipt and give acquittance for any and all moneys due or to
become due under and by virtue of any Pledged Collateral; (c) to prepare,
execute, file, record or deliver notices, assignments, financing statements,
continuation statements, applications for registration or like papers to
perfect, preserve or release the Pledgee's security interest in the Pledged
Collateral or any of the documents, instruments, certificates and agreements
described in Section 10; (d) to verify facts concerning the Pledged Collateral
in its own name or a fictitious name; (e) to endorse checks, drafts, orders and
other instruments for the payment of money payable to the Pledgor, representing
any interest or dividend or other distribution payable in respect of the Pledged
Collateral or any part thereof or on account thereof and to give full discharge
for the same; (f) to exercise all rights, powers and remedies which the Pledgor
would have, but for this Agreement, under the Pledged Collateral; and (g) to
carry out the provisions of this Agreement and to take any action and execute
any instrument which the Pledgee may deem necessary or advisable to accomplish
the purposes hereof, and to do all acts and things and execute all documents in
the name of the Pledgor or otherwise, deemed by the Pledgee as necessary, proper
and convenient in connection with the preservation, perfection or enforcement of
its rights hereunder. Nothing herein contained shall be construed as requiring
or obligating the Pledgee to make any commitment or to make any inquiry as to
the nature or sufficiency of any payment received by it, or to present or file
any claim or notice, or to take any action with respect to the Pledged
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken by the Pledgee or
omitted to be taken with respect to the Pledged Collateral or any part thereof
shall give rise to any defense, counterclaim or offset in favor of the Pledgor
or to any claim or action against the Pledgee. The power or attorney granted
herein is irrevocable and coupled with an interest.
SECTION 11 FURTHER ASSURANCES. The Pledgor shall, at its sole cost and
------------------
expense, take all action that may be necessary or desirable in the Pledgee's
sole discretion, so as at all times to maintain the validity, perfection,
enforceability and priority of the Pledgee's security interest in the Pledged
Collateral, or to enable the Pledgee to exercise or enforce its rights
hereunder, including without limitation executing and delivering financing
statements, pledges, designations, notices and assignments, in each case in form
and substance satisfactory to the Pledgee, relating to the creation, validity,
perfection, priority or continuation of the security interest granted hereunder.
The Pledgor agrees to take, and authorizes the Pledgee to take on the Pledgor's
behalf, any or all of the following actions with respect to any Pledged
Collateral as the Pledgee shall deem necessary to perfect the security interest
and pledge created hereby or to enable the Pledgee to enforce its rights and
remedies hereunder: (i) to register in the name of the Pledgee any Pledged
Collateral in certificated or uncertificated form; (ii) to endorse in the name
of the Pledgee any Pledged Collateral issued in certificated form; and (iii) by
book entry or otherwise, identify as belonging to the Pledgee a quantity of
securities that constitutes all or part of the Pledged Collateral registered in
the name of the Pledgee. Notwithstanding the foregoing the Pledgor agrees that
Pledged Collateral which is not in certificated form or is otherwise in book-
entry form shall be held for the account of the Pledgee. The Pledgor hereby
authorizes the Pledgee to execute and file in all necessary and appropriate
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<PAGE>
jurisdictions (as determined by the Pledgee) one or more financing or
continuation statements (or any other document or instrument) in the name of the
Pledgor and to sign the Pledgor's name thereto. The Pledgor authorizes the
Pledgee to file any such financing statement, document or instrument without the
signature of the Pledgor to the extent permitted by applicable law. Any
property comprising part of the Pledged Collateral required to be delivered to
the Pledgee pursuant to this Pledge Agreement shall be accompanied by proper
instruments of assignment duly executed by the Pledgor and by such other
instruments or documents as the Pledgee may reasonably request.
SECTION 12 SECURITIES ACT. In view of the position of the Pledgor in
--------------
relation to the Pledged Collateral, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar applicable law hereafter enacted analogous
in purpose or effect (such Act and any such similar applicable law as from time
to time in effect being called the "Federal Securities Laws") with respect to
any disposition of the Pledged Collateral permitted hereunder. The Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Pledgee if the Pledgee were to attempt to
dispose of all or any part of the Pledged Collateral in accordance with the
terms hereof, and might also limit the extent to which or the manner in which
any subsequent transferee of any Pledged Collateral could dispose of the same.
Similarly, there may be other legal restrictions or limitations affecting the
Pledgee in any attempt to dispose of all or part of the Pledged Collateral in
accordance with the terms hereof under applicable Blue Sky or other state
securities laws or similar applicable law analogous in purpose or effect. The
Pledgor recognizes that in light of the foregoing restrictions and limitations
the Pledgee may, with respect to any sale of the Pledged Collateral, limit the
purchasers to those who will agree, among other things, to acquire such Pledged
Collateral for their own account, for investment, and not with a view to the
distribution or resale thereof. The Pledgor acknowledges and agrees that in
light of the foregoing restrictions and limitations, the Pledgee, in its sole
and absolute discretion, may, in accordance with applicable law, (a) proceed to
make such a sale whether or not a registration statement for the purpose of
registering such Pledged Collateral or part thereof shall have been filed under
the Federal Securities Laws and (b) approach and negotiate with a single
potential purchaser to effect such sale. The Pledgor acknowledges and agrees
that any such sale might result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions. In the
event of any such sale, the Pledgee shall incur no responsibility or liability
for selling all or any part of the Pledged Collateral in accordance with the
terms hereof at a price that the Pledgee, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized if the
sale were deferred until after registration as aforesaid or if more than a
single purchaser were approached. The provisions of this Section will apply
notwithstanding the existence of public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Pledgee sells.
SECTION 14 INDEMNIFICATION. The Pledgor agrees to indemnify and hold the
---------------
Pledgee and any corporation controlling, controlled by, or under common control
with, the Pledgee and any officer, attorney, director, shareholder, agent or
employee of the Pledgee or any such corporation (each an "Indemnified Person"),
harmless from and against any claim, loss, damage, action, cause of action,
liability, cost and expense or suit of any kind or nature whatsoever
(collectively, "Losses"), brought against or incurred by an Indemnified Person,
in any manner arising out of or, directly or indirectly, related to or connected
with this Agreement, including without limitation, the exercise by the Pledgee
of any of its rights and remedies under this Agreement or any other action taken
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<PAGE>
by the Pledgee pursuant to the terms of this Agreement; provided, however, the
Pledgor shall not be liable to an Indemnified Person for any Losses to the
extent that such Losses result from the gross negligence or willful misconduct
of such Indemnified Person. The Pledgor's obligations under this section shall
survive the termination of this Agreement and the payment in full of the Secured
Obligations.
SECTION 15 CONTINUING SECURITY INTEREST. This Agreement shall create a
----------------------------
continuing security interest in the Pledged Collateral and shall remain in full
force and effect until it terminates in accordance with its terms. The Pledgor
and the Pledgee hereby agree that the security interest created by this
Agreement in the Pledged Collateral shall not terminate and shall continue and
remain in full force and effect notwithstanding the transfer to the Pledgor or
any person designated by it of all or any portion of the Pledged Collateral.
SECTION 15 SECURITY INTEREST ABSOLUTE. All rights of the Pledgee
--------------------------
hereunder, the grant of a security interest in the Collateral and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement or any other Credit Document, any agreement with respect to any of the
Secured Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of the payment of, or in
any other term of, all or any of the Secured Obligations, or any other amendment
or waiver of or any consent to any departure from the Credit Agreement, any
other Credit Document, or any other agreement or instrument relating to any of
the foregoing, (c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or departure
from any guaranty, for all or any of the Secured Obligations or (d) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Secured Obligations or in respect of
this Agreement (other than the indefeasible payment in full of all the Secured
Obligations).
SECTION 16 NO WAIVER. Neither the failure on the part of the Pledgee to
---------
exercise, nor the delay on its part in exercising any right, power or remedy
hereunder, nor any course of dealing between the Pledgee and the Pledgor shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power, or remedy hereunder preclude any other or the further
exercise thereof or the exercise of any other right, power or remedy.
SECTION 12 NOTICES. Notices, requests and other communications required
-------
or permitted hereunder shall be given in accordance with the applicable terms of
the Credit Agreement or at such other address a party may specify to the other
party by like notice. All such notices and other communications shall be
effective as governed by the terms of the Credit Agreement.
SECTION 18 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
SECTION 19 AMENDMENTS. No amendment or waiver of any provision of this
----------
Agreement nor consent to any departure by the Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
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<PAGE>
SECTION 20 BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Pledgor shall not be permitted to assign
this Agreement or any interest herein or in the Pledged Collateral, or any part
thereof, or any cash or property held by the Pledgee as collateral under this
Agreement.
SECTION 21 TERMINATION. Upon indefeasible payment in full of all of the
-----------
Secured Obligations, this Agreement shall terminate. Upon termination of this
Agreement in accordance with its terms the Pledgee agrees to take such actions
as the Pledgor may reasonably request, and at the sole cost and expense of the
Pledgor, (a) to return the Pledged Collateral to the Pledgor, and (b) to
evidence the termination of this Agreement, including, without limitation, the
filing of any releases or any termination statements under the UCC.
SECTION 22 SEVERABILITY. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provisions shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
SECTION 23 HEADINGS. Section headings used herein are for convenience
--------
only and are not to affect the construction of or be taken into consideration in
interpreting this Agreement.
SECTION 24 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which shall
constitute but one agreement.
SECTION 15 DEFINITIONS. Terms not otherwise defined herein are used
-----------
herein with the respective meanings given to them in the Credit Agreement.
[Signatures on Next Page]
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<PAGE>
IN WITNESS WHEREOF, the Pledgor has executed and delivered this Pledge
Agreement under seal as of this the date first written above.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
---------------------------------------
Title: President
---------------------------------
Agreed to, accepted and acknowledged
as of the date first written above.
CREDITANSTALT-BANKVEREIN,
AS AGENT
By: /s/ Robert M. Biringer
--------------------------
Title: EVP
By: /s/ Joseph P. Longoss
--------------------------
Title: VP
---------------------
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<PAGE>
SCHEDULE 1 TO PLEDGE AGREEMENT
PLEDGED SHARES
--------------
<TABLE>
<CAPTION>
Percentage of
Issuer No. of Securities Type of Securities Certificate Nos. Outstanding Stock
- ------------------------------ ----------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Karalea, Inc. 500 shares Common Stock 1 100%
Marthasville Trading Company 5,000 shares Common Stock 2 100%
HFMI Acquisition Corporation 712.3746 shares Common Stock 3 2.5%
HFMI Trust one Georgia Class 100% of Georgia
Owner Certificate Class Owner
Certificate
</TABLE>
<PAGE>
EXHIBIT 10.19
REVOLVING CREDIT NOTE
$12,000,000 Atlanta, Georgia
January __, 1997
FOR VALUE RECEIVED, the undersigned, HARRY'S FARMERS MARKET, INC., a
Georgia corporation (the "Maker"), hereby promises to pay to the order of
CREDITANSTALT-BANKVEREIN (the "Lender"), at the office of CREDITANSTALT-
BANKVEREIN (the "Agent"), at Two Greenwich Plaza, Greenwich, Connecticut 06830,
on the Maturity Date (as defined in the Amended and Restated Credit Agreement
dated as of December 30, 1994, as the same has been and may be amended,
modified, restated or supplemented from time to time (the "Credit Agreement"),
among the Maker, the Lenders named in Schedule I thereto, and the Agent) the
lesser of the principal sum of TWELVE MILLION AND no/100 DOLLARS ($12,000,000)
and the aggregate unpaid principal amount of all outstanding Revolving Credit
Loans made by the Lender to the Maker pursuant to the Credit Agreement, in
lawful money of the United States of America in immediately available funds, and
to pay interest from the date hereof on the principal amount hereof from time to
time outstanding, in like funds, at said office, at a rate or rates per annum
and payable on such dates and at such times and in such amounts as determined
pursuant to the terms of the Credit Agreement.
The Maker promises to pay interest, on demand, on any overdue
principal and, to the extent permitted by law, overdue interest from their due
dates at a rate or rates determined as set forth in the Credit Agreement.
The Maker hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever, other than as expressly required by the Credit
Agreement. The nonexercise by the holder of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
The date, amount, Type, interest rate and (if applicable) duration of
Interest Period (as such terms are defined in the Credit Agreement) applicable
to all borrowings evidenced by this Revolving Credit Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be recorded by such holder in its internal records and, prior to
any transfer of this Revolving Credit Note, endorsed by the holder on the
schedule attached hereto or any continuation thereof; provided, however, that
the failure of the holder hereof to make such a notation or any error in such a
notation shall not in any manner affect the obligation of the Maker to make
payments of principal and interest in accordance with the terms of this
Revolving Credit Note and the Credit Agreement.
This Revolving Credit Note is one of the Notes referred to in the
Credit Agreement, which, among other things, contains provisions for the
acceleration of the maturity hereof upon the happening of certain events, for
optional and mandatory prepayment of the principal hereof prior to the maturity
hereof and for the amendment or waiver of certain provisions of the Credit
Agreement, all upon the terms and conditions therein specified.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.
This Revolving Credit Note is secured by and entitled to the benefits
of the Security Documents (as defined in the Credit Agreement).
<PAGE>
IN WITNESS WHEREOF, the Maker has executed and delivered this
Revolving Credit Note under seal as of the date first above written.
HARRY'S FARMERS MARKET, INC.
By: /s/ Harry A. Blazer
-----------------------------
Name: Harry A. Blazer
---------------------------
Title:
--------------------------
[CORPORATE SEAL]
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<PAGE>
LOANS AND PAYMENTS
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<TABLE>
<CAPTION>
Duration of Unpaid
Interest Interest Period Payments of Principal Name of Person
Date Amount Type Rate (if Applicable) Principal Balance of Note Making Notation
- ---- ------ ---- -------- --------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
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<PAGE>
EXHIBIT 99.1
Contact: Tony Tortorici
404-365-9393
HARRY'S FARMERS MARKET RECEIVES
SIGNIFICANT INVESTMENT; JOINS FORCES WITH BOSTON CHICKEN
ATLANTA--JAN. 31, 1997 -- Harry's Farmers Market, Inc. (Nasdaq: HARY) announced
today that it has received $23 million of new capital from Progressive Food
Concepts, Inc. (PFCI), a new company formed with the help of Boston Chicken,
Inc. (Nasdaq-NMS: BOST). Harry's will use the proceeds to repay bank debt,
increase efficiencies at its food manufacturing and central bakery facilities
and to refine its existing Harry's In A Hurry concept with a view towards broad-
based expansion.
PFCI has been funded with a convertible loan from Boston Chicken and equity from
management and private investors. Boston Chicken has the option to convert the
loan into a majority interest in PFCI at a later date.
The agreements between Harry's and PFCI include: (1) a $20 million investment
from PFCI in the form of a long term loan to Harry's that can be exchanged for
up to 5 million shares of Class A common stock in Harry's, (2) $1 million from
PFCI for warrants to purchase 2 million shares of Class A common stock in
Harry's with exercise prices ranging from $4.00 - $5.50 per share, (3) a mutual
consulting agreement between Harry's and PFCI pursuant to which PFCI will pay
Harry's $500,000 at closing, and (4) $1.5 million and 2.5 percent equity
interest in PFCI, in exchange for intellectual property of Harry's, including
development and trademark rights to its concepts outside of Georgia and Alabama.
There are no ongoing royalties or fees associated with the transfer of these
rights. At closing, $12 million of the loan will be funded with the remaining
commitment available to refine business models as agreed to between Harry's and
PFCI. Assuming full exercise of its rights to acquire Harry's stock, PFCI could
own approximately 43% of Harry's.
Harry's, under the leadership of Harry Blazer, will continue to own and operate
all of its current stores as well as any future Harry's stores opened in Georgia
and Alabama. Mr. Blazer will also serve on the Board of Directors of PFCI.
The goal of PFCI and Harry's, working together, will be to capitalize on
emerging trends in the food buying habits of today's consumer with a focus on
branded take-home meal solutions, particularly ready-to-heat prepared foods.
Harry's intends to immediately focus its attention on refining its business
model through testing and experimentation and could incur losses associated with
such activities.
Harry Blazer, Chairman, President and CEO of Harry's said, "This is a momentous
day in the history of Harry's Farmers Market. We are excited about the
involvement of Boston Chicken and the confidence Boston Chicken has shown in our
concepts as evidenced by its commitment to the new venture. Combining our
expertise in high quality, fresh, ready-to-heat prepared foods, fruits,
vegetables, meat and seafood with the multi-unit retail knowledge, systems,
infrastructure and development expertise available from Boston Chicken could
create tremendous opportunities."
Blazer continued: "I am looking forward to working with Saad Nadhir, Chairman
and CEO of PFCI. I consider him one of the most significant talents in food
retailing today. I believe, together, we can help put "wheels" on the Harry's
concept and actualize our dream of quality growth in Georgia and Alabama. I
would like to express my gratitude to my customers, vendors and employees, and
my wife, Janet, whose support have made this day possible. I would like to give
special thanks to my Board of Directors, especially to Board member Robert
Glustrom, and Harry's corporate attorney, John Latham, for their hard work,
encouragement and guidance since my return to the company in October of 1995,
and especially in helping to get this deal consummated."
<PAGE>
--MORE--
Saad Nadhir, Chairman and CEO of PFCI, added "We're fortunate to have Harry
Blazer, an entrepreneur with 20 years of fresh food retailing experience, as a
partner. Harry's quality standards and personal commitment to these standards
are unsurpassed in the food retailing industry. Harry has pioneered innovative
approaches in both the ready-to-heat and perishable food segments, combining
proprietary production processes with leading-edge retail formats. This new
venture provides an excellent opportunity to combine Harry's know-how with the
experience we have gained and the brands we have built at Boston Market."
Harry's owns and operates five stores in the Atlanta area, including three
Harry's Farmers Markets, mega markets specializing in high quality fresh fruits
and vegetables; meats and seafood; fresh-bakery goods; freshly-made ready-to-
heat and ready-to-eat prepared foods; and deli, cheese and dairy products, and
two Harry's In A Hurry stores which are smaller than the mega markets, with more
emphasis on fresh, ready-to-heat and ready-to-eat prepared foods of high
quality. Harry's line of over 300 prepared food products and meals are made in
the company's 28,000 square foot USDA-approved manufacturing facility, while
over 200 proprietary bakery items are baked fresh daily in Harry's 55,000 square
foot bakery.
Boston Chicken, Inc. franchises and operates Boston Market food service stores
that specialize in fresh convenient meals featuring home style entrees, fresh
vegetables, salads and side dishes, including mashed potatoes made from scratch.
Boston Market combines the freshness and quality of traditional home cooking
with convenience and value. As of December 29, 1996, there were 1,087 Boston
Market stores in 38 states and the District of Columbia.
# # #
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