DALLAS, Aug. 15, 2001 (PRIMEZONE) -- Fresh America Corp. (Pink Sheets:FRES), a major North America fresh produce distribution company, announced today that it entered into definitive agreements pursuant to which, North Texas Opportunity Fund LP ("NTOF") will invest $5 million in cash in exchange for $5 million of preferred stock and warrants exercisable for approximately 50% of Fresh America's fully-diluted common stock upon completion of the transaction.
Additionally, under the agreements, Fresh America's subordinated debt holders will exchange their existing subordinated debt and preferred stock for $2.7 million of preferred stock and warrants convertible into an additional 27% of Fresh America's fully-diluted common stock. The warrants have a ten-year term and are exercisable at a nominal price. Upon completion of the transaction, NTOF will have the right to appoint three directors to Fresh America's five-member board of directors and the subordinated debt holders, which are exchanging for new preferred stock, will have the right to appoint an additional director to the board.
In addition to customary closing conditions, the agreements provide for the transaction to close upon NTOF obtaining voting agreements from a limited number of Fresh America's shareholders representing two-thirds of Fresh America's outstanding capital stock. The shareholders are entitled to vote on a proposed charter amendment which would, among other things, increase the authorized common stock so that the new warrants could be exercised in full. After closing, shareholder approval of such charter amendment must be effected, the failing of which will result in NTOF and the subordinated debt holders obtaining substantially increased cumulative dividend payments, enhanced liquidation payments and an accelerated put right on the new preferred stock at three times their face value.
NTOF is a private equity fund started in 2000. Utilizing the venture capital model for nurturing and growing promising companies, NTOF seeks to make equity investments in North Texas companies that are either located in or willing to expand operations to under-served areas in North Texas or minority or women-owned or managed companies located anywhere in the North Texas region.
NTOF seeks investment opportunities in companies that have quality management, defensible market positions, predictable exposure to risks and attractive growth prospects either internally through core revenue growth or externally through strategic acquisitions. Candidates generally have established a solid franchise through product leadership, superior customer service, low cost structure, brand name or other competitive advantages.
As of the signing of the agreements, Darren Miles became Fresh America's new Chief Executive Officer and Colon Washburn resigned as Fresh America's Chief Executive Officer. During Miles' 20-year career he has been Chief Financial Officer and a key executive of three different distribution companies all of which had sales in excess of $100 million.
Miles said, "As I have gotten to know the Fresh America employees and management team, their dedication to the Company and their customers has been exceptional. Once the transaction is complete, we will have the tools to successfully implement our business plan."
Washburn said, "I look forward to continuing my relationship with Fresh America as a director and advisor to the management team. After working with Darren Miles for the past couple of months, I feel very confident that he will be a strong leader for the Company as the new CEO. Fresh America's position going forward will be strengthened by NTOF's strategic partnership and the conversion of the subordinated debt to equity".
On a pro forma basis after the transaction closes, Fresh America's debt will be reduced by approximately $21.7 million and the closing will provide approximately $4.2 million of cash for working capital needs.
Arthur Hollingsworth, co-founder and partner of NTOF, stated "We are excited about being close to the successful completion of NTOF's investment in Fresh America. We are proud to be associated with one of the leading produce distribution companies in the United States. We are confident in the management and employees ability to utilize Fresh America's national network of seven distribution locations to provide premier produce offerings to its customers. Fresh America's balance sheet, with approximately $22 million less debt and approximately $26 million incremental preferred stock and common equity, will provide a strong base for building this fine company."
Under the terms of the agreements, NTOF and the other preferred stock holders will have a put right in the preferred stock after three years and immediately upon the occurrence of certain events. The agreements also require Fresh America to obtain NTOF and/or the other preferred stock holders' consent prior to taking certain actions in the operations of its business. While Fresh America anticipates completing this transaction by the end of August, there is no assurance that the closing conditions to this transaction will be satisfied by such time and that closing will occur by such time or at some future date.
Forward-looking Statements
This announcement may contain forward-looking statements that are subject to significant risks and uncertainties. Although Fresh America believes that the expectations reflected in its forward-looking statements are reasonable, Fresh America can give no assurance that such expectations or any of their forward-looking statements will prove to be correct, and future results may differ from those discussed in this press release. Important information regarding the factors that may affect Fresh America's future performance is included in the public reports that Fresh America files with the Securities Exchange Commission. Fresh America disclaims any intention or obligation to revise any forward-looking statements whether as a result of new information, future event, change in expectations, conditions or circumstances, or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The inclusion of any statement in this release does not constitute an admission by Fresh America or any other person that the events or circumstances described in such statement are material.