<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1997
REGISTRATION NO. 333-10775
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------
MONTEREY PASTA COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 2096 77-0227341
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION NUMBER) IDENTIFICATION
ORGANIZATION) NO.)
</TABLE>
1528 MOFFETT STREET, SALINAS, CALIFORNIA 93905
(408) 753-6262
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
KENNETH A. STEEL, JR.
CHIEF EXECUTIVE OFFICER
MONTEREY PASTA COMPANY
1528 MOFFETT STREET, SALINAS, CALIFORNIA 93905
(408) 753-6262
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ERIC J. LAPP
GILBERT GALLARDO
GRAY CARY WARE & FREIDENRICH
400 HAMILTON AVE.
PALO ALTO, CALIFORNIA 94301
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock ($.001 par value per
share).......................... 5,782,869(1) $1.78(2) $10,293,506.82(3) $3,119.24(4)
</TABLE>
(1) Includes all of the shares of Common Stock that may be offered from time to
time by the Selling Stockholders.
(2) Estimated solely for the purpose of computing the registration fee
calculated pursuant to Rule 457(c) and based on the average of the high and
low prices of the Common Stock of Monterey Pasta Company as reported on the
Nasdaq National Market on May 5, 1997.
(3) This registration statement covers an additional indeterminate number of
shares of Common Stock which may be issued in accordance with Rule 416.
(4) Paid upon initial filing.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
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<PAGE>
5,782,869 SHARES
MONTEREY PASTA COMPANY
------------------
COMMON STOCK
------------------------
Of the 5,782,869 shares of common stock of Monterey Pasta Company ("Monterey
Pasta" or the "Company") being offered hereby (the "Shares"), 400,750 shares may
be issued upon exercise of warrants issued in July 1996; up to 2,343,750 shares
may be issued upon conversion of 3,000 shares of the Company's Series A-1
Convertible Preferred Stock issued in March 1997; up to 195,313 shares may be
issued upon conversion of 250 shares of the Company's Series B-1 Convertible
Preferred Stock issued in April 1997 (the Series A-1 Convertible Preferred Stock
and the Series B-1 Convertible Preferred Stock are collectively referred to
herein as the "Preferred Stock"); 160,256 shares were issued in April 1997 upon
the conversion of 250 shares of Series B Preferred Stock issued in August 1996;
1,600,000 shares were issued in a private placement in March 1997; 532,800
shares may be issued upon exercise of warrants issued in April 1997 and 550,000
shares were issued to Kenneth A. Steel, Jr. in April 1997 subject to vesting
upon achievement of time in service and performance criteria. All of such Shares
may be sold from time to time by or on behalf of shareholders of the Company
(the "Selling Stockholders") described in this Prospectus under "Selling
Stockholders". The Selling Stockholders acquired the common stock and the
Preferred Stock from the Company in private placement transactions exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"). The Company is obligated to register under the Securities Act the Shares
issuable upon conversion of the Preferred Stock and to use its best efforts to
cause this Registration Statement covering the Shares to be declared effective
and to remain effective for up to thirty (30) months following the effective
date of this Registration Statement. The holders of the Shares issued or
issuable in the transactions described above have the right to participate in
such registration.
The Company will not receive any of the proceeds from the sale of the Shares
by the Selling Stockholders.
The Company has been advised by the Selling Stockholders that they may sell
all or a portion of the Shares in the Nasdaq National Market, in negotiated
transactions or otherwise, and on terms and at prices then obtainable. The
Selling Stockholders and any broker-dealers, agents or underwriters that
participate with the Selling Stockholders in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commission received by them and any profit on the resale of the
Shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The Company and the Selling Stockholders
have agreed to certain indemnification and contribution arrangements. See "Plan
of Distribution."
The Company will bear the cost of preparing and printing the Registration
Statement, the Prospectus and any Prospectus Supplements and all filing fees and
legal and accounting expenses associated with registration under federal and
state securities laws. The Selling Stockholders will pay all other expenses
related to the distribution of the Shares.
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS OF ANY
STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR DEALERS
EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF
THE SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH
TRANSACTIONS OCCUR, OR THE EXISTENCE OF ANY EXEMPTIONS FROM
SUCH REGISTRATION.
The Company's common stock is listed on the National Market of the National
Association of Securities Dealers, Inc. (the "NASD") and is traded under the
symbol "PSTA". On May 5, 1997, the last sales price of the Company's common
stock as reported on the NASD Automatic Quotation System was $1.93.
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 HEREOF FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information filed by the Company may
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's Regional Offices located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material may be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Documents filed with the Commission
via the Electronic Data Gathering, Analysis and Retrieval System ("EDGAR") may
be obtained through the Commission's website at http://www.sec.gov. Reports,
proxy and information statements and other information concerning the Company
may be inspected at, and also be obtained at, the National Association of
Securities Dealers, Inc., Market Listing Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has also filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Shares offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus or in any document incorporated by reference herein
as to the contents of any contract or other document referred to herein or
therein are not necessarily complete and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement or incorporated herein by reference. Each such statement
is qualified in all respects by such reference to such exhibit. For further
information with respect to the Company and the Shares offered hereby, reference
is made to the Registration Statement and the exhibits and schedules thereto.
The Registration Statement may be inspected without charge, and copies thereof
may be obtained at prescribed rates from, the Public Reference Section of the
Commission, at 450 Fifth Street, N.W., Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference: (1) the Company's Annual
Report on Form 10-K for the year ended December 29, 1996, as amended by Form
10-K/A for the year ended December 29, 1996; (2) the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996; (3) the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996; (4) the Company's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1996; (5) the
Company's Current Reports on Form 8-K, filed on February 9, 1996, May 3, 1996,
May 28, 1996, October 17, 1996 and October 25, 1996 as amended by Form 8-K/A on
November 8, 1996; (6) and the description of the Company's common stock
contained in the Company's Registration Statements on Forms 8-A, as filed with
the Commission on October 8, 1993 and May 28, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act prior to the termination of this offering shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference herein or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
2
<PAGE>
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request, a copy of any or all of the foregoing documents incorporated by
reference in this Prospectus (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents or into this Prospectus). Requests for such documents should be
directed to Monterey Pasta Company at 1528 Moffett Street, Salinas, California
93905, Attn: Secretary (telephone: (408) 753-6262).
GENERAL
The following discussion should be read in conjunction with the financial
statements and related notes and other information, reports and documents
incorporated by reference included in this Prospectus. Other than the historical
facts contained herein, this Prospectus contains forward-looking statements that
involve substantial risks and uncertainties. For a discussion of such risks and
uncertainties, please see the Company's Annual and Quarterly Reports
incorporated by reference herein.
In addition to the risks and uncertainties discussed in such reports and
discussed below, the following factors should be considered. As the Company has
continued to expand its retail distribution, it has expended substantial
resources on slotting allowances and other incentives in order to attract new
customers. There can be no assurance that such expenditures will generate
sufficient revenues to cover costs or that such new customers will be retained.
New markets increase the risk of significant product returns resulting from
slower selling product than expected. In addition, grocery and club store chains
continually re-evaluate the products carried in their stores and no assurance
can be given that the chains currently offering the Company's products will
continue to do so in the future. Should these channels choose to reduce or
eliminate products, the Company could experience a significant reduction in
product sales. The Company also adjusts its manufacturing schedules in
accordance with sales forecasts with the result that it may incur additional
fixed manufacturing expenses in anticipation of sales increases. In the event
that such sales increases are not achieved or such forecasts prove to be
inaccurate, such increased manufacturing expenses would negatively affect the
Company's profitability. The Company's business continues to be dominated by
several very large competitors which have significantly greater resources than
the Company; such competitors can outspend the Company and negatively affect the
Company's market share and results of operations. The Company also continues to
be dependent on common carriers to distribute its products. Any disruption in
the Company's distribution system or increase in the costs thereof could have a
material adverse impact on the Company's business.
THE COMPANY
The Company produces and markets premium quality refrigerated pasta and
pasta sauces, emphasizing superior flavors and innovative products. The Company
seeks to build national brand recognition and customer loyalty by employing an
aggressive marketing program that focuses on developing multiple points of sale
for the Company's products.
The Company sells its pasta and pasta sauces through leading grocery store
chains, including Safeway, Albertsons, Giant Foods, Hannaford Bros., Brunos,
H.E. Butt, Star Markets, Kroger, Shaws, Nob Hill and Smitty's and club store
chains such as Price/Costco, Sams and BJs. As of December 29, 1996, a total of
3,585 grocery and club stores offered the Company's products.
Monterey Pasta currently offers 38 varieties of contemporary gourmet pasta
products that are produced using the Company's proprietary recipes, including
refrigerated cut pasta, ravioli, tortelloni, tortellini, and pasta sauces.
Examples of the Company's pasta and pasta sauces include: Snow Crab Ravioli,
Smoked Salmon Ravioli, Gorgonzola Roasted Walnut Ravioli, Sweet Red Pepper
Fettuccini, Sun Dried Tomato Pesto Sauce, Roasted Garlic Artichoke Sauce and the
new Reduced Fat Herb Alfredo and Reduced Fat Sundried Tomato Cream sauces. Other
products introduced in 1996 include Five Cheese Tortelloni, Low Fat Ravoli,
Chicken Sausage Ravoli, Chicken Tarragon Ravioli, and Roasted Garlic
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Chicken Ravioli, as well as the new dessert raviolis, Apple Cinnamon and
Chocolate Raspberry and dessert sauces, Vanilla Creme and Raspberry. Monterey
Pasta believes its pasta products appeal to health-conscious consumers who are
seeking excellent quality, convenience and value as well as innovative taste
combinations.
Effective December 31, 1995, the Company discontinued the business of its
restaurant and franchise subsidiaries, and wrote off its entire $7,693,000
investment. Accordingly, the restaurant and franchise businesses are accounted
for as discontinued operations in the consolidated financial statements
incorporated by reference herein for all periods presented. In 1996, the Company
sold its restaurant subsidiary to an entity owned by Mr. Lance H. Mortensen, a
former Chairman, Chief Executive Officer, and Board member of the Company. In
late 1996, the Company discontinued its efforts to sell to national food service
distributors/contract feeders, and nontraditional venues such as sports
coliseums and universities.
The Company's executive offices are located at 1528 Moffett Street Salinas,
California 93905; its telephone number at that address is (408) 753-6262.
RISK FACTORS
IN ADDITION TO OTHER INFORMATION CONTAINED IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY
IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OFFERED
HEREBY.
HISTORY OF LOSSES
RECENT OPERATING LOSSES: NO ASSURANCE OF PROFITABILITY. The Company's
profitability began to decline in 1994. In the second quarter of 1994, the
Company reported its first operating loss from continuing operations. The
Company reported additional operating losses from continuing operations in eight
of ten quarters since then. The Company's operating loss for the quarter ended
December 1996 was $1,345,000. At December 29, 1996, the Company had an
accumulated deficit of $34,320,000. There can be no assurance that the Company
will return to profitability in the short term or ever.
EMPHASIS ON GROCERY AND CLUB STORE SALES
The success of the Company's efforts in its restructured business will
depend on a number of factors, including whether grocery and club store chains
will continue to expand the number of their stores offering the Company's
products and whether the Company can continue to increase the number of grocery
and club store chains offering its products. Grocery and club store chains
continually re-evaluate the products carried in their stores and no assurance
can be given that the chains currently offering the Company's products will
continue to do so in the future.
DEPENDENCE UPON MAJOR CUSTOMERS
For the years 1994, 1995, and 1996, Price/Costco and Safeway each accounted
for approximately 45% and 13%, 47% and 12%, and 41% and 9% respectively, of
total revenues. No other customer accounted for greater than 10% of the
Company's total revenues during this period. The Company currently sells its
products to three separate Price/Costco regions which make purchasing decisions
independently of one another. These regions re-evaluate, on a regular basis, the
products carried in their stores. There can be no assurance that these
Price/Costco regions will continue to offer Monterey Pasta's products in the
future or continue to allocate Monterey Pasta the same amount of shelf space.
The loss of or significant decrease in products sold to either of those
customers would materially adversely affect the Company's business operations.
4
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COMPETITION
The Company's business is subject to significant competition. The
refrigerated pasta and pasta sauce category is highly competitive and is
dominated by a small number of very large national companies, such as Nestle
with its Contadina-Registered Trademark- brand, and Kraft, with its
DiGiorno-Registered Trademark- brand, along with a number of regional
competitors, such as Mallards, Romance and Trios. Regional competitors also
include grocery chains such as Safeway that offer private label refrigerated
pasta. The national competitors and many of the regional competitors have
significantly more brand name recognition, marketing personnel, and cash
resources than the Company. Moreover, competition for shelf space in grocery
stores is intense and poses great difficulty for smaller food companies. The
Company seeks to compete in the premium segment of the category, by selling high
quality, innovative products with flavor and appearance which it believes
compare favorably with its competitors' products.
To date, the Company has benefitted from the marketing efforts of Nestle and
Kraft and certain large regional companies. These companies have committed
significant financial resources towards advertisement, promotion and development
of the refrigerated pasta and pasta sauce category. No assurance can be given
that these large companies will continue to expend such resources in the future
or that the Company will continue to enjoy such benefits. The Company in the
future may be required to incur significantly greater expenses for promotion,
advertisement and marketing, which could adversely affect profitability. There
can be no assurance that the Company will be able to commit funds to promotion,
advertisement and marketing while operating profitably.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local regulations
relating to cleanliness, maintenance of food production equipment, food storage,
cooking and cooling temperatures and food handling, and is subject to
unannounced on-site inspections of production facilities. As a producer and
distributor of foods, the Company is subject to the regulations of the U.S. Food
and Drug Administration, state food and health boards and local health boards
for the production, handling, storage, transportation, labeling and processing
of food products. Regulations in new markets and future changes in existing
regulations may adversely impact the Company by raising the cost of production
and delivery of pasta and pasta sauces and/or by affecting the perceived
healthfulness of the Company's products. A failure to comply with one or more
regulatory requirements could result in a variety of sanctions, including fines
and the withdrawal of the Company's products from store shelves. The Company is
not aware of any currently existing facts or circumstances that would cause it
to fail to comply with any of the regulations to which it is currently subject.
CAPITAL REQUIREMENTS
The Company required additional capital in 1995, 1996 and 1997 to continue
to meet its expected growth needs and to finance its operations and
restructuring plans.
In April and May 1996, the Company received approximately $4,000,000 from
its sale of 916,000 shares in a private offering to accredited investors at a
gross price of $4.375 per share. Such shares are currently eligible for sale
pursuant to Rule 144 and are not included in the Shares offered hereby. Spelman
& Co., Inc. acted as placement agent (the "Placement Agent") on a "best efforts,
"any or all" basis. The Placement Agent received no cash commissions in the
offering but received warrants to purchase one share of common stock for each
$10 in shares sold, exercisable at a price of $6.50 per share, for a term of
seven years. Warrants for 400,750 shares have been issued, and the shares
underlying such warrants are included in the Shares being offered hereby. The
net proceeds from the offering have been used by the Company for advertising,
marketing, promotion, capital equipment and working capital.
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<PAGE>
In August 1996 the Company sold 3,000 shares of Series A Convertible
Preferred Stock and 500 shares of Series B Convertible Preferred Stock at a face
amount of $1,000 per share, with aggregate gross proceeds of approximately
$3,500,000 to be used for capital expenditures, working capital and other
general corporate purposes.
In March 1997 the Company received approximately $2,160,000 in aggregate
gross proceeds from the sale of 1,600,000 shares of its Common Stock at a price
of $1.35 per share.
There can be no assurance that the Company will not require additional
financing or, if the Company requires additional financing, that it will secure
adequate financing on satisfactory terms when needed.
DECLINE IN INDUSTRY
Industry sources report that from 1987 to 1992, the refrigerated pasta sauce
category experienced dramatic double digit growth as major players, Nestle and
Kraft, rolled out their brands nationally with strong advertising and
promotional support. The refrigerated pasta and pasta sauce category has
experienced modest single digit declines since 1992. No assurance can be given
that the fresh pasta and pasta sauce category will experience any further
growth.
NEW PRODUCTS
The Company is investing resources into expanding its existing product lines
and developing new products and product lines. The Company's goal is to
introduce new products on a timely and regular basis to maintain customer
interest. There can be no assurance that such investment of resources will
result in successful new products or product lines or that new products can be
developed and introduced on a timely and regular basis. If the Company's new
products are not successful, the Company's grocery and club store sales may be
adversely affected as customers seek new products.
DISTRIBUTION
The Company's success depends upon an effective system of distribution for
its products. The Company uses its direct store delivery system ("DSD") to
deliver its products to certain customers in Northern California. To distribute
its products to other customers and to other parts of the country, the Company
uses common carriers. The dependence on other companies for delivery of its
products poses a risk to the Company, particularly as the Company increases its
distribution to the eastern United States. While this method of delivery has
been reliable and available at acceptable rates thus far, there can be no
assurance that the Company will continue to be able to negotiate acceptable
freight rates in the future or that delivery will not be disrupted for reasons
including, but not limited to, adverse weather, natural disasters or labor
disputes in the trucking industry.
PRODUCTION FACILITY
The Company currently produces and distributes its pasta and pasta sauce
products for its grocery and club store and food service accounts from its
production facility in Monterey County, California, which was expanded from
10,000 square feet to 37,666 square feet in March 1995. The Company expects that
the present facility will be adequate to accommodate the Company's growth needs
for 1997. There can be no assurance, however, that this facility will be
adequate to meet future demand for the Company's products. Furthermore, since
the Company's business is heavily dependent upon production and delivery from
one production facility, adverse weather, natural disasters such as earthquakes,
local strikes and other occurrences may have a severe adverse impact upon the
Company's operations. The Company develops its manufacturing schedules in
accordance with sales forecasts with the result that it may incur additional
fixed manufacturing expenses in anticipation of sales increases. In the event
that such sales increases are not achieved or such forecasts prove to be
inaccurate, such increased manufacturing expenses would
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negatively affect the Company's profitability. There can be no assurance that
the Company will sell enough products to cover its production and operating
costs.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company's grocery and club store accounts are expected to experience
minor seasonal fluctuations. The Company's business in general may be affected
by a variety of other factors, including, but not limited to, general economic
trends, competition, marketing programs and special or unusual events. Such
effects, however, may not be apparent in the Company's operating results during
a period of significant expansion.
HIRING AND RETENTION OF KEY PERSONNEL; MANAGEMENT TRANSITION
The success of the Company depends on the efforts of key management
personnel. In the fourth quarter of 1996, a number of corporate officers left
the Company. These included its President and Chief Executive Officer, Executive
Vice President and Vice President-Legal Affairs, who resigned on October 4, 1996
together with three additional Board members, and its Chief Financial Officer,
who resigned on November 8, 1996. In addition, the interim President appointed
in December 1996 resigned in March 1997. The Company currently has a Chief
Executive Officer and a new Chief Financial Officer, neither of whom has
previously been a part of the Company's management team, and both of whom may
not continue in their current positions on a long-term basis. The Board of
Directors began a search for a new Chief Executive Officer in the first quarter
of 1997. The Company's success will depend on its ability to operate under new
management, to attract qualified candidates, to effect a smooth transition to
new management with minimal disruption in operations, and to motivate and retain
key employees and officers. There can be no assurance that the Company will be
able to effect smooth transitions from its management team to a new management
team, that new officers will be hired or if hired will be able to perform
effectively, or that significant management turnover will not continue in the
future.
GENERAL LIABILITY AND COMMERCIAL INSURANCE; PRODUCT LIABILITY INSURANCE
Although the Company carries general liability, product liability and
commercial insurance, there can be no assurance that this insurance will be
adequate to protect the Company against any general, commercial and/or product
liability claims. Any general, commercial and/or product liability claim which
is not covered by such policy, or is in excess of the limits of liability of
such policy, could have a material adverse effect on the financial condition of
the Company. There can be no assurance that the Company will be able to maintain
this insurance on reasonable terms.
ABILITY TO ISSUE PREFERRED STOCK; REGISTRATION RIGHTS AND WARRANTS
The Board of Directors has the authority to issue up to 1,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including dividend, liquidation, conversion, voting, redemption or other rights
without any further vote or action by the stockholders, which rights could
adversely affect the voting power or other rights of the holders of common
stock. As indicated above, the Company has issued to certain of the Selling
Stockholders 3,500 shares of Preferred Stock at a price of $1,000 per share
("Preferred Stock"), of which 250 shares have been converted to Common Stock and
3,250 shares are convertible into shares of Common Stock of the Company. The
rights of the holders of the common stock will be subject to, and may be
adversely affected by, the rights of the holders of such Preferred Stock and any
holders of Preferred Stock that may be issued in the future. The issuance of
Preferred Stock, while providing desired flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company, thereby delaying, deferring or preventing a change in
control of the Company. Furthermore, such Preferred Stock, has other rights,
including economic rights
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senior to the common stock, and, as a result, the issuance thereof could have a
material adverse effect on the market value of the common stock.
The Company has issued warrants to Franklin-Lord, Inc., the representative
of the underwriters in the Company's initial public offering in December 1993,
and three affiliates of Franklin-Lord (the "Franklin-Lord Warrants"), which are
exercisable at any time through December 7, 1998, to purchase up to an aggregate
of 205,000 shares of common stock for $8.40 per share. The exercise of the
Franklin-Lord Warrants would further dilute the ownership interest of the
holders of common stock.
The Company also issued to Spelman & Co., Inc. (the "Placement Agent"),
warrants to purchase 400,750 shares of Common Stock, at a price of $6.50 per
share, for a term of seven years, in connection with the Placement Agent's
services in soliciting and obtaining purchasers of 916,000 shares of the
Company's Common Stock, in April 1996. Such Placement Agent warrants ("Placement
Agent Warrants") provide for piggy-back registration rights at any time until
May 1, 2003 and one demand registration right for a term of three years. The
exercise of the Placement Agent Warrants would further dilute the ownership
interest of the holders of Common Stock. The shares underlying such Placement
Agent Warrants are included in the Shares being offered hereby.
The Company issued warrants to purchase an aggregate of 532,800 shares of
Common Stock at an exercise price of $2.25 to Sentra Securities Corporation the
Placement Agent in connection with the Company's March 1997 private placement.
Such warrants (the "Sentra Warrants") have a term of three years, expiring in
March 2000. The shares underlying the Sentra Warrants are included in the Shares
being offered hereby. Exercise of the Sentra Warrants would further dilute the
ownership interest of the holders of Common Stock.
LACK OF DIVIDENDS
The Company has never paid any cash dividends on its Common stock. The
Company presently intends to retain future earnings for use in its business and
does not anticipate paying cash dividends on its Common Stock in the foreseeable
future.
RISKS INHERENT IN FOOD PRODUCTION
The Company faces all of the risks inherent in the production and
distribution of refrigerated food products, including contamination,
adulteration and spoilage, and the associated risks of product liability
litigation and declines in the price of its stock may be associated with even an
isolated event. The Company has a modern production facility, employs what it
believes is state-of-the-art thermal processing, temperature-controlled storage,
HAACP programs intended to insure food safety, and has obtained USDA approval
for its production plant. However, there can be no assurance that the Company's
procedures will be adequate to prevent the occurrence of such events.
MATERIAL CHANGES
REINCORPORATION IN DELAWARE
On August 7, 1996, the Company changed its state of incorporation from
California to Delaware. In connection with the reincorporation, the Company
increased the number of shares of common stock authorized from 20,000,000 to
70,000,000 and decreased the number of shares of Preferred Stock authorized from
5,000,000 to 1,000,000. The Delaware Certificate of Incorporation and Bylaws
provide that a director may be removed with or without cause by the affirmative
vote of the holders of at least 66 2/3 percent of the voting power of the then
outstanding voting stock of the Company, voting together as a single class.
Under the Delaware Certificate of Incorporation and Bylaws, the Company's
stockholders do not have the ability to act by written consent without a meeting
of the stockholders, nor do they have the right to cumulative voting for
directors.
8
<PAGE>
In addition, Section 203 of the Delaware General Corporation Law restricts
certain business combinations with any "interested stockholder" as defined by
such statute. Section 203 may have the effect of delaying, deferring or
preventing a change in control of the Company and limit the flexibility of
stockholders to determine the composition of the Company's Board of Directors or
make other changes, even in circumstances where a majority of the stockholders
may desire change. Further, certain other provisions of the Company's
Certificate of Incorporation and Bylaws and of Delaware law could delay or make
more difficult a merger, tender offer or proxy contest involving the Company.
ADOPTION OF SHAREHOLDER RIGHTS PLAN
As disclosed by the Company's Form 8-A and its Report on Form 8-K filed with
the Commission on May 28, 1996, the Company adopted a shareholder rights plan
pursuant to a Rights Agreement dated as of May 15, 1996 with Corporate Stock
Transfer, as rights agent (the "Rights Agreement"). The Company declared a
dividend of one right for each outstanding share of common stock of the Company,
payable on May 20, 1996, to shareholders of record on that date. If the rights
under the Rights Agreement are not exercised, such rights will expire on the
earliest of (i) December 31, 2004, (ii) redemption by the Company or (iii)
consummation of a Permitted Offer (defined as full tender offer approved by a
majority of the Company's outside directors) on terms that are fair to the
Company's stockholders.
ADOPTION OF EMPLOYEE BENEFITS PLAN
In July 1996, the Company established a voluntary defined contribution
401(k) plan to be effective as of January 1996. The plan covers all employees
that are not covered by a collective bargaining agreement, which includes all of
the Company's employees, beginning on the first day of the calendar quarter
after having completed six months of service. The plan allows for employer
matching contributions. The Company is currently matching fifty percent (50%) of
the first six percent (6%) contributed by employees. Employee and employer
matching contributions are one hundred (100%) percent vested. The plan also
provides for a voluntary profit sharing contribution by the Company at its
election based on the eligible employees salary as a percent of total eligible
salaries. Profit sharing contributions vest over five years at twenty percent
(20%) per year.
AMENDMENT OF STOCK OPTION PLAN
Effective August 1, 1996, the Company amended its First Amended and Restated
1993 Stock Option Plan to increase the number of shares of common stock reserved
for issuance upon exercise of options granted thereunder from 1,200,000 to
1,740,000.
SELLING STOCKHOLDERS
In April 1997, the Company issued 550,000 shares of common stock at $1.875
per share to Kenneth A. Steel, Jr., Chief Executive Officer and President of the
Company and a Selling Stockholder, in a private sale pursuant to an exemption
from registration under the Securities Act and exemptions available under
applicable state securities laws and regulations. Such shares vest based upon
time in service and performance criteria, with unvested shares required to be
repurchased at cost by the Company in 1997. Pursuant to the terms of such
Agreement, the shares issued to Mr. Steel are being included in the Shares
offered hereby.
In connection with a private offering in March 1997, the Company entered
into Registration Rights Agreements with each of the purchasers of the 1,600,000
shares, which entitled each holder to include his or her or its shares in any
registration of the Company's securities either for its own account or the
account of a security holder or holders exercising their respective demand
registration rights. All of the participants in such private offering have
elected to include their shares in this Prospectus. As discussed under "Ability
to Issue Preferred Stock; Registration Rights and Warrants" above, the holders
of the Sentra Warrants have requested that the shares underlying such warrants,
which aggregate 532,800 shares, be included in this Prospectus. The exercise of
the Sentra Warrants would further dilute the ownership interest of holders of
the Company's common stock.
9
<PAGE>
In August 1996, the Company issued 3,000 shares of Series A Convertible
Preferred Stock (the "Series A Preferred Stock") Preferred Stock and 500 shares
of Series B Preferred Stock (the "Series B Preferred Stock") at $1,000 per share
to certain Selling Stockholders in a private offering pursuant to an exemption
from registration under the Securities Act and exemptions available under
applicable state securities laws and regulations. In connection therewith, the
Company granted such Selling Stockholders registration rights pursuant to a
Registration Rights Agreement.
The Series A Preferred Stock and Series B Preferred Stock were convertible
into shares of common stock of the Company at any time commencing 90 days after
the date of issuance and within two (2) years of such date of issuance. The
conversion price was computed at 80% of the average closing bid prices of the
Company's common stock as quoted on NASDAQ for the five-day trading period
ending on the day prior to the date of conversion, and such price may not be
greater than $9.00 per share. The Company had the right to redeem the Series A
Preferred Stock and Series B Preferred Stock in whole or in part (i) at 115% of
the subscription price at any time prior to 90 days from the closing date and
(ii) at 120% of the subscription price at any time thereafter. The Series A
Preferred Stock and Series B Preferred Stock had a cumulative dividend of $40.00
per annum per share, accruing from the date of issuance and payable quarterly
out of funds legally available for such purpose.
In March 1997, the Selling Stockholder holding all 500 shares of Series B
Preferred Stock converted 250 of such shares into 160,256 shares of Common Stock
of the Company. Pursuant to the terms of the Registration Rights Agreement, the
Company has included such shares in the Shares offered by this Prospectus.
In March 1997, the Company issued 3,000 shares of Series A-1 Convertible
Preferred Stock (the "Series A-1 Preferred Stock") to a Selling Stockholder in
exchange for the 3,000 shares of Series A Preferred Stock held by such Selling
Stockholder in a private offering pursuant to an exemption from registration
under the Securities Act and exemptions available under applicable state
securities laws and regulations. In April 1997, the Company issued 250 shares of
Series B-1 Convertible Preferred Stock (the "Series B-1 Preferred Stock") to a
Selling Stockholder in exchange for the remaining 250 outstanding shares of
Series B Preferred Stock held by such Selling Stockholder in a private offering
pursuant to an exemption from registration under the Securities Act and
exemptions available under applicable state securities laws and regulations. In
connection therewith, the Company also amended the Registration Rights Agreement
described above in order to grant the holders of Series A-1 and Series B-1
Preferred Stock registration rights pursuant to the Registration Rights
Agreement. Pursuant to the terms of such Registration Rights Agreement, the
Company has prepared this Prospectus.
The Series A-1 Preferred Stock is convertible into shares of common stock of
the Company at any time commencing 90 days after the date of issuance and after
the effective date of this Registration Statement and within two (2) years of
such date of issuance. The conversion price is computed at 80% of the average
closing bid prices of the Company's common stock as quoted on NASDAQ for the
five-day trading period ending on the day prior to the date of conversion, and
such conversion price may not be greater than $4.40 per share. The Company has
no rights to redeem and has no obligation to declare or pay dividends on the
Series A-1 Preferred Stock.
The Series B-1 Preferred Stock is convertible into shares of common stock of
the Company at any time commencing 90 days after the date of issuance and after
the earlier of (i) July 31, 1997 and (ii) the effective date of this
Registration Statement, and within two (2) years of such date of issuance. The
conversion price is computed at 80% of the average closing bid prices of the
Company's common stock as quoted on NASDAQ for the five-day trading period
ending on the day prior to the date of conversion, and such conversion price may
not be greater than $4.40 per share. The Company has rights to redeem the Series
B-1 Preferred Stock. The Series B-1 Preferred Stock has a cumulative dividend of
$80.00 per annum per share, accruing from the date of issuance and payable
quarterly out of funds legally available for such purpose.
10
<PAGE>
The holders of the Placement Agent Warrants have requested that the shares
underlying such warrants, which aggregate 400,750 shares, be included in this
Prospectus, pursuant to Section 3 of each Placement Agent Warrant executed by
each respective holder and the Company. The exercise of the Placement Agent
Warrants would further dilute the ownership interest of holders of the Company's
Common Stock.
The following table sets forth the number of shares of the Company's Common
Stock which each Selling Stockholder owned as of April 30, 1997, or will have
the right to acquire upon the exercise of the Placement Agent Warrants or the
Sentra Warrants or upon conversion of the Preferred Stock, and the number of
shares of the Company's Common Stock being registered on behalf of each Selling
Stockholder.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED PRIOR TO SHARES BEING
SELLING STOCKHOLDER OFFERING REGISTERED
- ----------------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
GFL Performance Fund Limited(1).............................................. 2,343,750 2,343,750
Kenneth A. Steel, Jr. (2).................................................... 735,180 705,180
Pangaea Fund Limited (1)..................................................... 355,569 355,569
S & J Family Limited Partnership............................................. 177,940 177,940
Robert and Jennifer Steel, as joint tenants (2).............................. 150,000 150,000
Bradley T. Shaw.............................................................. 184,954 137,954
Bert Coyle................................................................... 132,978 122,978
James K. Farrelly............................................................ 142,979 122,979
Jim Carrazza................................................................. 131,519 126,519
Duck Partners, L.P........................................................... 75,000 75,000
Glenn C. Smigiel and Lynne M. Smigiel, as joint tenants...................... 74,000 74,000
Sunbeam Ventures Ltd......................................................... 168,000 68,000
Spelman & Co., Inc........................................................... 67,882 67,882
Sentra Securities Corporation................................................ 53,120 53,120
Vernon F. Sanders............................................................ 62,000 62,000
H. Wayne Lewis and Janet A. Lewis, trustees FBO Lewis Family Trust dtd
4/29/92.................................................................... 50,000 50,000
Lyonshare Venture Capital, a General Partnership............................. 65,000 50,000
Howard Falco................................................................. 70,152 70,152
Timothy E. Young, Trustee and Julienne Young, Trustee Arinu Corp. Retirement
Plan & Trust dtd 2-22-95................................................... 38,000 38,000
Lanny Stout.................................................................. 42,463 42,463
Mark A. Turk and Karen S. Turk, as joint tenants............................. 37,000 37,000
Steve Harrington............................................................. 30,550 30,550
Dan Chiappetta............................................................... 30,000 30,000
Richard M. Steel (2)......................................................... 30,000 30,000
Mateo Lettunich.............................................................. 25,000 25,000
Sylvanus V. Tunstall......................................................... 25,000 25,000
Steven L. and Faith H. Chinskey.............................................. 25,000 20,000
Rob Brumbaugh................................................................ 25,000 25,000
Ronald J. Faust.............................................................. 30,000 20,000
Dennis R. Graue.............................................................. 20,000 20,000
Dwight Hiscox and Judy Hiscox, as joint tenants.............................. 25,000 20,000
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED PRIOR TO SHARES BEING
SELLING STOCKHOLDER OFFERING REGISTERED
- ----------------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Gerald W. King and Edith C. King, trustees FBO King Family Trust dtd
1/22/93.................................................................... 20,000 20,000
Milton Koffman............................................................... 20,000 20,000
Lanny Lahr................................................................... 30,000 20,000
Karl Reisel.................................................................. 20,000 20,000
Nicholas Rizzo or Lori Rizzo Co-TTEES for the Trust Account dtd 11/7/94...... 32,500 20,000
Lori Rizzo or Sam Rosenfarb Co-TTEES FBO The Sheri Rizzo Trust dtd
11/26/84................................................................... 20,000 20,000
Drew Siler and Chris Siler, as joint tenants................................. 20,000 20,000
Jerry A. Mikus and Jean M. Mikus, as joint tenants........................... 20,000 20,000
E. Lee Pinney................................................................ 18,750 18,750
Richard Fineberg............................................................. 22,000 17,000
Patrick Harrington........................................................... 15,750 15,750
George Connelly and Kathleen Connelly, as joint tenants...................... 25,000 25,000
Scott J. Wooley.............................................................. 15,000 15,000
Steve Mallia................................................................. 14,404 14,404
Alan Jablon.................................................................. 12,000 12,000
John E. Cramer TTE FBO John E. Cramer Defined Benefit Plan DTD 12/28/85...... 15,000 10,000
John J. Cresto............................................................... 10,000 10,000
Foley Family Limited Partnership............................................. 10,000 10,000
William Fowler and Susan Fowler.............................................. 10,000 10,000
Robert G. Grummond and Roberta P. Grummond, as joint tenants................. 10,000 10,000
Kenneth Hersh................................................................ 10,000 10,000
Byron Kilpatrick and Myriam Kilpatrick....................................... 10,000 10,000
Dr. Jonathan Kind and Leslie Kind, as joint tenants.......................... 10,000 10,000
Brian J. Koos and Mary Pat Koos, as joint tenants............................ 10,000 10,000
Thomas G. and Susan E. Lusty, as joint tenants............................... 15,000 10,000
John B. Marsala.............................................................. 10,000 10,000
Stephen G. Meisel, DDS....................................................... 10,000 10,000
Phoenix Metropolitan Investors, Ltd.......................................... 20,000 10,000
Lori Rizzo................................................................... 22,500 10,000
Mark Rubin................................................................... 10,000 10,000
Walter W. Schroeder and Karen Schroeder, as joint tenants.................... 10,000 10,000
Sharon H. Semple............................................................. 20,000 10,000
Constance J. Steel(2)........................................................ 12,000 12,000
David H. Welch............................................................... 10,000 10,000
Michael J. Hurley and Denise Enright Hurley, as joint tenants................ 10,000 10,000
Daniel E. Shulgin and Geraldene F. Shulgin, as joint tenants................. 8,000 8,000
Donahue Bunch................................................................ 15,000 10,000
Ira Biderman................................................................. 8,000 8,000
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED PRIOR TO SHARES BEING
SELLING STOCKHOLDER OFFERING REGISTERED
- ----------------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
G. Lee and Janet Brookshire.................................................. 10,000 10,000
Francis Carlson.............................................................. 10,000 10,000
Howard S. Falco Profit Sharing Plan.......................................... 10,000 6,000
Greg Stoia................................................................... 10,143 5,143
Ann McCarty.................................................................. 5,231 5,231
Donald S. Cleverly........................................................... 5,000 5,000
John B. Grabowski............................................................ 5,000 5,000
Robert L. Kinsman and Annette M. Kinsman, Family Limited Partnership......... 5,000 5,000
Edward McManus............................................................... 5,000 5,000
Edward Penry................................................................. 5,000 5,000
Theron L. Sims............................................................... 5,000 5,000
Richard A. Singer and Jacqueline C. Singer, trustees, FBO Singer Family Trust
dtd 6-1-92................................................................. 5,000 5,000
James S. Tiernan............................................................. 5,000 5,000
James S. Serbin.............................................................. 5,000 5,000
The Investment Company, Inc.................................................. 4,700 4,700
James H. McCarthy TTEE for Self-Employed Retirement Plan FBO James H.
McCarthy dtd 1-1-85........................................................ 3,000 3,000
Gary Falco................................................................... 2,500 2,500
Richard N. Rothenberg........................................................ 2,000 2,000
Burton Sutker................................................................ 2,000 2,000
Timothy Watters.............................................................. 2,000 2,000
Steven Laslewicz............................................................. 2,000 2,000
Greg K. Smith................................................................ 6,625 1,355
----------------- ---------------
Total:....................................................................... 6,119,139 5,782,869
</TABLE>
- ------------------------
(1) The shares being registered upon conversion of the Series A-1 and Series B-1
Preferred Stock held by such Selling Stockholder are calculated based on a
hypothetical market price of $1.60 with resulting conversion at $1.28. Such
number will increase or decrease if the price of the Company's Common Stock
is lower or higher respectively, than such amount at the time of conversion.
(2) Kenneth A. Steel, Jr. is a Selling Stockholder, and is the President, Chief
Executive Officer and a Director of the Company. Constance J. Steel is Mr.
Steel's wife. Robert Steel is Mr. Steel's brother and a Director of the
Company. Richard M. Steel is the brother of Kenneth and Robert Steel.
Because the Selling Stockholders may offer all or some of the shares of
common stock which they hold pursuant to the offering contemplated by this
Prospectus, and because such offering is not being underwritten on a firm
commitment basis, no estimate can be given as to the number of shares that will
be held by the Selling Stockholders after completion of such offering.
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholders that they may sell
all or a portion of the Shares from time to time on the Nasdaq National Market,
or otherwise, at prices and on terms prevailing at the time of sale or at prices
related to the then current market price, or in negotiated transactions. The
13
<PAGE>
Shares may be sold by one or more of the following methods: (a) a block trade in
which the broker or dealer so engaged will attempt to sell the Shares as agent,
but may position and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its own account pursuant to this Prospectus; (c) an
over-the-counter distribution in accordance with the rules of the Nasdaq
National Market; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (e) in privately negotiated transactions.
There is no assurance that the Selling Stockholders will offer or sell any or
all of the Shares registered hereunder.
The Selling Stockholders and any underwriters, dealers or agents that
participate in the distribution of the Shares may be deemed to be underwriters
within the meaning of the Securities Act and any discounts, commissions or
concessions received by them and any provided pursuant to the sale of the shares
by them might be deemed to be underwriting discounts and commissions under the
Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless such Shares have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to such Shares for a period of nine
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, each Selling Stockholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-2, 10b-6 and 10b-7, which
may limit the timing of purchases and sales of the Shares by the Selling
Stockholders. All of the foregoing may affect the marketability of the Shares.
The Shares registered hereby are being registered pursuant to Registration
Rights Agreements and Warrants between the Selling Stockholders and the Company.
Pursuant to such Registration Rights Agreements and Warrants the Company has
agreed to bear certain expenses of registration of the Shares under the
Securities Act. In addition, the Registration Rights Agreements provide for
cross-indemnification and contribution of the Company and the Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act.
The Company has agreed with certain of the Selling Stockholders to keep the
Registration Statement of which this Prospectus constitutes a part hereof
effective for up to thirty (30) months following the date on which such
Registration Statement becomes effective. The Company intends to de-register any
of the Shares not sold by the Selling Stockholder at the end of such thirty (30)
month period.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Shares by the
Selling Stockholders.
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich, A Professional Corporation, Palo Alto, California.
14
<PAGE>
EXPERTS
The consolidated financial statements for the year ended December 29, 1996
of the Company incorporated in this Prospectus by reference from the Company's
Annual Report on Form 10-K for year ended December 29, 1996, as amended by Form
10-K/A have been audited by BDO Seidman, LLP, independent certified public
accountants, as set forth in their report which is incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in auditing and accounting.
The consolidated financial statements for the year ended December 31, 1995
of the Company incorporated in this Prospectus by reference from the Company's
Annual Report on Form 10-K for the year ended December 29, 1996, as amended by
Form 10-K/A, have been audited by Deloitte & Touche LLP, independent auditors,
as set forth in their report which is incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
auditing and accounting.
The consolidated financial statements for the year ended January 1, 1995 of
the Company included in the Company's Annual Report on Form 10-K for the year
ended December 29, 1996, as amended by Form 10-K/A have been audited by Arthur
Andersen LLP, independent public accountants, as set forth in their report
included therein, and are incorporated herein by reference in reliance upon such
report of said firm as experts in auditing and accounting.
On October 18, 1996, Deloitte & Touche LLP ("Deloitte") resigned as
independent auditors for the Company. Deloitte's report on the Company's
financial statements for 1995 (1) did not contain an adverse opinion or a
disclaimer of opinion and (2) was not qualified or modified as to uncertainty,
audit scope or accounting principles.
Deloitte advised the Company that this registration statement on Form S-3
should be amended due to recent changes in management and deterioration of
operations. Additionally, in a letter dated October 31, 1996, Deloitte indicated
that Item 4.1 of a Form 8-K filed by the Company on October 25, 1996, should
have included the following statement regarding auditing scope:
"Deloitte & Touche LLP ("D&T") advised the Company that allegations of
potential violations by Board members of Company policy on insider
trading would have caused D&T to expand the scope of their work if they
would have audited 1996. D&T recommended an independent investigation of
such allegations."
In response to notification about alleged potential violations of the
Company's policy, the Company's newly-elected Chief Executive Officer conducted
a preliminary investigation into the allegations. The investigation revealed,
that in connection with margin calls, a former Director incurred a Section 16(b)
violation of the Securities and Exchange Act of 1934, and another Director
incurred violations of internal Company policy as a result of margin calls. The
Company's outside attorneys, Gray Cary Ware & Freidenrich, a Professional
Corporation, are finalizing an independent investigation into the foregoing
charges.
There were no disagreements with Deloitte on any matter of accounting
principles and practices, financial statement disclosure, or auditing scope or
procedure.
As disclosed in the Company's Current Reports on Form 8-K filed on December
26, 1995 and December 27, 1995, the Company engaged Deloitte & Touche LLP to
serve as its independent public accountants, replacing Arthur Andersen LLP, who
resigned as the Company's independent public accountants. The reports of Arthur
Andersen LLP on the financial statements of the Company neither contained any
adverse opinion or disclaimer of opinion nor were qualified or modified as to
uncertainty, audit scope or accounting principles. The Company's Current Reports
on Form 8-K referenced above set forth the only disagreements between the
Company and Arthur Andersen LLP with respect to any matters of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which if not resolved to the satisfaction of Arthur Andersen LLP,
would have caused it to make reference to the subject matter of the disagreement
in its report. Such matters were resolved to the satisfaction of Arthur Andersen
LLP.
15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON
IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
General................................................................... 3
The Company............................................................... 3
Risk Factors.............................................................. 4
Material Changes.......................................................... 8
Selling Stockholders...................................................... 9
Plan of Distribution...................................................... 14
Use of Proceeds........................................................... 14
Legal Matters............................................................. 14
Experts................................................................... 15
</TABLE>
5,782,869 SHARES
MONTEREY PASTA
COMPANY
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MAY , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and the NASD
filing fee. The Company intends to pay all expenses of registration, issuance
and distribution, excluding Underwriter's discounts and commissions, with
respect to the Shares being sold by the Selling Stockholders.
<TABLE>
<CAPTION>
AMOUNT TO
ITEM BE PAID
- ---------------------------------------------------------------------------------- ----------
<S> <C>
SEC Registration Fee.............................................................. $ 4,975
NASD Registration Fee............................................................. 17,500
Printing and Engraving Expenses................................................... 30,000
Legal Fees and Expenses........................................................... 35,000
Accounting Fees and Expenses...................................................... 30,000
Blue Sky Fees and Expenses........................................................ 5,000
Miscellaneous..................................................................... 5,000
----------
Total....................................................................... $ 127,475
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to indemnify such persons, under
certain circumstances, for liabilities (including reimbursement of expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). The Registrant's Certificate of Incorporation and Bylaws provide for
indemnification of its officers and directors to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law and applicable law. The
Registrant has also entered into indemnification agreements with each of its
officers and directors and certain employees providing for indemnification of
such officers and directors by the Company to the maximum extent permitted by
law.
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated August 7, 1996 by and between Monterey Pasta Company, a California
corporation and Monterey Pasta Company, a Delaware corporation (incorporated by reference from Exhibit A
to the Company's Proxy Statement for the Special Meeting of Shareholders held on August 1, 1996, filed
with the Securities and Exchange Commission on June 27, 1996)
3.1 Certificate of Incorporation dated August 1, 1996 (incorporated by reference from Exhibit 5 to the
Company's Proxy Statement for the Special Meeting of Shareholders held on August 1, 1996, filed with the
Securities and Exchange Commission on June 27, 1996).
3.2 Certificate of Designations of Series A Convertible Preferred Stock (incorporated by reference from
Annex I to the Subscription Agreement dated July 31, 1996, filed as Exhibit 4.1 to this Form 10-K)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
3.3 Certificate of Designations of Series B Convertible Preferred Stock (incorporated by reference from
Annex I to the Subscription Agreement dated August 9, 1996, filed as Exhibit 4.3 to this Form 10-K)
3.4 Bylaws of the Company (incorporated by reference from Exhibit C to the Company's Proxy Statement for the
Special Meeting of Shareholders held on August 1, 1996, filed with the Securities and Exchange
Commission on June 27, 1996)
3.5 Certificate of Designations of Series A-1 Convertible Preferred Stock (incorporated by reference from
Exhibits with corresponding numbers filed with the Company's Annual Report on Form 10-K/A on April 29,
1997)
3.6 Certificate of Designations of Series B-1 Convertible Preferred Stock (incorporated by reference from
Exhibits with corresponding numbers filed with the Company's Annual Report on Form 10-K/A on April 29,
1997)
4.1 Subscription Agreement, dated as of July 31, 1996 (incorporated by reference from Exhibits with
corresponding numbers filed with the Company's Registration Statement on Form S-3 on August 23, 1996)
4.2 Registration Rights Agreement, dated as of July 31, 1996 (incorporated by reference from Exhibits with
corresponding numbers filed with the Company's Registration Statement on Form S-3 on August 23, 1996)
4.3 Subscription Agreement, dated as of August 9, 1996 (incorporated by reference from Exhibits with
corresponding numbers filed with the Company's Registration Statement on Form S-3 on August 23, 1996)
4.4 Registration Rights Agreement, dated as of August 9, 1996 (incorporated by reference from Exhibits with
corresponding numbers filed with the Company's Registration Statement on Form S-3 on August 23, 1996)
4.5 Form of Warrant for purchase of the Company's Common Stock, dated as of July 1, 1996 (incorporated by
reference from Exhibits with corresponding numbers filed with the Company's Registration Statement on
Form S-3 on August 23, 1996)
4.6 Form of Registration Rights Agreement dated April 1996, among the Company, Spelman & Co., Inc. and
investor (incorporated by reference from Exhibits with corresponding numbers filed with the Company's
Quarterly Report on Form 10-Q on June 21, 1996).
4.7 Shareholder Rights Agreement dated as of May 15, 1996 between the Company and Corporate Stock Transfer,
as rights agent (incorporated by reference from Item 2 of Form 8-A filed with the Securities and
Exchange Commission on May 28, 1996)
4.8 Form of Subscription Agreement dated April 1996, among the Company, Spelman & Co., Inc. and investor
(incorporated by reference from Exhibits with corresponding numbers filed with the Company's Annual
Report on Form 10-K/A on April 29, 1997)
4.9 Form of Amendment to Registration Rights Agreement dated as of April 20, 1997 among the Company, Spelman
& Co., Inc. and Investor, amending the Registration Rights Agreement entered into as of April 1996
(incorporated by reference from Exhibits with corresponding numbers filed with the Company's Annual
Report on Form 10-K/A on April 29, 1997)
4.10 Series A Convertible Preferred Stock Exchange Agreement dated as of March 10, 1997 by and between the
Company and GFL Performance Fund Limited (incorporated by reference from Exhibits with corresponding
numbers filed with the Company's Annual Report on Form 10-K/A on April 29, 1997)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
4.11 Series B Convertible Preferred Stock Exchange Agreement dated as of April 2, 1997 by and between the
Company and Pangaea Fund Limited (incorporated by reference from Exhibits with corresponding numbers
filed with the Company's Annual Report on Form 10-K/A on April 29, 1997)
4.12 Registration Rights Agreement dated as of December 31, 1996 among the Company, Sentra Securities
Corporation and Investor (incorporated by reference from Exhibits with corresponding numbers filed with
the Company's Annual Report on Form 10-K/A on April 29, 1997)
4.13 Form of Warrant ("Sentra Warrant") for purchase of Company's Common Stock dated March 1997 issued in
connection with the Company's March 1997 private placement.
4.14* Stock Purchase Agreement between the Company and Kenneth A. Steel, Jr. dated April 29, 1997.
5.1 Opinion and Consent of Gray Cary Ware & Freidenrich, a Professional Corporation.
10.1* Second Amended and Restated 1993 Stock Option Plan (as amended on August 1, 1996) (incorporated by
reference to the Company's Annual Report on Form 10-K filed April 14, 1997)
10.2* 1995 Employee Stock Purchase Plan (incorporated by reference from Exhibit 10.15 to the Company's 1994
Form 10-K)
10.3 Blackhawk Plaza Lease of the Company (incorporated by reference from Exhibit 10.02 to the Company's
Registration Statement No. 33-69590-LA on Form SB-2 (the "SB-2")
10.4 353 Sacramento Street Office Lease dated as of December 27, 1995 with John Hancock Mutual Life Insurance
Company, together with letter agreement dated March 20, 1996 regarding basement storage (incorporated by
reference to the Company's Annual Report on Form 10-K filed April 1, 1996 (the "1995 Form 10-K")
10.5 Monterey County Production Facility Lease of the Company, as amended (incorporated by reference from
Exhibit 10.03 to the SB-2)
10.6 Amendment No. 1 dated February 1, 1995 and Amendment No. 2 dated March 1, 1995 to Monterey County
Production Facility Lease of the Company (incorporated by reference from Exhibits with corresponding
numbers filed with the 1995 Form 10-K)
10.7 Christie Avenue Warehouse Lease of the Company (incorporated by reference from Exhibit 10.04 to the
SB-2)
10.8 Loan and Security Agreement dated December 8, 1995 with Coast Business Credit, a Division of Southern
Pacific Thrift and Loan Association, and Schedule thereto (incorporated by reference from Exhibits with
corresponding numbers filed with the 1995 Form 10-K)
10.9 Equipment Collateral Security Agreement dated December 8, 1995 with Coast Business Credit (incorporated
by reference from Exhibits with corresponding numbers filed with the 1995 Form 10-K)
10.10 Secured Promissory Note dated December 8, 1995 in the original principal amount of $500,000 in favor of
Coast Business Credit (incorporated by reference from Exhibits with corresponding numbers filed with the
1995 Form 10-K)
10.11 Secured Promissory Note dated December 8, 1995 in the original principal amount of $750,000 in favor of
Coast Business Credit (incorporated by reference from Exhibits with corresponding numbers filed with the
1995 Form 10-K)
10.12 Investment Agreement dated July 12, 1995 with The Seychelles Fund, Ltd. (incorporated by reference from
Exhibits with corresponding numbers filed with the 1995 Form 10-K)
10.13 Master Lease dated August 1, 1995 with Sentry Financial Corporation (incorporated by reference from
Exhibits with corresponding numbers filed with the 1995 Form 10-K)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.14 Letter Agreement dated July 26, 1995 between Monterey Pasta Development Company and California Pasta
Company (incorporated by reference from Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for
the quarter ended October 2, 1995 ("Q3 10-Q"))
10.15 Asset Purchase Agreement dated July 26, 1995 between Upscale Food Outlets, Inc. and California Pasta
Company (incorporated by reference from Exhibit 10.22 to the Company's Q3 10-Q)
10.16 Franchise Termination Agreement and Release dated March 8, 1996 among the Company, Upscale Food Outlets,
Inc., Monterey Pasta Development Company, The Lance H. Mortensen Unitrust dated December 3, 1994, and
LBJ Restaurants, LLC (incorporated by reference from Exhibits with corresponding numbers filed with the
1995 Form 10-K)
10.17 Acquisition Agreement between the Company and Upscale Food Outlets, Inc. (incorporated by reference from
Exhibit 10.05 to the SB-2)
10.18* Employment Agreement with Lance H. Mortensen (incorporated by reference from Exhibit 10.06 to the SB-2)
10.19* Employment Agreement dated September 5, 1995 with Mr. Norman E. Dean (incorporated by reference from
Exhibit 10.20 to the Company's Q3 10-Q)
10.20* Consulting Agreement dated May 25, 1995 with Daniel J. Gallery (incorporated by reference from Exhibit
10.18 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 2, 1995 ("Q2 10-Q"))
10.21* Employment Agreement dated June 30, 1993 with Anthony W. Giannini (incorporated by reference from
Exhibits with corresponding numbers filed with the 1994 Form 10-K.
10.22* Employment Agreement with Mr. David J. Massara (incorporated by reference from Exhibit 10.18 to the
Company's 1994 Form 10-K)
10.23 Trademark Registration--MONTEREY PASTA COMPANY, under Registration No. 1,664,278, registered on November
12, 1991 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibit 10.09 to the
SB-2)
10.24 Trademark Registration--MONTEREY PASTA COMPANY, under Registration No. 1,943,602, registered on December
26, 1995 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibits with
corresponding numbers filed with the 1995 Form 10-K)
10.25 Trademark Registration--MONTEREY PASTA COMPANY and Design, under Registration No. 1,945,131, registered
on January 2, 1996 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibits
with corresponding numbers filed with the 1995 Form 10-K)
10.26 Trademark Registration--MONTEREY PASTA COMPANY and Design, under Registration No. 1,951,624, registered
on January 23, 1996 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibits
with corresponding numbers filed with the 1995 Form 10-K)
10.27 Trademark Registration--MONTEREY PASTA COMPANY, under Registration No. 1,953,489, registered on January
30, 1996 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibits with
corresponding numbers filed with the 1995 Form 10-K)
10.28 Subscription Agreement dated as of June 21, 1995 with GFL Advantage Fund Limited (incorporated by
reference from Exhibit 10.19 to the Company's Q2 10-Q)
10.29 Registration Rights Agreement dated as of June 15, 1995 with GFL Advantage Fund Limited, as amended on
October 13 and 19, 1995, respectively (incorporated by reference from Exhibit 10.2 to the Company's Q2
10-Q, and Exhibits 10.6 and 10.7 to the Company's S-3 Registration Statement No. 33-96684, filed on
December 12, 1995 (the "S-3"))
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.30 Joint Escrow Instructions dated as of October 1995 (incorporated by reference from Exhibit 10.5 to the
Company's S-3)
10.31 Note Purchase Agreement dated as of October 19, 1995 with GFL Advantage Fund Limited (incorporated by
reference from Exhibit 10.3 to the Company's S-3)
10.32 Convertible Note dated as of October 25, 1995, executed by the Company in favor of GFL Advantage Fund
Limited (incorporated by reference from Exhibits with corresponding numbers filed with the 1995 Form
10-K)
10.33 Trademark Purchase (Burns) (incorporated by reference from Exhibit 10.12 of the SB-2)
10.34 Purchase of Stock and Exhibits (Burns- Mortensen-Hill) (incorporated by reference from Exhibit 10.13 of
the SB-2)
10.35 Non-Recourse Promissory Note (Hill-Mortensen) (incorporated by reference from Exhibit 10.15 of the SB-2)
10.36 Asset Purchase Agreement dated March 1, 1994 between Upscale Food Outlets, Inc., Lucca's Pasta Bar,
Inc., Timothy John Morris and Marian Kathryn Morris (incorporated by reference from Exhibit 10.16 to the
Company's 1993 Form 10-K)
10.39 Franchise Termination Agreement and Release dated as of March 27, 1996, among the Company, Upscale Food
Outlets, Inc., Monterey Pasta Development Company, California Pasta Company, and James G. Schlicher
(incorporated by reference from Exhibits with corresponding numbers filed with the Company's Quarterly
Report on Form 10-Q on June 21, 1996)
10.40 Stock Purchase Agreement dated April 1, 1996 between Upscale Acquisitions, Inc. and the Company
(incorporated by reference from Exhibits with corresponding numbers filed with the Company's Quarterly
Report on Form 10-Q on June 21, 1996).
10.41 Placement Agent Agreement dated April 12, 1996 between the Company and Spelman & Co., Inc. (incorporated
by reference from Exhibits with corresponding numbers filed with the Company's Quarterly Report on Form
10-Q on June 21, 1996).
10.44* The Company's 401(k) Plan, established to be effective as of January 1, 1996, adopted by the Board of
Directors on June 7, 1996 (incorporated by reference from Exhibit 10.24 to the Company's Quarterly
Report on Form 10-Q filed June 21, 1996)
10.45* Directed Employee Benefit Trust Agreement dated June 17, 1996 between the Company and The Charles Schwab
Trust Company, as Trustee of the Company's 401(k) Plan (incorporated by reference from Exhibit 10.24 to
the Company's Quarterly Report on Form 10-Q filed June 21, 1996)
10.46* Employment Agreement dated February 12, 1996 with Mr. Robert J. Otto (incorporated by reference from
Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q filed June 21, 1996).
16.1 Letter from Deloitte & Touche LLP dated October 31, 1996 (incorporated by reference to the Company's
Report on Form 8-K/A filed November 8, 1996)
21.1 Subsidiaries of the Company (incorporated by reference to the Company's Annual Report on Form 10-K filed
April 14, 1997)
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation (included in Exhibit 5.1.)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
24.1 Power of Attorney (included in the Signature Page contained in Part II of the Registration Statement.)
27.1 Financial Data Schedule (incorporated by reference to the Company's Annual Report on Form 10-K filed
April 14, 1997)
</TABLE>
- ------------------------
* Management contract or compensatory plan or arrangement covering executive
officers or directors of Monterey Pasta Company.
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act of 1933 (the
"Securities Act"); (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; (iii) to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement; PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the registration statement is on Form S-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
II-6
<PAGE>
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
D. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Salinas, State of California, on May 1, 1997.
MONTEREY PASTA COMPANY
By: /s/ KENNETH A. STEEL, JR.
-----------------------------------------
Kenneth A. Steel, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the persons whose signatures appear
below, hereby constitute and appoint Kenneth A. Steel, Jr., his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments, including post-effective amendments, to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof. This Power of
Attorney may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ KENNETH A. STEEL, JR. Officer and Director
- ------------------------------ (Principal Executive May 1, 1997
Kenneth A. Steel, Jr. Officer)
Chief Financial Officer
/s/ JAMES S. SERBIN (Principal Financial
- ------------------------------ Officer and Principal May 1, 1997
James S. Serbin Accounting Officer)
/s/ CHARLES B. BONNER
- ------------------------------ Director May 1, 1997
Charles B. Bonner
/s/ DANIEL J. GALLERY
- ------------------------------ Director May 1, 1997
Daniel J. Gallery
/s/ FLOYD R. HILL
- ------------------------------ Director May 1, 1997
Floyd R. Hill
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ TIMOTHY J. RYAN
- ------------------------------ Director May 1, 1997
Timothy J. Ryan
/s/ ROBERT F. STEEL
- ------------------------------ Director May 1, 1997
Robert F. Steel
/s/ VAN TUNSTALL
- ------------------------------ Director May 1, 1997
Van Tunstall
/s/ JAMES WONG
- ------------------------------ Director May 1, 1997
James Wong
</TABLE>
II-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated August 7, 1996 by and between Monterey Pasta Company, a California
corporation and Monterey Pasta Company, a Delaware corporation (incorporated by reference from Exhibit A
to the Company's Proxy Statement for the Special Meeting of Shareholders held on August 1, 1996, filed
with the Securities and Exchange Commission on June 27, 1996)
3.1 Certificate of Incorporation dated August 1, 1996 (incorporated by reference from Exhibit 5 to the
Company's Proxy Statement for the Special Meeting of Shareholders held on August 1, 1996, filed with the
Securities and Exchange Commission on June 27, 1996).
3.2 Certificate of Designations of Series A Convertible Preferred Stock (incorporated by reference from
Annex I to the Subscription Agreement dated July 31, 1996, filed as Exhibit 4.1 to this Form 10-K)
3.3 Certificate of Designations of Series B Convertible Preferred Stock (incorporated by reference from
Annex I to the Subscription Agreement dated August 9, 1996, filed as Exhibit 4.3 to this Form 10-K)
3.4 Bylaws of the Company (incorporated by reference from Exhibit C to the Company's Proxy Statement for the
Special Meeting of Shareholders held on August 1, 1996, filed with the Securities and Exchange
Commission on June 27, 1996)
3.5 Certificate of Designations of Series A-1 Convertible Preferred Stock (incorporated by reference from
Exhibits with corresponding numbers filed with the Company's Annual Report on Form 10-K/A on April 29,
1997)
3.6 Certificate of Designations of Series B-1 Convertible Preferred Stock (incorporated by reference from
Exhibits with corresponding numbers filed with the Company's Annual Report on Form 10-K/A on April 29,
1997)
4.1 Subscription Agreement, dated as of July 31, 1996 (incorporated by reference from Exhibits with
corresponding numbers filed with the Company's Registration Statement on Form S-3 on August 23, 1996)
4.2 Registration Rights Agreement, dated as of July 31, 1996 (incorporated by reference from Exhibits with
corresponding numbers filed with the Company's Registration Statement on Form S-3 on August 23, 1996)
4.3 Subscription Agreement, dated as of August 9, 1996 (incorporated by reference from Exhibits with
corresponding numbers filed with the Company's Registration Statement on Form S-3 on August 23, 1996)
4.4 Registration Rights Agreement, dated as of August 9, 1996 (incorporated by reference from Exhibits with
corresponding numbers filed with the Company's Registration Statement on Form S-3 on August 23, 1996)
4.5 Form of Warrant for purchase of the Company's Common Stock, dated as of July 1, 1996 (incorporated by
reference from Exhibits with corresponding numbers filed with the Company's Registration Statement on
Form S-3 on August 23, 1996)
4.6 Form of Registration Rights Agreement dated April 1996, among the Company, Spelman & Co., Inc. and
investor (incorporated by reference from Exhibits with corresponding numbers filed with the Company's
Quarterly Report on Form 10-Q on June 21, 1996).
4.7 Shareholder Rights Agreement dated as of May 15, 1996 between the Company and Corporate Stock Transfer,
as rights agent (incorporated by reference from Item 2 of Form 8-A filed with the Securities and
Exchange Commission on May 28, 1996)
4.8 Form of Subscription Agreement dated April 1996, among the Company, Spelman & Co., Inc. and investor
(incorporated by reference from Exhibits with corresponding numbers filed with the Company's Annual
Report on Form 10-K/A on April 29, 1997)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
4.9 Form of Amendment to Registration Rights Agreement dated as of April 20, 1997 among the Company, Spelman
& Co., Inc. and Investor, amending the Registration Rights Agreement entered into as of April 1996
(incorporated by reference from Exhibits with corresponding numbers filed with the Company's Annual
Report on Form 10-K/A on April 29, 1997)
4.10 Series A Convertible Preferred Stock Exchange Agreement dated as of March 10, 1997 by and between the
Company and GFL Performance Fund Limited (incorporated by reference from Exhibits with corresponding
numbers filed with the Company's Annual Report on Form 10-K/A on April 29, 1997)
4.11 Series B Convertible Preferred Stock Exchange Agreement dated as of April 2, 1997 by and between the
Company and Pangaea Fund Limited (incorporated by reference from Exhibits with corresponding numbers
filed with the Company's Annual Report on Form 10-K/A on April 29, 1997)
4.12 Registration Rights Agreement dated as of December 31, 1996 among the Company, Sentra Securities
Corporation and Investor (incorporated by reference from Exhibits with corresponding numbers filed with
the Company's Annual Report on Form 10-K/A on April 29, 1997)
4.13 Form of Warrant ("Sentra Warrant") for purchase of Company's Common Stock dated March 1997 issued in
connection with the Company's March 1997 private placement.
4.14* Stock Purchase Agreement between the Company and Kenneth A. Steel, Jr. dated April 29, 1997.
5.1 Opinion and Consent of Gray Cary Ware & Freidenrich, a Professional Corporation.
10.1* Second Amended and Restated 1993 Stock Option Plan (as amended on August 1, 1996) (incorporated by
reference to the Company's Annual Report on Form 10-K filed April 14, 1997)
10.2* 1995 Employee Stock Purchase Plan (incorporated by reference from Exhibit 10.15 to the Company's 1994
Form 10-K)
10.3 Blackhawk Plaza Lease of the Company (incorporated by reference from Exhibit 10.02 to the Company's
Registration Statement No. 33-69590-LA on Form SB-2 (the "SB-2")
10.4 353 Sacramento Street Office Lease dated as of December 27, 1995 with John Hancock Mutual Life Insurance
Company, together with letter agreement dated March 20, 1996 regarding basement storage (incorporated by
reference to the Company's Annual Report on Form 10-K filed April 1, 1996 (the "1995 Form 10-K")
10.5 Monterey County Production Facility Lease of the Company, as amended (incorporated by reference from
Exhibit 10.03 to the SB-2)
10.6 Amendment No. 1 dated February 1, 1995 and Amendment No. 2 dated March 1, 1995 to Monterey County
Production Facility Lease of the Company (incorporated by reference from Exhibits with corresponding
numbers filed with the 1995 Form 10-K)
10.7 Christie Avenue Warehouse Lease of the Company (incorporated by reference from Exhibit 10.04 to the
SB-2)
10.8 Loan and Security Agreement dated December 8, 1995 with Coast Business Credit, a Division of Southern
Pacific Thrift and Loan Association, and Schedule thereto (incorporated by reference from Exhibits with
corresponding numbers filed with the 1995 Form 10-K)
10.9 Equipment Collateral Security Agreement dated December 8, 1995 with Coast Business Credit (incorporated
by reference from Exhibits with corresponding numbers filed with the 1995 Form 10-K)
10.10 Secured Promissory Note dated December 8, 1995 in the original principal amount of $500,000 in favor of
Coast Business Credit (incorporated by reference from Exhibits with corresponding numbers filed with the
1995 Form 10-K)
10.11 Secured Promissory Note dated December 8, 1995 in the original principal amount of $750,000 in favor of
Coast Business Credit (incorporated by reference from Exhibits with corresponding numbers filed with the
1995 Form 10-K)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.12 Investment Agreement dated July 12, 1995 with The Seychelles Fund, Ltd. (incorporated by reference from
Exhibits with corresponding numbers filed with the 1995 Form 10-K)
10.13 Master Lease dated August 1, 1995 with Sentry Financial Corporation (incorporated by reference from
Exhibits with corresponding numbers filed with the 1995 Form 10-K)
10.14 Letter Agreement dated July 26, 1995 between Monterey Pasta Development Company and California Pasta
Company (incorporated by reference from Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for
the quarter ended October 2, 1995 ("Q3 10-Q"))
10.15 Asset Purchase Agreement dated July 26, 1995 between Upscale Food Outlets, Inc. and California Pasta
Company (incorporated by reference from Exhibit 10.22 to the Company's Q3 10-Q)
10.16 Franchise Termination Agreement and Release dated March 8, 1996 among the Company, Upscale Food Outlets,
Inc., Monterey Pasta Development Company, The Lance H. Mortensen Unitrust dated December 3, 1994, and
LBJ Restaurants, LLC (incorporated by reference from Exhibits with corresponding numbers filed with the
1995 Form 10-K)
10.17 Acquisition Agreement between the Company and Upscale Food Outlets, Inc. (incorporated by reference from
Exhibit 10.05 to the SB-2)
10.18* Employment Agreement with Lance H. Mortensen (incorporated by reference from Exhibit 10.06 to the SB-2)
10.19* Employment Agreement dated September 5, 1995 with Mr. Norman E. Dean (incorporated by reference from
Exhibit 10.20 to the Company's Q3 10-Q)
10.20* Consulting Agreement dated May 25, 1995 with Daniel J. Gallery (incorporated by reference from Exhibit
10.18 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 2, 1995 ("Q2 10-Q"))
10.21* Employment Agreement dated June 30, 1993 with Anthony W. Giannini (incorporated by reference from
Exhibits with corresponding numbers filed with the 1994 Form 10-K.
10.22* Employment Agreement with Mr. David J. Massara (incorporated by reference from Exhibit 10.18 to the
Company's 1994 Form 10-K)
10.23 Trademark Registration--MONTEREY PASTA COMPANY, under Registration No. 1,664,278, registered on November
12, 1991 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibit 10.09 to the
SB-2)
10.24 Trademark Registration--MONTEREY PASTA COMPANY, under Registration No. 1,943,602, registered on December
26, 1995 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibits with
corresponding numbers filed with the 1995 Form 10-K)
10.25 Trademark Registration--MONTEREY PASTA COMPANY and Design, under Registration No. 1,945,131, registered
on January 2, 1996 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibits
with corresponding numbers filed with the 1995 Form 10-K)
10.26 Trademark Registration--MONTEREY PASTA COMPANY and Design, under Registration No. 1,951,624, registered
on January 23, 1996 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibits
with corresponding numbers filed with the 1995 Form 10-K)
10.27 Trademark Registration--MONTEREY PASTA COMPANY, under Registration No. 1,953,489, registered on January
30, 1996 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibits with
corresponding numbers filed with the 1995 Form 10-K)
10.28 Subscription Agreement dated as of June 21, 1995 with GFL Advantage Fund Limited (incorporated by
reference from Exhibit 10.19 to the Company's Q2 10-Q)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.29 Registration Rights Agreement dated as of June 15, 1995 with GFL Advantage Fund Limited, as amended on
October 13 and 19, 1995, respectively (incorporated by reference from Exhibit 10.2 to the Company's Q2
10-Q, and Exhibits 10.6 and 10.7 to the Company's S-3 Registration Statement No. 33-96684, filed on
December 12, 1995 (the "S-3"))
10.30 Joint Escrow Instructions dated as of October 1995 (incorporated by reference from Exhibit 10.5 to the
Company's S-3)
10.31 Note Purchase Agreement dated as of October 19, 1995 with GFL Advantage Fund Limited (incorporated by
reference from Exhibit 10.3 to the Company's S-3)
10.32 Convertible Note dated as of October 25, 1995, executed by the Company in favor of GFL Advantage Fund
Limited (incorporated by reference from Exhibits with corresponding numbers filed with the 1995 Form
10-K)
10.33 Trademark Purchase (Burns) (incorporated by reference from Exhibit 10.12 of the SB-2)
10.34 Purchase of Stock and Exhibits (Burns- Mortensen-Hill) (incorporated by reference from Exhibit 10.13 of
the SB-2)
10.35 Non-Recourse Promissory Note (Hill-Mortensen) (incorporated by reference from Exhibit 10.15 of the SB-2)
10.36 Asset Purchase Agreement dated March 1, 1994 between Upscale Food Outlets, Inc., Lucca's Pasta Bar,
Inc., Timothy John Morris and Marian Kathryn Morris (incorporated by reference from Exhibit 10.16 to the
Company's 1993 Form 10-K)
10.39 Franchise Termination Agreement and Release dated as of March 27, 1996, among the Company, Upscale Food
Outlets, Inc., Monterey Pasta Development Company, California Pasta Company, and James G. Schlicher
(incorporated by reference from Exhibits with corresponding numbers filed with the Company's Quarterly
Report on Form 10-Q on June 21, 1996)
10.40 Stock Purchase Agreement dated April 1, 1996 between Upscale Acquisitions, Inc. and the Company
(incorporated by reference from Exhibits with corresponding numbers filed with the Company's Quarterly
Report on Form 10-Q on June 21, 1996).
10.41 Placement Agent Agreement dated April 12, 1996 between the Company and Spelman & Co., Inc. (incorporated
by reference from Exhibits with corresponding numbers filed with the Company's Quarterly Report on Form
10-Q on June 21, 1996).
10.44* The Company's 401(k) Plan, established to be effective as of January 1, 1996, adopted by the Board of
Directors on June 7, 1996 (incorporated by reference from Exhibit 10.24 to the Company's Quarterly
Report on Form 10-Q filed June 21, 1996)
10.45* Directed Employee Benefit Trust Agreement dated June 17, 1996 between the Company and The Charles Schwab
Trust Company, as Trustee of the Company's 401(k) Plan (incorporated by reference from Exhibit 10.24 to
the Company's Quarterly Report on Form 10-Q filed June 21, 1996)
10.46* Employment Agreement dated February 12, 1996 with Mr. Robert J. Otto (incorporated by reference from
Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q filed June 21, 1996).
16.1 Letter from Deloitte & Touche LLP dated October 31, 1996 (incorporated by reference to the Company's
Report on Form 8-K/A filed November 8, 1996)
21.1 Subsidiaries of the Company (incorporated by reference to the Company's Annual Report on Form 10-K filed
April 14, 1997)
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation (included in Exhibit 5.1.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
24.1 Power of Attorney (included in the Signature Page contained in Part II of the Registration Statement.)
27.1 Financial Data Schedule (incorporated by reference to the Company's Annual Report on Form 10-K filed
April 14, 1997)
</TABLE>
- ------------------------
* Management contract or compensatory plan or arrangement covering executive
officers or directors of Monterey Pasta Company.
<PAGE>
EXHIBIT 4.13
THESE SECURITIES MAY NOT BE PUBLICLY OFFERED OR SOLD UNLESS AT THE TIME OF
SUCH OFFER OR SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A
PROSPECTUS MEETING THE REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF
1933 FORMING A PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT
THERETO, WHICH IS EFFECTIVE UNDER SAID ACT, UNLESS IN THE OPINION OF COUNSEL
TO THE COMPANY SUCH OFFER AND SALE IS EXEMPT FROM THE PROVISIONS OF SECTION 5
OF SAID ACT.
WARRANT
For the Purchase of Common Stock of
MONTEREY PASTA COMPANY
(Incorporated Under the Laws of the State of Delaware)
Void After 5 P.M. March 27, 2000
No. 1 Warrant to Purchase
Five Hundred Thirty-Two Thousand Eight Hundred (532,800) Shares
THIS IS TO CERTIFY, that, for value received, Sentra Securities
Corporation (the "Placement Manager") or registered assigns, is entitled,
subject to the terms and conditions hereinafter set forth, on or after March
27, 1997 and at any time prior to 5 P.M., San Diego, California time, on
March 27, 2000 but not thereafter, to purchase such number of shares (the
"Shares") of common stock, no par value (the "Common Stock"), of MONTEREY
PASTA COMPANY, a Delaware corporation (the "Company"), from the Company as is
set forth above and upon payment to the Company of $2.25 per share (the
"Purchase Price") if and to the extent this Warrant is exercised, in whole or
in part, during the period this Warrant remains in force, subject in all
cases to adjustment as provided in Article II hereof, and to receive a
certificate or certificates representing the Shares so purchased, upon
presentation and surrender to the Company of this Warrant, with the form of
subscription attached hereto duly executed, and accompanied by payment of the
Purchase Price of each Share purchased.
1. TERMS OF THE WARRANT.
1.1 TERM OF WARRANT. Subject to the provisions of Subsection 3.1
hereof, this Warrant may be exercised at any time and from time to time from
the date hereof until 5:00 P.M., March 27, 2000 (the "Expiration Time") at
which it shall become void, and all rights hereunder shall thereupon cease.
1.2 MANNER OF EXERCISE. This Warrant may be exercised as follows:
(a) The holder of this Warrant (the "Holder") may exercise
this Warrant, in whole or in part, upon surrender of this Warrant with the
form of subscription attached hereto duly
<PAGE>
executed, to the Company and its corporate office in San Francisco,
California and upon compliance with and subject to the conditions set forth
herein:
(b) The Purchase Price shall become immediately due upon
exercise of this Warrant and shall be payable in one or more of the forms
specified below:
(i) lawful money of the United States, or by certified
check, bank draft or postal or express money order payable in United States
dollars to the order of the Company; or
(ii) Shares held by the Holder (including Shares received
upon exercise of this Warrant) and all such Shares so surrendered shall be
credited against the Purchase Price in an amount per share equal to the
average of the average of the Wall Street Journal's reported closing bid and
ask prices of the Shares on the Nasdaq National Market System (or the Shares
primary trading market, if different) on the trading day immediately prior to
the date of exercise of the Warrant.
(c) Upon receipt of this Warrant with the form of
subscription duly executed, the Company shall cause to be issued certificates
for the total number of whole Shares for which this Warrant is being exercised
in such denominations as are required for delivery to the Holder, and the
Company shall thereupon deliver such certificates to the Holder or its
nominee.
(d) In case the Holder shall exercise this Warrant with
respect to less than all of the Shares that may be purchased under this
Warrant, the Company shall execute a new Warrant for the balance of the
Shares that may be purchased upon exercise of this Warrant and deliver such
new Warrant to the Holder.
(e) The Company covenants and agrees that it will pay when
due and payable any and all taxes which may be payable in respect of the
issuance of this Warrant, or the issuance of any Shares upon the exercise of
this Warrant. 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 this Warrant or of the Shares in a name other than that of the
Holder at the time of surrender, and until the payment of such tax the
Company shall not be required to issue such Shares.
1.3 SPLIT-UP, COMBINATION OR EXCHANGE OF WARRANTS. This Warrant
may be split-up, combined or exchanged for another Warrant or Warrants of
like tenor to purchase a like aggregate number of Shares. If the Holder
desires to split-up, combine or exchange this Warrant, he shall make such
request in writing delivered to the Company at its corporate office and shall
surrender this Warrant and any other Warrants to be so split-up, combined or
exchanged, the Company shall execute and deliver to the person entitled
thereto a Warrant or Warrants, as the case may be, as so requested. The
Company shall not be required to effect any split-up, combination or exchange
which will result in the issuance of a Warrant entitling the Holder to
purchase upon exercise a fraction of a Share. The Company may require the
Holder to pay a sum sufficient to cover any tax or
2
<PAGE>
governmental charge that may be imposed in connection with any split-up,
combination or exchange of Warrants.
1.4 HOLDER TREATED AS OWNER. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Holder as the absolute owner of this Warrant (notwithstanding any notation of
ownership or other writing hereon) for the purpose of any exercise hereof and
for all other purposes, and the Company shall not be affected by any notice
to the contrary.
1.5 METHOD OF TRANSFER. Any assignment permitted hereunder shall
be made by surrender of this Warrant to the Company at its principal office
with the form of assignment attached hereto duly executed and funds
sufficient to pay any transfer tax. In such event, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee named
in such instrument of assignment and this Warrant shall promptly be canceled.
This Warrant may be divided or combined with other Warrants which carry the
same rights upon presentation thereof at the corporate office of the Company
together with a written notice signed by the Holder, specifying the names and
denominations in which such new Warrants are to be issued.
1.6 STATUS OF WARRANT HOLDER; NOTICE OF CORPORATE ACTION. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
the right to vote or to consent or to receive notice as a stockholder in
respect of any meetings of stockholders for the election of directors or any
other matter, or as having any rights whatsoever as a stockholder of the
Company. If, however, at any time prior to the expiration of this Warrant and
prior to its exercise, any of the following shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in case, or a cash dividend
or distribution payable otherwise than out of current or retained earnings;
as indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or
(b) the Company shall offer to the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company,
or any option, right or warrant to subscribe therefor; or
(c) there shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all
of the assets of the Company, or a consolidation or merger of the Company
with another entity; or
(d) there shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
3
<PAGE>
then, in any one or more of said cases, the Company shall cause to be mailed
to the Holder, at the earliest practicable time (and, in any event, not less
than thirty (30) days before any record date or other date set for
definitive action), written notice of the date on which the books of the
Company shall close or a record shall be taken to determine the stockholders
entitled to such dividend, distribution, convertible or exchangeable
securities or subscription rights, or entitled to vote on such
reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be. Such notice shall also set
forth such facts as shall indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Purchase Price
and the kind and amount of the Common Stock and other securities and property
deliverable upon exercise of this Warrant. Such notice shall also specify the
date as of which the holders of the Common Stock of record shall participate
in said distribution or subscription rights or shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the
Company, the right to exercise this Warrant shall terminate). Without
limiting the obligation of the Company to provide notice to the holder of
actions hereunder, it is agreed that failure of the Company to give notice
shall not invalidate such action of the Company.
1.7 LOST, STOLEN, MUTILATED OR DESTROYED CERTIFICATES. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such
reasonable terms as to indemnity or otherwise as it may impose (which shall,
in the case of a mutilated Warrant, include the surrender thereof, issue a
new Warrant of like denomination and tenor as, and in substitution for, this
Warrant, which shall thereupon become void. Any such new Warrant shall
constitute an additional contractual obligation of the Company, whether or
not the Warrant so lost, stolen, destroyed or mutilated shall be at any time
enforceable by anyone.
1.8 COVENANTS OF THE COMPANY. The Company covenants and agrees
that at all times while the Warrant is outstanding as follows:
(a) The Company shall reserve and keep available for the
exercise of this Warrant such number of authorized Shares as are sufficient
to permit the exercise in full of this Warrant.
(b) Prior to the issuance of any Shares upon exercise of this
Warrant, the Company shall secure the listing of such Shares upon any
securities exchange or automated quotation system upon which the shares of
the Company's Common Stock are listed for trading.
(c) The Company covenants that all Shares when issued upon the
exercise of this Warrant will be validly issued, fully paid, non-assessable
and free of preemptive rights.
4
<PAGE>
2. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
EXERCISE.
2.1 ISSUANCE OF ADDITIONAL SHARES.
(a) If at any time or from time to time after the date of
issuance of this Warrant, the Company issues or sells, or is deemed by the
express provisions of this subsection 2.1 to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), for an Effective Price (as
hereinafter defined) less than the Purchase Price (or, if an adjusted
Purchase Price shall be in effect by reason of a previous adjustment, then
less than such adjusted Purchase Price), then and in each such case the then
existing Purchase Price shall be reduced, as of the opening of business on
the date of such issue or sale, to a price determined by multiplying that
Purchase Price by a fraction (i) the numerator of which shall be (A) the
number of shares of Common Stock outstanding at the close of business on the
day next preceding the date of such issue or sale plus (B) the number of
shares of Common Stock which the aggregate consideration received (or by
express provision hereof deemed to have been received) by the Company for the
total number of Additional Shares of Common Stock so issued would purchase at
such Purchase Price and (ii) the denominator of which shall be the number of
shares of Common Stock outstanding at the close of business on the date of
such issue after giving effect to such issue of Additional Shares of Common
Stock.
(b) For the purpose of making any adjustment required under
this Subsection 2.1 the consideration received by the Company for any issue
or sale of securities shall (i) to the extent it consists of cash be computed
at the net amount of cash received by the Company after deduction of any
expenses payable by the Company and any underwriting or similar commissions,
compensation or concessions paid or allowed by the Company in connection with
such issue or sale, (ii) to the extent it consists of property other than
cash, be computed at the fair value of that property as determined in good
faith by the Board of Directors and (iii) if Additional Shares of Common
Stock, Convertible Securities (as hereinafter defined) or rights or options
to purchase either Additional Shares of Common Stock or Convertible
Securities or are issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers both, be
computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable
to such Additional Shares of Common Stock, Convertible Securities or rights
or options.
(c) For the purpose of the adjustment required under this
Subsection 2.1, if at any time or from time to time after the date of this
Warrant the Company issues or sells any rights or options for the purchase
of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being hereinafter
referred to as "Convertible Securities"), then in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to
the total amount of the consideration, if any, received by the Company for
the issuance of such rights or options or Convertible Securities plus, in the
case of such options or rights, the minimum amounts of consideration, if
any, payable to the
5
<PAGE>
Company upon the exercise of such options or rights and, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable
to the Company (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities). No further adjustment of the
Purchase Price, adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or
options or the conversion of any such Convertible Securities. If any such
rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the
Purchase Price adjusted upon the issuance of such options, rights or
Convertible Securities shall be readjusted to the Purchase Price which would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of
Common Stock, if any, actually issued or sold on the exercise of such rights
or options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted
plus the consideration, if any, actually received by the Company (other than
by cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities.
(d) For the purpose of the adjustment required under this
Subsection 2.1, if at any time or from time to time after the date of this
Warrant the Company issues or sells any rights or options for the purchase of
Convertible Securities, then in each such case the Company shall be deemed to
have issued at the time of the issuance of such rights or options the maximum
number of Additional Shares of Common Stock issuable upon conversion of the
total amount of Convertible Securities covered by such rights or options and
to have received as consideration for the issuance of such Additional Shares
of Common Stock an amount equal to the amount of consideration, if any,
received by the Company for the issuance of such rights or options, plus the
minimum amounts of consideration, if any, payable to the Company upon the
exercise of such rights or options and plus the minimum amount of
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion of such Convertible Securities. No further adjustment of the
Purchase Price, adjusted upon the issuance of such rights or options, shall
be made as a result of the actual issuance of the Convertible Securities upon
the exercise of such rights or options or upon the actual issuance of
Additional Shares of Common Stock upon the conversion of such Convertible
Securities. The provisions of paragraph (c) above for the readjustment of the
Purchase Price upon the expiration of rights or options or the rights of
conversion of Convertible Securities shall apply MUTATIS MUTANDIS to the
rights, options and Convertible Securities referred to in this paragraph (d).
(e) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued by the Company after the date of this Warrant, whether
or not subsequently reacquired or retired by the Company to any person or
entity who assists the Company in raising funds or performs investment
banking, placement agent or related services for the Company. The "Effective
Price" of Additional Shares of Common Stock shall mean the quotient
determined by
6
<PAGE>
dividing the total number of Additional Shares of Common stock issued or
sold, or deemed to have been issued or sold by the Company under this
Subsection 2.1, into the aggregate consideration received or deemed to have
been received by the Company for such issue under this Subsection 2.1.
2.2 STOCK SPLITS. If the Company at any time or from time to time
after the issuance date of this Warrant effects a subdivision of the
outstanding Common Stock, the Purchase Price then in effect immediately
before that subdivision shall be proportionately decreased, and conversely,
if the Company at any time or from time to time after the issuance date of
this Warrant combines the outstanding shares of Common Stock, the Purchase
Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Subsection 2.2 shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
2.3 DIVIDENDS AND DISTRIBUTIONS. In the event the Company at any
time, or from time to time after the issuance date of this Warrant makes, or
fixes a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in additional shares of
Common Stock, then and in each such event the Purchase Price then in effect
shall be decreased as of the time of such issuance or, in the event such a
record date is fixed, as of the close of business on such record date, by
multiplying the Purchase Price then in effect by a fraction (i) the numerator
of which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on
such record date, and (ii) the denominator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; PROVIDED, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Purchase Price shall be recomputed accordingly as of
the close of business on such record date and thereafter the Purchase Price
shall be adjusted pursuant to this Subsection 2.3 as of the time of actual
payment of such dividends or distributions.
2.4 RECAPITALIZATION OR RECLASSIFICATION. If the Common Stock
issuable upon the exercise of the Warrant is changed into the same or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets, provided for elsewhere in this Section 2,
then and in any such event each holder of Warrants shall have the right
thereafter to exercise such Warrant as to the kind and amount of stock and/or
other securities and property receivable upon such reclassification or other
change, by the holder of the number of shares of Common Stock as to which
such Warrant might have been exercised immediately prior to such
reclassification or exchange, all subject to further adjustment as provided
herein.
2.5 SALE OF THE COMPANY. If at any time or from time to time there
is a capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination,
7
<PAGE>
reclassification or exchange of shares provided for elsewhere in this Section
2 or a merger or consolidation of the Company with or into another Company,
or the sale of all or substantially all of the Company's properties and
assets to any other person, then, as a part of such reorganization, merger,
consolidation or sale, provision shall be made so that the holders of the
Warrants shall thereafter be entitled to receive upon exercise of the
Warrants, the number of shares of stock or other securities or property of
the Company, or of the successor Company resulting from such merger or
consolidation or sale, to which a holder of Common Stock deliverable upon
exercise would have been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section 2 with respect to
the rights - of the holders of the Warrants after the reorganization, merger,
consolidation or sale to the end that the provisions of this Section 2
(including adjustment of the Purchase Price then in effect and number of
shares purchasable upon exercise of the Warrants) shall be applicable after
that event and be as nearly equivalent to the provisions hereof as may be
practicable.
2.6 OBSERVANCE OF DUTIES. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, 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
this subsection 2.6 and in the taking of all such action as may be neccesary
or appropriate in order to protect the Exercise Rights of the holders of the
Warrants against dilution or other impairment.
3. OTHER MATTERS.
3.1 PAYMENT OF TAXES. The Company will from time to time promptly
pay, subject to the provisions of paragraph (d) of Subsection 1.2 hereof, all
taxes and charges that may be imposed upon the Company in respect of the
issuance or delivery of this Warrant or the Shares purchasable upon the
exercise of this Warrant.
3.2 PARTIES BOUND AND BENEFITTED. All of the covenants and
provisions of this Warrant by or for the benefit of the Company shall bind
and inure to the benefit of its successors and assigns hereunder.
3.3 NOTICES. Notices or demands pursuant to this Warrant to be
given or made by the Holder to or on the Company shall be sufficiently given
or made if sent by certified or
8
<PAGE>
registered mail, return receipt requested, postage prepaid, and addressed,
until another address is designated in writing by the Company, as follows:
Monterey Pasta Company
353 Sacramento St.
San Francisco, California 94111
Notices to the Holder provided for in this Warrant shall be deemed given or
made by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at his last known
address as it shall appear on the books of the Company.
3.4 CHOICE OF LAW. The validity, interpretation and performance of
this Warrant shall be governed by the laws of the State of California.
3.5 NO THIRD PARTY BENEFICIARIES. Nothing in this Warrant expressed
and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any person or
Company other than the Company and the Holder and right, remedy or claim
under promise or agreement hereof, and all covenants, conditions,
stipulations, promises and agreements contained in this Warrant shall be for
the sole and exclusive benefit of the Company and its successors and of the
Holder, its successors and, if permitted, its assignees.
3.6 HEADINGS. The Article headings herein are for convenience only
and are not part of this Warrant and shall not affect the interpretation
thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 27th day of March 1997.
MONTEREY PASTA COMPANY,
a Delaware corporation
By:
------------------------------
Its:
------------------------------
[Corporate Seal]
Attest:
- -------------------------------
- -------------, Secretary
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MONTEREY PASTA COMPANY
Assignment
FOR VALUE RECEIVED, SENTRA SECURITIES CORPORATION, hereby sells, assigns and
transfers unto ____________________ the within Warrant and the rights
represented thereby, and does hereby irrevocably constitute and appoint
___________, Attorney to transfer said Warrant on the books of the Company,
with full power of substitution.
Dated:_____________________
Signed:_____________________________
Signature guaranteed:
___________________________
AGREED AND CONSENTED TO:
MONTEREY PASTA COMPANY,
a Delaware corporation
By: ________________________
Its:________________________
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Subscription Form
MONTEREY PASTA COMPANY
353 Sacramento St.
San Francisco, California 94111
The undersigned hereby irrevocably subscribes for the purchase of shares
of your Common Stock pursuant to and in accordance with the terms and
conditions of this Warrant, and herewith makes payment, covering such shares
of Common Stock which should be delivered to the undersigned at the address
stated below, and, if said number of shares shall not be all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of
the remaining shares purchasable hereunder be delivered to the undersigned at
the address stated below.
The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such shares of Common Stock unless
either (a) a registration statement, or post-effective amendment thereto,
covering such shares of Common Stock has been filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and such sale, transfer or other disposition is accompanied by a
prospectus meeting the requirements of Section 10 of the act forming a part
of such registration statement, or post-effective amendment thereto, which is
in effect under the Act covering the shares of Common Stock to be so sold,
transferred or otherwise disposed of, or (b) counsel to MONTEREY PASTA
COMPANY satisfactory to the undersigned has rendered an opinion in writing
and addressed to MONTEREY PASTA COMPANY that such proposed offer, sale,
transfer or other disposition of the shares of Common Stock is exempt from
the provisions of Section 5 of the Act in view of the circumstances of such
proposed offer, sale, transfer or other disposition; (2) MONTEREY PASTA
COMPANY may notify the transfer agent for its Common Stock that the
certificates for the Common Stock acquired by the undersigned are not to be
transferred unless the transfer agent receives advice from MONTEREY PASTA
COMPANY that one or both of the conditions referred to in (1)(a) and (1)(b)
above have been satisfied; and (3) MONTEREY PASTA COMPANY may affix the
legend set forth in Section 3.1 of this Warrant to the certificates for
shares of Common Stock hereby subscribed for, if such legend is applicable.
Dated:_________________ Signed:________________________
Signature guaranteed: Address:_______________________
_______________________________
________________________
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EXHIBIT 4.14
MONTEREY PASTA COMPANY
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
April , 1997 (the "Effective Date"), by and between Monterey Pasta Company, a
California corporation (the "Company"), and Kenneth A. Steel ("Purchaser").
RECITALS
A. Purchaser is the Acting President and Chief Executive Officer of the
Company.
B. The Company desires to issue and the Purchaser desires to acquire stock
of the Company as herein described, on the terms and conditions hereafter set
forth.
AGREEMENT
The parties, intending to be legally bound, hereby agree as follows:
1. SHARE PURCHASE.
(a) Subject to the terms and conditions of this Agreement, Purchaser
agrees to purchase from the Company, and the Company agrees to issue and
sell to Purchaser, five hundred fifty thousand (550,000) shares (the
"Shares") of Common Stock of the Company ("Common Stock") at a purchase
price of $1.875 per Share. This Agreement, as executed and delivered by
Purchaser, shall be accompanied by payment of the aggregate purchase price
of the Shares, which shall be paid in the form of (i) a check from Purchaser
made payable to the Company, (ii) a recourse promissory note in a form
acceptable to the Company, or (iii) any combination of the foregoing.
(b) The closing of such purchase shall occur at the offices of the
Company on the date hereof.
2. UNVESTED SHARE REPURCHASE OBLIGATION.
(a) GRANT OF UNVESTED SHARE REPURCHASE OBLIGATION. In the event of the
occurrence of a "Repurchase Date" (as defined below), the Company shall,
unless otherwise mutually agreed in writing by the parties hereto,
repurchase such Unvested Shares, and only such Unvested Shares, as to which
such Repurchase Date relates (as set forth in Section 2(b)(i) below) under
the terms and subject to the conditions set forth in this Section 2 (the
"Unvested Share Repurchase Obligation").
(b) CERTAIN DEFINITIONS.
(i) "Repurchase Date" means: (1) with respect to the Shares which vest
pursuant to Section 2(b)(iii)(2), one day after the date of the public
release of the Company's financial results for the third quarter of 1997;
(2) with respect to the Shares which vest pursuant to Section 2(b)(iii)(3),
July 1, 1997; and (3) with respect to the Shares which vest pursuant to
Section 2(b)(iii)(4), October 1, 1997.
(ii) "Unvested Shares" means, on any given date, the number of Shares
which exceed the number of Vested Shares determined as of such date.
(iii) "Vested Shares" means, on any given date, the total number of
Shares, rounded down to the nearest whole number, determined as follows:
(1) On and after the Effective Date, two hundred thousand (200,000)
Shares shall be Vested Shares.
(2) One hundred thousand (100,000) Shares shall become Vested Shares
on the date that the Company publicly releases its financial results
which indicate an operating profit for a quarter
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which ends after the Effective Date, net of write-offs, write-downs,
reserves and other one-time extraordinary expenses, as determined in
accordance with generally accepted accounting principles consistently
applied; provided, however, that such quarter may be no later than the
third quarter of 1997.
(3) One hundred fifty thousand (150,000) Shares shall become Vested
Shares on the date that the closing price of the Common Stock, as
reported on the Nasdaq National Market or other principal market on which
the Common Stock is then traded, shall have equaled or exceeded four
dollars ($4.00) per share for any seven (7) consecutive trading days,
provided that such date occurs on or before June 30, 1997.
(4) One hundred thousand (100,000) Shares shall become Vested Shares
on the date that the closing stock price of the Common Stock, as reported
on the Nasdaq National Market or other principal market on which the
Common Stock is then traded, shall have equaled or exceeded five dollars
($5.00) per share for any seven (7) consecutive trading days, provided
that such date occurs on or before September 30, 1997.
(c) EFFECTING OF UNVESTED SHARE REPURCHASE OBLIGATION. Except as
otherwise mutually agreed in writing by the parties hereto, the Company
shall effect the Unvested Share Repurchase Obligation with respect to a
particular Repurchase Date by written notice delivered personally or
forwarded by certified mail, postage and certification fees prepaid, return
receipt requested, to Purchaser within thirty (30) days after the occurrence
of such Repurchase Date. If the Company has no Unvested Share Repurchase
Obligation with respect to a particular Repurchase Date, the Unvested Share
Repurchase Obligation shall terminate with respect to the Unvested Shares
associated with such Repurchase Date and such Unvested Shares shall be
deemed Vested Shares.
(d) PAYMENT FOR SHARES AND RETURN OF SHARES. The purchase price per
Share being repurchased by the Company shall be an amount equal to
Purchaser's original cost per Share, as adjusted pursuant to Section 6 (the
"Repurchase Price"). The Company shall pay the aggregate Repurchase Price to
Purchaser in cash within fifteen (15) days after the date of personal
delivery or mailing of the written notice of the Company's effecting of the
Unvested Share Repurchase Obligation. At the election of Purchaser, any such
payment shall instead be made by cancellation of indebtedness of Purchaser
to the Company. For purposes of the foregoing, cancellation of any
indebtedness of Purchaser to the Company shall be treated as payment to
Purchaser in cash to the extent of the unpaid principal canceled. In the
event that the Company cancels the unpaid principal of any indebtedness of
Purchaser to the Company, the Company shall simultaneously cancel any
interest payable with respect to such cancelled unpaid principal. Any such
cancellation shall be effected by written notice to Purchaser of such
cancellation. The Shares being repurchased shall be delivered to the Company
by or on behalf of Purchaser at the same time as the delivery of the
Repurchase Price to Purchaser.
(e) EFFECT OF OWNERSHIP CHANGE. Except as otherwise provided below,
upon the occurrence of an Ownership Change, as defined in Section 3 below,
any and all new, substituted or additional securities or other property to
which Purchaser is entitled by reason of Purchaser's ownership of particular
Unvested Shares shall be immediately subject to the Unvested Share
Repurchase Obligation and included in the terms "Shares" and "Unvested
Shares" for all purposes of the Unvested Share Repurchase Obligation with
the same force and effect as applicable to such Unvested Shares immediately
prior to the Ownership Change. While the aggregate Repurchase Price shall
remain the same after such Ownership Change, the Repurchase Price per
Unvested Share upon exercise of the Unvested Share Repurchase Obligation
following such Ownership Change shall be adjusted as fair and appropriate to
reflect such Ownership Change. For purposes of determining the Vested Shares
following an Ownership Change, credited employment shall include all
employment with the Company and its successor.
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<PAGE>
3. OWNERSHIP CHANGE. An "Ownership Change" will be deemed to have occurred
if any of the following events occur with respect to the Company:
(a) the direct or indirect sale or exchange by the shareholders of the
Company of all or substantially all of the stock of the Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially all of the
assets of the Company (other than a sale, exchange, or transfer to one or
more subsidiary corporations of the Company); or
(d) a liquidation or dissolution of the Company.
4. ESCROW. As security for his faithful performance of the terms of this
Agreement and to insure the availability for delivery of the Shares upon
exercise of the Unvested Share Repurchase Obligation herein provided for,
Purchaser agrees to deliver to and deposit with Gray Cary Ware & Freidenrich, A
Professional Corporation, counsel to the Company (the "Escrow Agent"), as Escrow
Agent in this transaction, two Stock Assignments duly endorsed (with date and
number of shares blank) in the form attached hereto as EXHIBIT A, together with
the certificate or certificates evidencing the Shares; such documents are to be
held by the Escrow Agent pursuant to the Joint Escrow Instructions of the
Company and Purchaser set forth in EXHIBIT B attached hereto and incorporated by
this reference, which instructions shall also be delivered to the Escrow Agent
at the closing hereunder.
5. EMPLOYMENT MATTERS. Nothing in this Agreement will create in any manner
whatsoever an employment agreement between Company and Purchaser or affect in
any manner the right or power of the Company to terminate Purchaser's service as
an employee, director or consultant, for any reason or no reason, with or
without cause, subject to any other agreements between the Company and
Purchaser.
6. ADJUSTMENT TO SHARES SUBJECT TO COMPANY'S RIGHTS. If, from time to time
during the term of this Agreement, there is any stock dividend or liquidating
dividend of cash and/or property, stock split, reverse stock split,
recapitalization, reclassification or other similar change in the character or
amount of any of the outstanding securities of the Company, then, in such event
any and all new, substituted or additional securities or other property to which
Purchaser is entitled by reason of his ownership of Shares will be immediately
subject to the provisions of this Agreement on the same basis as all Shares
originally purchased hereunder, and will be included in the word "Shares" for
all purposes of this Agreement with the same force and effect as the Shares
presently subject to this Agreement. The number of Shares set forth in each of
Sections 2(b)(iii)(1)-(4), and the per share stock prices set forth in Sections
2(b)(iii)(3) and (4) shall be fairly and appropriately adjusted to reflect any
such event. For purposes of Section 2 hereof, while the total price payable by
the Company to exercise the Unvested Share Repurchase Obligation provided in
such section will remain the same after each such event, the price payable per
share to exercise such Unvested Share Repurchase Obligation will be fairly and
appropriately adjusted to reflect such event.
7. LEGENDS. All certificates representing any Shares subject to the
provisions of this Agreement will bear the following legends; provided, however,
that Purchaser shall have the right after any Shares become Vested Shares, to
exchange the certificates (or portions thereof) representing such Shares for
certificates which do not bear the legend set forth in Section 7(a):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
UNVESTED SHARE REPURCHASE OBLIGATION OF THE COMPANY OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR HIS
OR HER PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY."
(b) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
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SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
(c) Any legend required under applicable state securities laws.
8. TRANSFER RESTRICTIONS. The Company will not be required (i) to transfer
on its books any Shares which will have been sold or transferred in violation of
any of the provisions set forth in this Agreement or (ii) to treat as owner of
such Shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares will have been so transferred.
9. RIGHTS AS SHAREHOLDER. Subject to the provisions of this Agreement,
Purchaser shall, during the term of this Agreement, exercise all rights and
privileges of a shareholder of the Company with respect to the Shares deposited
in escrow, including, without limitation, all voting rights and rights to
receive dividends declared by the Company.
10. REPRESENTATIONS AND WARRANTIES OF PURCHASER. In connection with the
purchase of the Shares, Purchaser hereby agrees, represents and warrants to the
Company as follows:
(a) INVESTMENT INTENT. Purchaser is purchasing the Shares solely for
Purchaser's own account for investment and not with a view to or for sale in
connection with any distribution of the Shares or any portion thereof and
not with any present intention of selling, offering to sell or otherwise
disposing of or distributing the Shares or any portion thereof in any
transaction other than a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"). Purchaser further
represents that the entire legal and beneficial interest of the Shares is
being purchased, for the account of Purchaser only and neither in whole nor
in part for any other person.
(b) RESIDENCE. Purchaser's principal residence is located at the
address indicated beneath Purchaser's signature below.
(c) INFORMATION CONCERNING THE COMPANY. Purchaser is aware of the
Company's business affairs and financial condition and has acquired
sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Shares. Purchaser further represents
and warrants that Purchaser has discussed the Company and its plans,
operations and financial condition with its officers, has received all such
information as Purchaser deems necessary and appropriate to enable Purchaser
to evaluate the financial risk inherent in making an investment in the
Shares and has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries
in respect thereof.
(d) ECONOMIC RISK. Purchaser realizes that this purchase of the Shares
will be a highly speculative investment and that Purchaser is able, without
impairing his or her financial condition, to hold the Shares for an
indefinite period of time and to suffer a complete loss on Purchaser's
investment.
(e) CAPACITY TO PROTECT INTERESTS. Purchaser has (i) a preexisting
personal or business relationship with the Company or any of its officers,
directors, or controlling persons, consisting of personal or business
contacts of a nature and duration to enable Purchaser to be aware of the
character, business acumen and general business and financial circumstances
of the person with whom such relationship exists, or (ii) such knowledge and
experience in financial and business matters as to make Purchaser capable of
evaluating the merits and risks of an investment in the Shares and to
protect Purchaser's own interests in the transaction, or (iii) both such
relationship and such knowledge and experience.
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(f) NO QUALIFICATION; RELIANCE BY COMPANY. Purchaser understands that
the Shares have not been qualified under the Corporate Securities Law of
1968, as amended, of the State of California by reason of a specific
exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser's representations as expressed herein.
Purchaser understands that the Company is relying on Purchaser's
representations and warrants that the Company is entitled to rely on such
representations and that such reliance is reasonable.
(g) RESTRICTED SECURITIES. Purchaser understands and acknowledges
that:
(i) The sale of the Shares has not been registered under the
Securities Act, and the Shares must be held indefinitely unless a
transfer of it is subsequently registered under the Securities Act or an
exemption from such registration is available.
(ii) The Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(h) DISPOSITION UNDER RULE 144. Purchaser understands that the Shares
are restricted securities within the meaning of Rule 144 promulgated under
the Securities Act and any future disposition of the Shares in accordance
with the exemption provided by Rule 144 (other than paragraph (k) thereof)
must be made only in limited amounts pursuant to the terms and conditions of
Rule 144.
(i) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
Purchaser's representations and warranties set forth above, Purchaser
further agrees that Purchaser will in no event make any disposition of all
or any portion of the Shares which Purchaser is purchasing unless:
(i) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with said Registration Statement; or
(ii) Purchaser shall have notified the Company of the proposed
disposition and furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and either:
(1) Purchaser shall have furnished the Company with an opinion of
Purchaser's own counsel to the effect that such disposition will not
require registration of such shares under the Securities Act, and
such opinion of Purchaser's counsel shall have been concurred in by
counsel for the Company and the Company shall have advised Purchaser
of such concurrence; or
(2) The disposition is made in compliance with Rule 144 after
Purchaser has furnished the Company such detailed statement and after
the Company has had a reasonable opportunity to discuss the matter
with Purchaser.
(j) ELECTION UNDER SECTION 83(B) OF THE CODE.
(i) Purchaser understands that Section 83 of the Internal Revenue
Code of 1986, as amended (the "Code") taxes as ordinary income the
difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse.
In this context, "restriction" includes the obligation of the Company to
buy back the stock pursuant to the Unvested Share Repurchase Obligation
contained in this Agreement. Purchaser understands that he may elect to
be taxed at the time the Shares are purchased rather than when and as the
Unvested Share Repurchase Obligation expires by filing an election under
Section 83(b) of the Code with the IRS within thirty (30) days from the
date of purchase. Even if the fair market value of the Shares equals the
amount paid for the Shares, the election must be made to avoid adverse
tax consequences in the future. The form for making this election is
attached as EXHIBIT C hereto. Purchaser understands that failure to make
this filing timely may result in the
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<PAGE>
recognition of ordinary income by Purchaser, as the Unvested Share
Repurchase Obligation lapses on the difference between the purchase price
and the fair market value of the Shares at the time such restriction
lapses.
(ii) Purchaser understands that he should consult with the his tax
advisor regarding the advisability of filing with the IRS an election
under Section 83(b) of the Code, which must be filed no later than thirty
(30) days after the date of this Agreement. Failure to file an election
under Section 83(b), if appropriate, may result in adverse tax
consequences to Purchaser. Purchaser acknowledges that he has been
advised to consult with a tax advisor regarding the tax consequences to
Purchaser of the purchase of Shares hereunder. AN ELECTION UNDER SECTION
83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH PURCHASER
ACQUIRES THE SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. PURCHASER
ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS
PURCHASER'S SOLE RESPONSIBILITY, EVEN IF PURCHASER REQUESTS THE COMPANY
OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS BEHALF.
11. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In connection with the
sale of the Shares, the Company hereby agrees, represents and warrants to
Purchaser as follows:
(a) ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, and
has the requisite legal power and authority, corporate and other, to own its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted by it. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure
to do so would have a material adverse effect on its business or properties.
The Company has made available to Purchaser or his counsel copies of the
Articles of Incorporation and By-laws of the Company. Said copies are true,
correct, and complete and contain all amendments through the date hereof.
(b) AUTHORITY: NO CONFLICT. The Company has all requisite power and
authority, corporate and other, to enter into this Agreement and the other
documents and instruments contemplated hereby (collectively, the
"Agreements"), to carry out the terms of the Agreements and to perform all
of its obligations under the Agreements. None of the execution, delivery and
performance of the Agreements and the consummation of the transactions
provided for, or contemplated by, the Agreements, the fulfillment by the
Company of the terms of the Agreements and the issuance and delivery of the
Shares will (with or without notice or passage of time or both) (i) conflict
with or result in the breach of any provision of the Company's Articles of
Incorporation or By-laws, (ii) result in a default, give rise to any right
of termination, cancellation or acceleration or require any consent or
approval, under any of the terms, conditions or provisions of any agreement
or instrument to which it is a party or by which it or any of its assets is
bound or (iii) violate any law, judgment, order, writ, injunction, decree,
statute, rule or regulation of any court, administrative agency or other
governmental entity applicable to the Company or any of its assets. Each of
the Agreements constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms.
(c) NO PERMITS. No permit, consent, approval or authorization of, or
declaration to or filing with, any governmental authority is required in
connection with the execution, delivery and performance by the Company of
the Agreements or the consummation by the Company of the transactions
contemplated by the Agreements.
(d) CORPORATE ACTION. All corporate and other action on the part of
the Company necessary for the authorization, execution, issuance, delivery
and performance by the Company of the Agreements and the consummation of the
transactions contemplated by the Agreements has been taken.
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(e) VALIDITY OF SHARES. The Shares have been authorized by all
necessary action, corporate and other, and when issued and sold in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable, free from any preemptive or similar rights and free
and clear from all liens, claims, charges or encumbrances whatsoever.
12. REGISTRATION RIGHTS. Purchaser shall be entitled to have the Company
register the Shares on the same terms and conditions as the investors
participating in the Company's recently concluded private placement pursuant to
Regulation D under the Securities Act.
13. MISCELLANEOUS.
(a) The parties agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent
of this Agreement.
(b) Any notice required or permitted hereunder will be given in writing
and will be deemed effectively given upon personal delivery or three (3)
days after deposit with a United States Post Office, by registered or
certified mail with postage and fees prepaid, return receipt requested,
addressed to the other party hereto at the address shown below that party's
signature or at such other address as such party may designate by ten days'
advance written notice to the other party hereto.
(c) This Agreement will inure to the benefit of the successors and
assigns of the Company and, subject to the restrictions on transfer herein
set forth, be binding upon Purchaser and Purchaser's heirs, executors,
administrators, successors and assigns; provided, however, that neither
party may assign its rights or obligations under this Agreement without the
other party's prior written consent.
(d) This Agreement, together with the exhibits hereto, will be construed
under the laws of the State of California and constitutes the entire
agreement of the parties with respect to the subject matter hereof,
superseding all prior written or oral agreements with respect to the subject
matter hereof, and no amendment or addition hereto will be deemed effective
unless agreed to in writing by the parties hereto.
(e) No failure on the part of any party to exercise or delay in
exercising any right hereunder will be deemed a waiver thereof, nor will any
such failure or delay, or any single or partial exercise of any such right,
preclude any further or other exercise of such right or any other right.
(f) If any provision of this Agreement, or the application thereof, is
for any reason and to any extent determined by a court of competent
jurisdiction to be invalid or unenforceable, the remainder of this Agreement
and the application of such provision to other persons or circumstances will
be interpreted so as best to reasonably effect the intent of the parties
hereto. The parties agree to use their best efforts to replace such void or
unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve, to the extent greatest possible, the economic,
business and other purposes of the void or unenforceable provision.
(g) This Agreement may be executed in counterparts, each of which will
be an original and all of which together will constitute one and the same
agreement.
(h) Any officer of the Company will have the authority to act on behalf
of the Company with respect to any matter, right, obligation, or election
which is the responsibility of or which is allocated
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to the Company herein, provided the officer has apparent authority with
respect to such matter, right, obligation, or election.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MONTEREY PASTA COMPANY
By:
-------------------------------------
Title:
-------------------------------------
Address:
----------------------------------------
----------------------------------------
PURCHASER
----------------------------------------
Address:
----------------------------------------
----------------------------------------
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EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, hereby sells, assigns and transfers
unto ( ) shares of the Common Stock of Monterey Pasta
Company, a California corporation, standing in the undersigned's name on the
books of said corporation represented by Certificate No. herewith, and
does hereby irrevocably constitute and appoint my attorney to
transfer the said stock on the books of the said corporation with full power of
substitution in the premises.
Dated: , 199 By:
-----------------------------------------
<PAGE>
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
April , 1997
Gray Cary Ware & Freidenrich
A Professional Corporation
400 Hamilton Avenue
Palo Alto, California 94301
Gentlemen:
As Escrow Agent for both Monterey Pasta Company, a California corporation
("Company"), and the undersigned purchaser of Stock (the "Stock") of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement"), dated as of the date hereof, to which a copy of these
Joint Escrow Instructions is attached as Exhibit B, and the Promissory Note and
Pledge Agreement (the "Note") attached hereto as Exhibit A, in accordance with
the following instructions:
1. In the event the Company shall effect the Unvested Share Repurchase
Obligation set forth in the Agreement in accordance with the terms thereof,
the Company shall give to Purchaser and you a written notice specifying the
number of shares of Stock to be purchased, the purchase price, and the time
for a closing hereunder at the principal office of the Company. Purchaser
and the Company hereby irrevocably authorize and direct you to close the
transaction contemplated by such notice in accordance with the terms of such
notice.
2. At the closing of a transaction pursuant to Paragraph 1, you are
directed (a) to date the stock assignments necessary for the transfer in
question, (b) to fill in the number of shares of Stock being transferred,
(c) to deliver same, together with the certificates evidencing the shares of
Stock to be transferred, to the Company against the simultaneous delivery to
you of the purchase price (by check or by written notice of cancellation of
the applicable principal amount of the Note, and related interest) for the
number of shares of Stock being purchased pursuant to the exercise of the
Unvested Share Repurchase Obligation, and (d) to forward any purchase price
received from the Company to Purchaser.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of Stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his or her
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities all stock certificates, stock assignments, or
other documents necessary or appropriate to make such securities negotiable
and complete any transaction herein contemplated. Subject to the provisions
of this paragraph 3, Purchaser shall exercise all rights and privileges of a
shareholder of the Company while the Stock is held by you.
4. This escrow shall terminate at such time as there are no longer any
shares of Stock subject to the Unvested Share Repurchase Obligation or
securing repayment of the Note.
5. As security for full repayment of the Note, the Purchaser has
granted to the Company a security interest in the Stock. Notwithstanding
anything herein to the contrary, you hold the certificate(s) representing
the Stock as the Company's agent to perfect the Company's security interest
in the Stock and not as an escrow holder for the Company and the Purchaser.
In the event that the Purchaser fails to make payment under the Note, or
otherwise defaults in any obligation due the
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Company, you shall deliver the certificate(s) to the Company, or take such
other action as the Company, as a secured creditor under the California
Commercial Code, shall direct.
6. If at the time of termination of this escrow you should have in your
possession any shares of Stock or any other documents, securities, or other
property belonging to Purchaser, you shall deliver all of same to Purchaser
and shall be discharged of all further obligations hereunder.
7. Your duties hereunder may be altered, amended, modified or revoked
only by writing signed by all of the parties hereto.
8. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party
or parties. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser
while acting in good faith and in the exercise of your own good judgment,
and any act done or omitted by you pursuant to the advice of your own
attorneys shall be conclusive evidence of such good faith.
9. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order,
judgment or decree of any court, you shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
10. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting
to execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
11. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
12. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary or proper to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
13. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be counsel to the Company or if you shall resign by
written notice to each party. In the event of any such termination, the
Company and Purchaser shall jointly appoint a successor Escrow Agent.
14. If you reasonably require other or further instructions in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
15. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or rights of possession of the
securities held by you hereunder, you are authorized and directed to retain
in your possession, without liability to anyone, all or any part of said
securities until such dispute shall have been settled either by mutual
written agreement of the parties concerned or by a final order, decree, or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
16. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or three (3)
days after deposit with a United States Post Office, by registered or
certified mail with postage and fees prepaid, return receipt requested,
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addressed to each of the other parties thereunto entitled at the following
address, or at such other addresses as a party may designate by ten (10)
days' advance written notice to each of the other parties hereto.
Company: Monterey Pasta Company
------------------------------------------
------------------------------------------
PURCHASER: Kenneth A. Steel
------------------------------------------
------------------------------------------
ESCROW AGENT: Gray Cary Ware & Freidenrich
A Professional Corporation
400 Hamilton Avenue
Palo Alto, California 94301
Attn: Eric J. Lapp
17. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
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18. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
Very truly yours,
Monterey Pasta Company,
a California corporation
By:
PURCHASER:
---------------------------------
Kenneth A. Steel
Agreed to and accepted as of the date set forth
above:
ESCROW AGENT:
GRAY CARY WARE & FREIDENRICH
A Professional Corporation
By:
-----------------------------
Eric J. Lapp
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EXHIBIT C
April , 1997
Internal Revenue Service
5045 East Butler Avenue
Fresno, CA 93888
Re: Election Under Section 83(b) of the Internal Revenue Code of 1986, as
Amended
Gentlemen:
The following information is submitted pursuant to Treas. Reg. 1.83-2 in
connection with this election by the undersigned under section 83(b) of the
Internal Revenue Code of 1986, as amended.
1. The name and address of the taxpayer are:
Name: Kenneth A. Steel
Address:
-------------------------------------------------
-------------------------------------------------
Taxpayer ID:
-------------------------------------------------
2. The following is a description of each item of property with respect to
which the election is made:
Three hundred fifty thousand (350,000) shares of Common Stock of
Monterey Pasta Company (the "Shares")
3. The property was transferred to the undersigned on:
April , 1997
The taxable year for which the election is made is:
Calendar, 1997.
4. The nature of the restriction to which the property is subject:
See ATTACHMENT A.
5. The following is the fair market value at the time of transfer
(determined without regard to any restriction other than a restriction
which by its terms will never lapse) of each property with respect to
which the election is made:
$656,250.00 (350,000 shares at $1.875 per share)
6. The following is the amount paid for the property:
$656,250.00
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7. A copy of this election has been furnished to Monterey Pasta Company,
the corporation for which services are performed by the undersigned.
Please acknowledge receipt of this election by signing or stamping the
enclosed copy of this letter and returning it to the undersigned in the enclosed
envelope.
Very truly yours,
Kenneth A. Steel
Enclosures
cc: Monterey Pasta Company
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ATTACHMENT A
Pursuant to the terms of my Restricted Stock Purchase Agreement with
Monterey Pasta Company (the "Company"), dated April , 1997 (the "Agreement"),
the Company shall have the obligation at any time within thirty (30) days after
a "Repurchase Date" (as defined in the Agreement) to purchase from me or my
personal representative, as the case may be, for a price of $1.875 per share,
subject to adjustment pursuant to Section 6 of the Agreement (the "Repurchase
Price"), a portion of the Shares which are unvested. Shares will vest pursuant
to the following schedule:
(i) One hundred thousand (100,000) Shares shall become Vested Shares on
the date that the Company publicly releases its financial results which
indicate an operating profit for a quarter which ends after the Effective
Date, net of write-offs, write-downs, reserves and other one-time
extraordinary expenses, as determined in accordance with generally accepted
accounting principles consistently applied; provided, however, that such
quarter may be no later than the third quarter of 1997.
(ii) One hundred fifty thousand (150,000) Shares shall become Vested
Shares on the date that the closing price of the Common Stock, as reported
on the Nasdaq National Market or other principal market on which the Common
Stock is then traded, shall have equaled or exceeded four dollars ($4.00)
per share for any seven (7) consecutive trading days, provided that such
date occurs on or before June 30, 1997.
(iii) One hundred thousand (100,000) Shares shall become Vested Shares on
the date that the closing stock price of the Common Stock, as reported on
the Nasdaq National Market or other principal market on which the Common
Stock is then traded, shall have equaled or exceeded five dollars ($5.00)
per share for any seven (7) consecutive trading days, provided that such
date occurs on or before September 30, 1997.
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EXHIBIT 5.1
May 6, 1997
Monterey Pasta Company
1528 Moffett Street
Salinas, California 93905
Ladies and Gentlemen:
You have requested our opinion as counsel for Monterey Pasta Company, a
Delaware corporation (the "Company"), in connection with the registration
under the Securities Act of 1933, as amended (the "Securities Act"), and the
Rules and Regulations promulgated thereunder, of an aggregate of 5,782,869
shares (the "Shares") of the Company's common stock, par value $.001 per
share (the "Common Stock"), presently outstanding, pursuant to a Registration
Statement on Form S-3 (the "Registration Statement").
This opinion is rendered pursuant to Item 601(b)(5)(i) of Registration
S-K promulgated under the Securities Act.
For purposes of this opinion, we have examined the Registration
Statement filed with the Commission on the date hereof, including the
prospectus which is a part thereof (the "Prospectus") and the exhibits
thereto. We have also been furnished with and have examined originals or
copies, certified or otherwise identified to our satisfaction, of all such
records of the Company, agreements and other instruments, certificates of
officers and representatives of the Company, certificates of public officials
and other documents as we have deemed it necessary to require as a basis for
the opinions hereafter expressed. As to questions of fact material to such
opinions, we have, where relevant facts were not independently established,
relied upon certifications by principal officers of the Company. We have made
such further legal and factual examination and investigation as we deem
necessary for purposes of rendering the following opinions.
In our examination we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the correctness of facts set forth in
certificates, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies, and the authenticity of the originals of
such copies. We have also assumed that such documents have each been duly
authorized, properly executed and delivered by each of the parties thereto
other than the Company.
We are members of the bar of the State of California. Our opinions below
are limited to the laws of the State of California, the General Corporation
Law of the State of Delaware and the federal securities laws of the United
States.
Based on the foregoing, it is our opinion that all of the Shares, when
sold and delivered in the manner described in the Prospectus will be legally
and validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and consent to the use of our name under the caption
"Legal Matters" in the Prospectus.
Very truly yours,
/s/ GRAY CARY WARE & FREIDENRICH, A PROFESSIONAL CORPORATION
GRAY CARY WARE & FREIDENRICH, A PROFESSIONAL CORPORATION
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the incorporation by reference in this pre-effective
Amendment No. 1 to Registration Statement of Monterey Pasta Company on Form S-3
of our report dated March 26, 1997 appearing in the Annual Report on Form 10-K
of Monterey Pasta Company for the year ended December 29, 1996, as amended by
Form 10-K/A, and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ BDO SEIDMAN, LLP
San Francisco, California
May 5, 1997
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-effective Amendment
No. 1 to Registration Statement No. 333-10775 of Monterey Pasta Company on Form
S-3 of our report dated March 29, 1996, appearing in the Annual Report on Form
10-K of Monterey Pasta Company for the year ended December 29, 1996, as amended
by Form 10-K/A, and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
May 6, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated March 6, 1995 incorporated by reference in this Form S-3
registration statement. It should be noted that we have performed no audit
procedures subsequent to March 6, 1995, the date of our report. Furthermore, we
have not audited any financial statements of Monterey Pasta Company as of any
date or for any period subsequent to January 1, 1995.
<TABLE>
<CAPTION>
<S> <C>
Oakland, California /s/ ARTHUR ANDERSEN LLP
May 6, 1997 ARTHUR ANDERSEN LLP
</TABLE>
