SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): APRIL 12, 1999
DELICIOUS BRANDS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 000-24941 06-1255882
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2070 MAPLE STREET, DES PLAINES, ILLINOIS 60018
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (847)669-3200
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Item 5. OTHER EVENTS.
On April 12, 1999, Delicious Brands Inc. (NASDAQ: DBSI) (the
"Company") issued and sold 35,000 shares of Series B Convertible Preferred
Stock, $.01 par value per share (the "Series B Convertible Stock"), and a
Warrant (the "Warrant") to purchase 700,000 shares of common stock, $.01 par
value per share ("Common Stock"), to Little Meadow Corp. (the "Purchaser") in a
private securities transaction. The Series B Convertible Stock is initially
convertible into 175,000 restricted shares of Common Stock. The initial exercise
price of the Warrant is $.01 per share, and the Warrant has a term of ten years.
The aggregate purchase price of the Series B Convertible Stock and the Warrant
was $1,750,000. Pursuant to the terms of the Securities Purchase Agreement,
dated April 12, 1999, by and between the Company and the Purchaser (the
"Securities Purchase Agreement"), the Purchaser has the right to appoint two
directors. For additional information, reference is made to (i) the Press
Release, dated April 13, 1999, which is incorporated herein by reference and is
attached hereto as Exhibit 99.1, (ii) the Securities Purchase Agreement, which
is incorporated herein by reference and is attached hereto as Exhibit 10.1,
(iii) the Warrant to purchase 700,000 shares of Common Stock, which is
incorporated herein by reference and is attached hereto as Exhibit 4.1, and (iv)
the Certificate of the Designations, Powers, Preferences and Rights of the
Series B Convertible Preferred Stock dated April 12, 1999, which is incorporated
herein by reference and is attached hereto as Exhibit 3.1.
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(C) EXHIBITS
EXHIBIT NO. EXHIBIT
3.1 Certificate of the Designations, Powers,
Preferences and Rights of the Series B
Convertible Preferred Stock, dated April 12,
1999.
4.1 Warrant to Purchase 700,000 Shares of Common
Stock, dated April 12, 1999.
10.1 Securities Purchase Agreement, dated April
12, 1999, by and between Delicious Brands,
Inc. and Little Meadow Corp.
99.1 Press Release, dated April 14, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DELICIOUS BRANDS, INC.
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(Registrant)
Dated: April 14, 1999 By: /S/ JEFFRY W. WEINER
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Name: Jeffry W. Weiner
Title: Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
3.1 Certificate of the Designations, Powers, Preferences
and Rights of the Series B Convertible Preferred
Stock, dated April 12, 1999.
4.1 Warrant to Purchase 700,000 Shares of Common Stock,
$.01 par value per share, dated April 12, 1999.
10.1 Securities Purchase Agreement, dated April 12,
1999, by and between Delicious Brands, Inc. and
Little Meadow Corp.
99.1 Press Release, dated April 14, 1999.
CERTIFICATE OF THE DESIGNATIONS, POWERS
PREFERENCES AND RIGHTS
OF THE
SERIES B CONVERTIBLE PREFERRED STOCK
($.01 PAR VALUE PER SHARE)
OF
DELICIOUS BRANDS, INC.
A DELAWARE CORPORATION
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PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
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DELICIOUS BRANDS, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY that, pursuant to authority conferred upon the
Board of Directors of the Company (the "Board") by the Certificate of
Incorporation of , and pursuant to the provisions of Section 151 of the Delaware
General Corporation Law, there hereby is created out of the 1,000,000 shares of
Preferred Stock authorized in Article Fourth of the Certificate of Incorporation
(the "Preferred Stock"), a series of the Preferred Stock consisting of 35,000
shares, $.01 par value per share, to be designated "Series B Convertible
Preferred Stock", and to that end the Board adopted a resolution providing for
the designation, powers, preferences and rights, and the qualifications,
limitations and restrictions, of the Series B Convertible Preferred Stock, which
resolution is as follows:
RESOLVED, that the Certificate of the Designations,
Powers, Preferences and Rights of the Series B Convertible Preferred
Stock ("Certificate of Designation") be and is hereby authorized and
approved, which Certificate of Designation shall be filed with the
Delaware Secretary of State in the form as follows:
1. DESIGNATIONS AND AMOUNT. Thirty Five Thousand (35,000) shares
of the Preferred Stock of the Company, $.01 par value per share, shall
constitute a class of Preferred Stock designated as "Series B Convertible
Preferred Stock" (the "Series B Convertible Stock"). After the initial issuance
of shares of Series B Convertible Stock, no additional shares of Series B
Convertible Stock may be issued by the Company except as provided in Section
4(c) hereof.
2. RANK. Except as specifically provided below, the Series B
Convertible Stock shall, with respect to dividend rights, rights on redemption
and rights on liquidation, winding up and
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dissolution, rank pari passu with all classes of Common Stock, $.01 par value
per share, of the Company (the "Common Stock").
3. DIVIDENDS. Holders of the Series B Convertible Stock shall not
be entitled to receive dividends except in the event the Company shall declare a
distribution, whether in cash, in kind or otherwise, with respect to the Common
Stock, and then, in each such case, the holders of the Series B Convertible
Stock shall be entitled to a proportionate share of any such distribution
(whether made in cash, securities of the Company (other than shares of Common
Stock) or other assets) as though the holders of the Series B Convertible Stock
were the holders of the number of shares of Common Stock into which their shares
of Series B Convertible Stock are convertible as of the record date fixed for
the determination of the holders of Common Stock entitled to receive such
distribution.
4. VOTING RIGHTS.
(a) Each share of Series B Convertible Stock shall entitle
the holder thereof to such number of votes as shall equal the number of whole
and fractional shares of Common Stock into which such shares of Series B
Convertible Stock is convertible pursuant to Section 5 hereof. Except as
otherwise required by law, the holders of Series B Convertible Stock shall be
entitled to vote on all matters as to which holders of Common Stock of any class
shall be entitled to vote, in the same manner and with the same effect as such
holders of Common Stock, voting together with the holders of the Common Stock
(or such class thereof) as one class.
(b) So long as the initial holder of record of the Series B
Convertible Stock or an affiliate of such holder, beneficially owns at least the
lesser of (x) 5% of the Common Stock or (y) 43,750 shares of Common Stock
(subject to equitable adjustment), then the holders of a majority of the
outstanding shares of Series B Convertible Stock shall have, in addition to the
voting rights set forth above, the exclusive right, voting separately as a
single class, to: (i) elect two (2) directors of the Company; and (ii) upon the
filing of a petition under any federal or state bankruptcy laws by or with
respect to the Company, the exclusive right, voting separately as a single
class, to elect up to that number of directors that would equal one-half (1/2)
of the number of directors that then constitute the whole board of directors,
plus one (1) member, of the Board (including the directors previously appointed
by such holders pursuant to this subsection (b)) (for which purpose, immediately
upon the filing of a petition under any federal or state bankruptcy laws by or
with respect to the Company, the number of directors constituting the Board
shall, automatically and without any further action on the part of the Board or
the stockholders of the Company, be increased to such number as shall permit the
majority of the holders of the Series B Convertible Stock to so elect one-half
(1/2) of the number of directors that then constitute the whole board of
directors, plus one (1) member, of the Board). Any vacancy in the office of any
director elected or otherwise entitled to be filled by the holders of Series B
Convertible Stock pursuant to this subsection (b) (including, without
limitation, vacancies created upon the increase in the size of the Board as
provided by clause (ii) above) shall be filled only by the holders of a majority
of the outstanding shares of Series B Convertible Stock voting as a single
class. Pending any such action by the holders of Series B Convertible Stock, any
vacancy in the office of any such director shall not be filled by the vote of
the remaining directors. At least one director elected by the holders of Series
B Preferred Stock pursuant to this Section 4 shall have the right (but not the
obligation) to be appointed to each of the committees of the Board, including,
without limitation, any executive committee of the Board, unless such director
would cause such committee
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to not be in compliance with such committee's applicable director qualification
requirements.
(c) The Company shall not take any of the following actions
without the approval by the affirmative vote of the holders of a majority of the
then outstanding shares of Series B Convertible Stock, voting as a separate
class:
(i) amend, alter or repeal any provision of the
Certificate of Incorporation or the Bylaws so as to adversely affect the
relative powers, preferences, rights, privileges or limitations provided for
herein for the benefit of any shares of Series B Convertible Stock so as to
adversely affect the rights of the holders of Series B Convertible Stock;
(ii) increase the authorized number of shares of, or
issue, Series B Convertible Stock;
(iii) effect any reclassification of the Series B
Convertible Stock;
(iv) increase the number of directors to more than seven
(7), except as provided by Section 4(b)(ii) above; or
(v) designate any additional class of capital stock which
grants to the holders thereof the right to elect a separate class of directors
of the Company.
Subject to these limitations, additional classes of preferred stock may be
designated and issued from time to time in one or more series with such
designations, voting powers, or other preferences and relative rights or
qualifications as are determined by the Board.
(d) Each director elected by the holders of Series B
Convertible Stock pursuant to this Section 4 shall have one vote on all matters
decided by the Board, PROVIDED that the Company may not, without the affirmative
vote or consent of the directors elected by the holders of Series B Convertible
Stock, file a voluntary petition or consent to the filing of a petition under
any federal or state bankruptcy laws.
5. CONVERSION OF SERIES B CONVERTIBLE STOCK.
(a) GENERAL. Each holder of Series B Convertible Stock shall
have the right, at such holder's option, at any time or from time to time from
and after the day immediately following the date the Series B Convertible Stock
is first issued, to convert each share of Series B Convertible Stock into
fully-paid and non-assessable shares of Common Stock. The number of shares of
Common Stock to which a holder of Series B Convertible Stock shall be entitled
to receive upon conversion at any particular time shall be the product obtained
by multiplying the Conversion Rate (determined as provided in Section 5(b)) by
the number of shares of Series B Convertible Stock being converted at such time.
(b) CONVERSION RATE. The conversion rate in effect at any
time for the Series B Convertible Stock shall be the quotient obtained by
dividing the number five (5) by the Conversion Value, calculated as provided in
Section 5(c) (the "Conversion Rate").
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(c) CONVERSION VALUE. The Conversion Value in effect from
time to time, shall initially be the number one (1) and shall be adjusted from
time to time as set forth and in accordance with Section 5(d) with respect to
the Series B Convertible Stock (the "Conversion Value").
(d) ADJUSTMENTS TO CONVERSION VALUE.
(i) UPON DILUTIVE ISSUANCES OF COMMON STOCK OR
CONVERTIBLE SECURITIES. If the Company shall issue or sell shares of its Common
Stock or Common Stock Equivalents (as hereafter defined) without consideration
or at a price per share less than the GREATER of: (x) the then current Fair
Market Value (as defined in Section 5(h) hereof) of such securities so issued or
sold; or (y) $8.00, then the Conversion Value, except as hereinafter provided,
shall be reduced so as to be equal to an amount determined by multiplying the
Conversion Value by a fraction:
(A) the numerator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock or Common Stock Equivalents (calculated on a
fully-diluted basis assuming the conversion of all presently exercisable
options, warrants, purchase rights or convertible securities), plus (2) the
number of shares of Common Stock or Common Stock Equivalents which the aggregate
consideration, if any, received by the Company for the total number of such
additional shares of Common Stock or Common Stock Equivalents so issued would
purchase at the GREATER of: (x) the then current Fair Market Value of such
securities so issued or sold; or (y) $8.00, and
(B) the denominator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to the issuance
of such additional shares of Common Stock or Common Stock Equivalents
(calculated on a fully-diluted basis assuming the exercise or conversion of all
presently exercisable options, warrants, purchase rights or convertible
securities), plus (2) the number of such additional shares of Common Stock or
Common Stock Equivalents so issued.
(ii) UPON DILUTIVE ISSUANCES OF WARRANTS, OPTIONS AND
PURCHASE RIGHTS TO COMMON STOCK OR CONVERTIBLE SECURITIES. For the purposes of
this Section 5, the issuance of any warrants, options, subscription or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock, or the issuance of
any warrants, options, subscriptions or purchase rights with respect to such
convertible or exchangeable securities (collectively, "Common Stock
Equivalents"), shall be deemed an issuance of Common Stock with respect to
adjustments in the Conversion Value of the Series B Convertible Stock if the
Consideration Per Share (as hereinafter determined) which may be received by the
Company for such Common Stock shall be less than the GREATER of: (x) the then
current Fair Market Value of such securities so issued or sold; or (y) $8.00.
Any obligation, agreement or undertaking to issue Common Stock Equivalents at
any time in the future shall be deemed to be an issuance of Common Stock
Equivalents at the time such obligation, agreement or undertaking is made or
arises. No adjustment of the Conversion Value shall be made under this Section 5
upon the issuance of any shares of Common Stock which are issued pursuant to the
exercise, conversion or exchange of any Common Stock Equivalents if any
adjustment shall previously have been made upon the issuance of any such Common
Stock Equivalents as above provided.
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(iii) ADJUSTMENTS FOR CANCELLATION OR EXPIRATION OF
COMMON STOCK EQUIVALENTS. Should the Consideration Per Share of any such Common
Stock Equivalents be decreased from time to time, then, upon the effectiveness
of each such change, the Conversion Value will be that which would have been
obtained (A) had the adjustments made upon the issuance of such Common Stock
Equivalents been made upon the basis of the decreased Consideration Per Share of
such securities, and (B) had the adjustments made to the Conversion Value since
the date of issuance of such Common Stock Equivalents been made to such
Conversion Value as adjusted pursuant to clause (A) above. Any adjustment of the
Conversion Value pursuant to this paragraph which relates to any Common Stock
Equivalent shall be eliminated if, as, and when such Common Stock Equivalent
expires or is canceled without being exercised, or is repurchased by the Company
at a price per share at or less than the original purchase price, so that the
Conversion Value for the Series B Convertible Stock effective immediately upon
such cancellation or expiration shall be equal to the Conversion Value that
would have been in effect had the expired or canceled Common Stock Equivalent
not been issued.
(iv) CONSIDERATION PER SHARE. For purposes of this
Section 5, the "Consideration Per Share" which may be received by the Company
shall be determined as follows:
(A) The "Consideration Per Share" shall mean the
amount equal to the total amount of consideration, if any, received by the
Company for the issuance of such Common Stock Equivalents, plus the minimum
amount of consideration, if any, payable to the Company upon exercise, or
conversion or exchange thereof, divided by the aggregate number of shares of
Common Stock that would be issued if all such Common Stock Equivalents were
exercised, exchanged or converted.
(B) The "Consideration Per Share" which may be
received by the Company shall be determined in each instance as of the date of
issuance of Common Stock Equivalents without giving effect to any possible
future upward price adjustments or rate adjustments which may be applicable with
respect to such Common Stock Equivalents.
(v) CONSIDERATION OTHER THAN CASH. If a part or all of
the consideration received by the Company in connection with the issuance of
shares of the Common Stock or the issuance of any of the securities described in
this Section 5 consists of property other than cash, such consideration shall be
deemed to have a fair market value as is reasonably determined in good faith by
the Board.
In the event of any dispute between the holders of the Series B
Convertible Stock and the Company regarding the determination of fair market
value of any securities or property, at the written request of the holders of a
majority of the outstanding shares of Series B Convertible Stock, the Company
shall engage a consulting firm or an investment banking firm, selected by the
Board and approved by such holders of a majority of the outstanding shares of
Series B Convertible Stock, to prepare an independent appraisal of the fair
market value of such securities or property. The determination of such appraiser
shall be final and binding for all purposes. The expenses of any appraisal by
such consulting or investment banking firm shall be borne by the Company.
(vi) EXCEPTIONS TO ANTI-DILUTION ADJUSTMENTS; RESERVED
EMPLOYEE SHARES.
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Sections 5(d)(i) through (d)(vi) shall not apply under any of the circumstances
which would constitute an Extraordinary Common Stock Event (as defined below).
Notwithstanding anything herein to the contrary, such sections shall not apply
with respect to (i) the conversion of the Series A Preferred Stock and (ii) the
issuance or sale of up to 1,277,730 shares of Common Stock issued or issuable
pursuant to options and warrants outstanding as of the date hereof and at the
exercise price for such as of the date hereof. The foregoing numbers shall be
subject to adjustment in the event of any stock dividend, stock split,
reorganization, recapitalization, or other similar event.
(vii) UPON EXTRAORDINARY COMMON STOCK EVENT. Upon the
happening of an Extraordinary Common Stock Event, the Conversion Value (and all
other conversion values set forth in Section 5 above) shall, simultaneously with
the happening of such Extraordinary Common Stock Event, be adjusted by
multiplying the Conversion Value by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
Extraordinary Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall thereafter
be the Conversion Value and the Conversion Value as so adjusted, shall be
readjusted in the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events.
An "Extraordinary Common Stock Event" shall mean (A) the issue of
additional shares of Common Stock as a dividend or other distribution on
outstanding shares of Common Stock, (B) a subdivision of outstanding shares of
Common Stock into a greater number of shares of Common Stock, or (C) a
combination or reverse stock split of outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or any recapitalization or
reorganization.
(e) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the
Common Stock issuable upon the conversion of the Series B Convertible Stock
shall be changed into the same or different number of shares of any class or
classes of capital stock, whether by capital reorganization, recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for elsewhere in this Section 5, or the sale of all
or substantially all of the Company's capital stock or assets to any other
person), then and in each such event the holder of each share of Series B
Convertible Stock shall have the right thereafter to convert such share into the
kind and amount of shares of capital stock and other securities and property
receivable upon such reorganization, recapitalization, reclassification or other
change by the holders of the number of shares of Common Stock into which such
shares of Series B Convertible Stock might have been converted immediately prior
to such reorganization, recapitalization, reclassification or change, all
subject to further adjustment as provided herein.
(f) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY COMPANY.
In each case of an adjustment or readjustment of the Conversion Rate, the
Company at its expense will furnish each record holder of Series B Convertible
Stock, at such holder's registered address as shall appear on the stock records
of the Company, a certificate prepared by the Treasurer or Chief Financial
Officer of the Company, showing such adjustment or readjustment, and stating in
detail the facts upon which such adjustment or readjustment is based.
(g) EXERCISE OF CONVERSION RIGHT. Before any holder of
Series B Convertible
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Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Company or of any transfer agent for the Series B
Convertible Stock, and shall give written notice to the Company at its principal
executive office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. The Company shall, as soon as practicable (but in no
event more than five (5) Business Days) thereafter, execute and deliver or cause
to be executed and delivered at such office to such holder of Series B
Convertible Stock, or to the nominee or nominees of such holder, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Series B Convertible Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.
(h) CASH IN LIEU OF FRACTIONAL SHARES. No fractional
shares shall be issued upon the conversion of any share or shares of the Series
B Convertible Stock. In lieu of any fractional shares to which the holder would
otherwise be entitled, the Company shall make a cash payment equal to the Fair
Market Value (as hereinafter defined) of the Common Stock as of two business
days prior to payment multiplied by such fraction. "Fair Market Value" shall
mean the closing price of the Common Stock on the national securities exchange
on which the Common Stock is listed (if the Common Stock is so listed) or on the
Nasdaq National Market or Small Cap Market (if the Common Stock is regularly
quoted on the Nasdaq National Market or Small Cap Market), or, if not so listed
or regularly quoted or if there is no such closing price, the mean between the
closing bid and asked prices of the Common Stock in the over-the-counter market
or on such exchange or on Nasdaq, or if such bid and asked prices shall not be
available, as reported by any nationally recognized quotation service, or if the
price is not so reported, as determined in good faith by the Board. The
determination as to whether or not any fractional shares are issuable shall be
based upon the aggregate number of shares of Series B Convertible Stock being
converted at any one time by any holder thereof, not upon each share of Series B
Convertible Stock being converted.
(i) PARTIAL CONVERSION. In the event some but not all
of the shares of Series B Convertible Stock represented by a certificate(s)
surrendered by a holder are converted, the Company shall execute and deliver to
or on the order of the holder, at the expense of the Company, a new certificate
representing the number of shares of Series B Convertible Stock which were not
converted.
(j) RESERVATION OF COMMON STOCK. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the Series B Convertible Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Convertible Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series B
Convertible Stock, in addition to such other remedies as shall be available to
the holder of such Series B Convertible Stock, the Company shall take such
corporate action as may, in the opinion of its counsel, be necessary to
increase, and shall increase, its authorized but unissued
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shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
(k) NO REISSUANCE OF SERIES B CONVERTIBLE STOCK. In the
event any shares of Series B Preferred Stock shall be converted pursuant to this
Section 5 or otherwise reacquired by the Company, the shares so converted or
reacquired shall be canceled. The Certificate of Incorporation of the Company
may be appropriately amended from time to time to effect the corresponding
reduction in the Company's authorized capital stock.
(l) In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Company shall mail to each holder of Series B Convertible
Stock, at least 20 days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right.
(m) The Company shall pay all documentary, stamp or
other transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Company upon conversion of any shares of Series B
Convertible Stock; provided, however, that the Company shall not be required to
pay any taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such shares in a name other than
that of the holder of the shares of Series B Convertible Stock in respect of
which such shares are being issued.
(n) All shares of Common Stock which may be issued in
connection with the conversion provisions set forth herein will, upon issuance
by the Company, be validly issued, fully paid and nonassessable and free from
all taxes (except income taxes), liens or charges with respect thereto.
6. MERGER, CONSOLIDATION, ETC.
(a) If at any time or from time to time there shall be (i) a
merger, or consolidation of the Company with or into another corporation, (ii)
the sale of all or substantially all of the Company's capital stock or assets to
any other person, (iii) any other form of business combination or reorganization
in which the Company shall not be the continuing or surviving entity of such
business combination or reorganization, or (iv) any transaction or series of
transactions by the Company in which in excess of 50 percent of the Company's
voting power is transferred (each, a "Reorganization"), then as a part of such
Reorganization, provision shall be made so that the holders of the Series B
Convertible Stock shall thereafter be entitled to receive upon conversion of the
Series B Convertible Stock the same kind and amount of stock or other securities
or property (including cash) of the Company, or of the successor corporation
resulting from such Reorganization, to which such holder would have been
entitled if such holder had converted its shares of Series B Convertible Stock
immediately prior to the effective time of such Reorganization. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Section 5 to the end that the provisions of this Section 5 (including
adjustment of the Conversion Value then in effect and the number of shares of
Common Stock or other securities issuable upon conversion of such shares of
Series B Convertible Stock) shall be applicable after that event in as nearly
equivalent a manner as may be practicable.
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(b) The provisions of this Section 6 are in addition to and
not in lieu of the provisions of Section 4 hereof.
7. NO IMPAIRMENT The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Certificate of Designation and in the taking of all such
action as may be necessary or appropriate in order to protect the conversion
rights of the holders of the Series B Convertible Stock against impairment.
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IN WITNESS WHEREOF, Delicious Brands, Inc. has caused this
Certificate of Designation to be executed this April 12, 1999.
DELICIOUS BRANDS, INC.
By: /s/ Michael J. Kirby
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Name: Michael J. Kirby
Title: President and Chief Executive Officer
By: /s/ Jeffry W. Weiner
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Name: Jeffry W. Weiner
Title: Secretary
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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO DELICIOUS BRANDS, INC. AND ITS COUNSEL, THAT SUCH REGISTRATION
IS NOT REQUIRED
DATED: APRIL 12, 1999
WARRANT
TO PURCHASE 700,000 SHARES OF COMMON STOCK
EXPIRING 5:00 P.M. NEW YORK TIME ON APRIL 11, 2009.
THIS IS TO CERTIFY THAT, for value received, Little Meadow
Corp., or registered assigns (the "Holder") is entitled to purchase from
Delicious Brands, Inc., a Delaware corporation (the "Company"), at any time or
from time to time prior to 5:00 p.m., New York City time, on April 11, 2009 at
the principal executive offices of the Company, at the Exercise Price (as
hereinafter defined), the number of shares of Common Stock shown above, all
subject to adjustment and upon the terms and conditions as hereinafter provided,
and is entitled also to exercise the other appurtenant rights, powers and
privileges hereinafter described.
Certain terms used in this Warrant are defined in Article V.
ARTICLE I
EXERCISE OF WARRANTS
1.1. METHOD OF EXERCISE. To exercise this Warrant in whole or
in part, the Holder shall deliver to the Company, at the Company's offices at
the address set forth in Section 6.1, (a) this Warrant, (b) a written notice, in
substantially the form of the Exercise Notice attached hereto (or a reasonable
facsimile thereof), of such Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, the
denominations of the certificate or certificates desired, and the name or names
in which such certificates are to be registered, and (c) payment of the Exercise
Price with respect to such Common Stock. Payment made pursuant to clause (c)
above may be made, at the option of the Holder by cash, money order, certified
or bank cashier's check or wire transfer.
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1.2. CONVERSION RIGHT. In lieu of the exercise of this Warrant
as provided in Section 1.1, the Holder shall have the right (but not the
obligation) to convert this Warrant, in whole or in part, into a number of
shares of Common Stock equal to the Conversion Number (as defined below) by
delivering to the Company, at the Company's offices at the address set forth in
Section 6.1, (a) this Warrant and (b) a written notice, in substantially the
form of the Conversion Notice attached hereto (or a reasonable facsimile
thereof), of such Holder's election to convert this Warrant, which notice shall
specify the number of shares of Common Stock into which the portion of the
Warrant so designated in such notice is to be converted, the denominations of
the certificate or certificates desired, and the name or names in which such
certificates are to be registered. As used herein the "Conversion Number" shall
mean that number of shares of Common Stock equal to the quotient obtained by
dividing: (x) the "Value" (as defined below) of the portion of the Warrant being
converted; by (y) the Market Price (as defined below).
For purposes of this Warrant (other than this Section 1.2),
any reference herein to the the exercise of this Warrant shall be deemed to
include a reference to the conversion of this Warrant in accordance with the
terms of this Section 1.2
1.3. DELIVERY OF STOCK CERTIFICATES, ETC. The Company shall,
as promptly as practicable and in any event within five Business Days after the
delivery to the Company of an Exercise Notice or Conversion, as the case may be,
execute and deliver or cause to be executed and delivered, in accordance with
such notice, a certificate or certificates representing the aggregate number of
Shares of Common Stock specified in said notice. The certificate or certificates
so delivered shall be in such denominations as may be specified in such notice
or, if such notice shall not specify denominations, shall be in the amount of
the number of shares of Common Stock for which the Warrant is being exercised
and shall be issued in the name of the Holder or such other name or names as
shall be designated in such notice. Such certificate or certificates shall be
deemed to have been issued, and such Holder or any other Person so designated to
be named therein shall be deemed for all purposes to have become a holder of
record of such Common Stock, as of the date the aforementioned notice,
accompanied by full payment of the Exercise Price with respect to such Common
Stock pursuant to Section 1.1 or Section 1.2, as applicable, is received by the
Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the certificate or certificates, deliver to
the Holder a new warrant certificate evidencing the rights to purchase the
remaining Common Stock provided for by this Warrant, which new warrant
certificate shall in all other respects be identical with this warrant, or, at
the request of the Holder, appropriate notation may be made on this Warrant
which shall then be returned to the Holder. The Company shall pay all expenses,
taxes (other then income taxes of a Holder) and other charges payable in
connection with the preparation, issuance and delivery of any such certificates
for Common Stock and new Warrants, except that, if any such Common Stock
certificates or new Warrants shall be registered in a name or names other than
the name of the Holder, funds sufficient to pay all transfer taxes payable as a
result of such transfer shall be paid by the Holder at the time of delivering
the aforementioned notice of exercise or promptly upon receipt of a written
request of the Company for payment.
1.4. SECURITIES TO BE FULLY PAID AND NONASSESSABLE. All Common
Stock issued upon the exercise of this Warrant: (i) shall be validly issued,
fully paid and nonassessable and free from all preemptive rights of any holder
of Common Stock, and from all taxes, liens and charges
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with respect to the issue thereof (other than transfer taxes); and (ii) if the
Common Stock is then listed on any national securities exchanges (as defined in
the Exchange Act) or quoted on NASDAQ, shall be duly listed or quoted thereon,
as the case may be.
1.5. SECURITIES LEGEND. Each certificate for Common Stock
issued upon exercise of this Warrant, unless at the time of exercise such Common
Stock are registered under the Securities Act, shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION OR COUNSEL, REASONABLY
SATISFACTORY TO DELICIOUS BRANDS, INC. AND ITS COUNSEL, THAT SUCH REGISTRATION
IS NOT REQUIRED.
Each such certificate shall also bear a legend indicating that
such shares are such subject to a lock-up agreement, if issued prior to the
expiration of the lock-up period provided for in Section 9.01 of the Securities
Purchase Agreement.
Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the reasonable
opinion of counsel to the Company, the securities represented thereby are no
longer subject to restrictions on resale under the Securities Act.
1.6. RESERVATION; AUTHORIZATION. The Company has reserved and
will keep available for issuance upon exercise of the Warrants the total number
of shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of such Common Stock has been duly and validly
authorized.
ARTICLE II
TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1. OWNERSHIP OF WARRANT. The Company may deem and treat the
Person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any
Person) for all purposes and shall not be affected by any notice to the
contrary, until presentation of this Warrant for registration of transfer as
provided in this Article II.
2.2. TRANSFER OF WARRANT. The Company agrees to maintain at
its principal executive offices books for the registration of transfers of the
Warrants, and transfer of this Warrant and all rights hereunder shall be
registered, in whole or in part, on such books, upon
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surrender of this Warrant at the Company's principal executive offices, together
with a written assignment of this Warrant duly executed by the Holder or his
duly authorized agent or attorney, with (unless the Holder is the original
Holder of this Warrant) signatures guaranteed by a bank or trust Company or a
broker or dealer registered with the NASD, and funds sufficient to pay any
transfer taxes payable upon such transfer. Upon surrender the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be canceled. The Company shall not be required
to register any transfers absent an opinion of counsel to the Company that such
transfer is exempt from the registration requirements of the Securities Act;
PROVIDED that the Company agrees not to request an opinion of counsel with
respect to transfers between or among affiliates of a Holder.
2.3. DIVISION OR COMBINATION OF WARRANTS. This Warrant may be
divided or combined with other Warrants upon surrender hereof and of any Warrant
or Warrants with which this Warrant is to be combined at the Company's offices
at the address set forth in Section 6.1, together with a written notice
specifying the names and denominations in which the new Warrant or Warrants are
to be issued, signed by the holders hereof and thereof or their respective duly
authorized agents or attorneys. The Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. Any such division or combination must
comply with Section 2.2, to the extent applicable.
2.4. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANTS. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company (the original Holder's or any institutional Holder's indemnity being
satisfactory indemnity in the event of loss, theft or destruction of any Warrant
owned by such holder), or, in the case of any such mutilation, upon surrender
and cancellation of such Warrant, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and representing the right to purchase the same aggregate number of Common Stock
as provided for in such lost, stolen, destroyed or mutilated Warrant.
2.5. EXPENSES OF DELIVERY OF WARRANTS. The Company shall pay
all expenses, taxes (other than transfer taxes or income taxes of a Holder) and
other charges payable in connection with the preparation, issuance and delivery
of Warrants and Common Stock issuable upon exercise of the Warrants hereunder.
ARTICLE III
CERTAIN RIGHTS
3.1. REGISTRATION RIGHTS. The Common Stock issuable upon
exercise of this Warrant are entitled to the benefits of the registration rights
contemplated in the Securities Purchase Agreement.
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3.2. CERTAIN COVENANTS. The Company covenants and agrees that,
until exercise or cancellation of this Warrant, the Company will deliver to each
Holder who beneficially owns (as defined in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934 as amended) at least the lesser of (x) 5% of the
outstanding Common Stock of the Company or (y) 5% of the Shares.:
(a) As soon as available but not later than 105 days
after the close of the fiscal year of the Company, a consolidated balance sheet
of the Company as at the end of such year and the related consolidated and
consolidating statements of income, of stockholders' equity and of cash flows
for such year, such consolidated statements to be audited by independent
certified public accountants.
(b) As soon as available but not later than 50 days after
the end of each of the first three fiscal quarters, a consolidated balance sheet
of the Company as at the end of, and the related consolidated statements of
income, of stockholders' equity and of cash flows for the portion of the
Company's fiscal year then elapsed, all prepared in accordance with generally
accepted accounting principles;
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1. ADJUSTMENTS GENERALLY. The Exercise Price and the number
of shares of Common Stock (or other securities or property) issuable upon
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events, as provided in this Article IV.
4.2. COMMON STOCK. In the event that the Exercise Price is
adjusted pursuant to the terms hereof, then, effective at the time of such
adjustment, the number of shares subject to this Warrant shall be increased (or,
in the case of the application of Section 4.3(g) as a result of clause (iii) of
the definition of Extraordinary Common Stock Event, reduced) to an amount equal
to the result obtained by multiplying: (i) the number of shares of Common Stock
subject to this Warrant prior to such adjustment by; (ii) a fraction the
numerator of which shall be the Exercise Price immediately prior to such
adjustment and the denominator of which shall be the Exercise Price following
such adjustment.
4.3. ADJUSTMENTS TO EXERCISE PRICE
(a) UPON DILUTIVE ISSUANCES. If the Company shall issue
or sell shares of its Common Stock or Common Stock Equivalents (as hereafter
defined) without consideration or at a price per share less than the GREATER of:
(i) the then current Market Price of such securities so issued; or (ii)$8.00,
then such Exercise Price shall be reduced so as to be equal to an amount
determined by multiplying such Exercise Price by a fraction:
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(i) the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock or Common Stock Equivalents (calculated on a
fully-diluted basis assuming the exercise or conversion of all presently
exercisable options, warrants, purchase rights or convertible securities), plus
(b) the number of shares of Common Stock or Common Stock Equivalents which
aggregate consideration, if any, received by the Company for the total number of
such additional shares of Common Stock or Common Stock Equivalents so issued
would purchase at the GREATER of: (x) the then current Market Price of such
securities so issued; or (y) $8.00 and
(ii) the denominator of which shall be (a) the number
of shares of Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock or Common Stock Equivalents (calculated on a
fully-diluted basis assuming the exercise or conversion of all presently
exercisable options, warrants, purchase rights or convertible securities), plus
(b) the number of such additional shares of Common Stock or Common Stock
Equivalents so issued.
(b) UPON DILUTIVE ISSUANCES OF WARRANTS, OPTIONS AND
PURCHASE RIGHTS TO COMMON STOCK OR CONVERTIBLE SECURITIES. For the purposes of
this Article IV, the issuance of any warrants, options, subscription or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock, or the issuance of
any warrants, options, subscription or purchase rights with respect to such
convertible or exchangeable securities (collectively, "Common Stock
Equivalents"), shall be deemed an issuance of Common Stock, with respect to
adjustments required hereunder if the Consideration Per Share which may be
received by the Company for such Common Stock shall be less than the GREATER of:
(i) the then current Market Price of such securities so issued; or (ii)$8.00.
Any obligation, agreement or undertaking to issue Common Stock Equivalents at
any time in the future shall be deemed to be an issuance of Common Stock
Equivalents at the time such obligation, agreement or undertaking is made or
arises. No adjustment of the Exercise Price shall be made under this Section
upon the issuance of any shares of Common Stock which are issued pursuant to the
exercise, conversion or exchange of any Common Stock Equivalents if any
adjustment shall previously have been made upon the issuance of any such Common
Stock Equivalents as above provided.
(c) ADJUSTMENTS FOR CANCELLATION OR EXPIRATION OF COMMON
STOCK EQUIVALENTS. Should the Consideration Per Share of any such Common Stock
Equivalents be decreased from time to time, then, upon the effectiveness of each
such change, the Exercise Price will be that which would have been obtained (1)
had the adjustments made upon the issuance of such Common Stock Equivalents been
made upon the basis of the decreased Consideration Per Share of such securities,
and (2) had the adjustments made to the Exercise Price since the date of
issuance of such Common Stock Equivalents been made to such Exercise Price as
adjusted pursuant to clause (1) above. Any adjustment of the Exercise Price
pursuant to this paragraph which relates to any Common Stock Equivalent shall be
eliminated if, as, and when such Common Stock Equivalent expires or is canceled
without being exercised, or is repurchased by the Company at a price per share
at or less than the original purchase price, so that the Exercise Price
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effective immediately upon such cancellation or expiration shall be equal to the
Exercise Price that would have been in effect had the expired or canceled Common
Stock Equivalent not been issued.
(d) CONSIDERATION PER SHARE. For purposes of this Article
IV, the "Consideration Per Share" which may be received by the Company shall be
determined as follows:
(i) The "Consideration Per Share" shall mean the
amount equal to the total amount of consideration, if any, received by the
Company for the issuance of such Common Stock Equivalents, plus the minimum
amount of consideration, if any, payable to the Company upon exercise,
conversion or exchange thereof, divided by the aggregate number of shares of
Common Stock that would be issued if all such Common Stock Equivalents were
exercised, exchanged or converted.
(ii) The "Consideration Per Share" which may be
received by the Company shall be determined in each instance as of the date of
issuance of Common Stock Equivalents without giving effect to any possible
future upward price adjustments or rate adjustments which may be applicable with
respect to such Common Stock Equivalents.
(e) CONSIDERATION OTHER THAN CASH. If a part or all of
the consideration received by the Company in connection with the issuance of
shares of the Common Stock or the issuance of any of the securities described in
this Section consists of property other than cash, such consideration shall be
deemed to have a fair market value as is reasonably determined in good faith by
the Board of Directors of the Company.
In the event of any dispute between the Holders and the
Company regarding the determination of fair market value of any securities or
property, at the written request of the Requisite Holders, the Company shall
engage a consulting firm or investment banking firm, selected by the Board of
Directors and approved by such Holders, to prepare an independent appraisal of
the fair market value of such securities or property. The determination of such
appraisal shall be final and binding for all purposes. The expenses of any
appraisal by such consulting or investment banking firm shall be borne by the
Company.
(f) EXCEPTIONS TO ANTI-DILUTION ADJUSTMENTS; RESERVED
EMPLOYEE SHARES. This Section 4.3 (a) through (f) shall not apply under any of
the circumstances which would constitute an Extraordinary Common Stock Event (as
defined below). Notwithstanding anything herein to the contrary, such Sections
shall not apply with respect to (i) the conversion of the Series A Preferred
Stock, and (ii) the issuance or sale of up to 1,277,730 shares of Common Stock
issued or issuable pursuant to options and warrants outstanding as of the date
hereof and at the exercise price for such as of the date hereof. The foregoing
numbers shall be subject to adjustment in the event of any stock dividend, stock
split, reorganization, recapitalization, or other similar event.
(g) UPON EXTRAORDINARY COMMON STOCK EVENT. Upon the
happening of an Extraordinary Common Stock Event, the Exercise Price shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by multiplying the Exercise Price, by a fraction, the numerator of
which shall be the number of shares of Common Stock
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outstanding immediately prior to such Extraordinary Common Stock Event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Exercise Price, and the Exercise Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
An "Extraordinary Common Stock Event" shall mean (i) the
issue of additional shares of Common Stock as a dividend or other distribution
on outstanding shares of Common Stock, (ii) a subdivision of outstanding shares
of Common Stock into a greater number of shares of Common Stock, (iii) a
combination or reverse stock split of outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or (iv) any recapitalization or
reorganization.
(h) DIVIDENDS. In the event the Company shall make or
issue, or shall fix a record date for the determination of holders of Common
Stock entitled to receive a dividend or other distribution (other than a
distribution in liquidation or other distribution otherwise provided for herein)
with respect to the Common Stock payable in (i) securities of the Company OTHER
THAN shares of Common Stock, or (ii) other assets (excluding cash dividends or
distributions), then and in each such event provision shall be made so that the
Holders shall receive upon exercise of this Warrant in addition to the number of
shares of Common Stock receivable thereupon, the number of securities or such
other assets of the Company which each Holder would have received had such
Holder exercised this Warrant and acquired Common Stock on the date of such
event and had such holder thereafter, during the period from the date of such
event to and including the exercise of this Warrant by the Holder, retained such
securities or such other assets receivable by such holder during such period,
giving application to all other adjustments called for during such period under
this Article IV with respect to the rights of the holders of the Common Stock.
(i) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the
Common Stock issuable upon the exercise of this Warrant shall be changed into
the same or different number of shares of any class or classes of capital stock,
whether by capital reorganization, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for elsewhere in this Section 4.3, or the sale of all or substantially
all of the Company's capital stock or assets to any other person), then and in
each such event each Holder shall have the right thereafter to acquire the kind
and amount of shares of capital stock and other securities and property
receivable upon such reorganization, recapitalization, reclassification or other
change by the holders of the number of shares of Common Stock for which such
Warrant might have been exercised immediately prior to such reorganization,
recapitalization, reclassification or change, all subject to further adjustment
as provided herein.
(j) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY COMPANY. In
each case of an adjustment or readjustment hereunder, the Company at its expense
will furnish each Holder not later than the fifth Business Day following any
such adjustment or readjustment, at such Holder's registered address as shall
appear on the records of the Company, a certificate prepared by the Treasurer or
Chief Financial Officer of the Company, showing such adjustment or readjustment,
and stating in detail the facts upon which such adjustment or readjustment is
based.
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(k) RESERVATION OF COMMON STOCK. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the exercise of the Warrants,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of the Warrants and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of Warrants, the Company shall take such action as may be
necessary to increase, and it shall increase, its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purpose.
4.4. MERGER, CONSOLIDATION, ETC.
(a) If at any time or from time to time there shall be
(i) a merger, or consolidation of the Company with or into another corporation,
(ii) the sale of all or substantially all of the Company's capital stock or
assets to any other person, (iii) any other form of business combination or
reorganization in which the Company shall not be the continuing or surviving
entity of such business combination or reorganization, or (iv) any transaction
or series of transactions by the Company in which in excess of 50 percent of the
Company's voting power is transferred (each, a "Reorganization"), then as a part
of such Reorganization, provision shall be made so that the Holders shall
thereafter be entitled to receive upon exercise the same kind and amount of
stock or other securities or property (including cash) of the Company, or of the
successor corporation resulting from such Reorganization to which such Holder
would have been entitled if such Holder had exercised its Warrants immediately
prior to the effective time of such Reorganization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
Article IV to the end that the provisions of Article IV (including adjustment of
the Exercise Price then in effect and the number of shares of Common Stock or
other securities issuable upon exercise of the Warrants) shall be applicable
after that event in as nearly equivalent a manner as may be practicable.
(b) The Company will not effect any of the
transactions described in clause (a) of this Section 4.4 hereof unless, prior to
the consummation thereof, each person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
this Warrant as provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the Holders: (i) the obligations of the
Company under this Warrant (and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this Warrant),
(ii) the obligations of the Company under the Securities Purchase Agreement with
respect to Registration Rights and (iii) the obligation to deliver to each
holder such shares of stock, securities, cash or property as, in accordance with
the foregoing provisions of this Section 4, each Holder may be entitled to
receive, and such Person shall have similarly delivered to such Holder an
opinion of counsel for such Person, stating that this Warrant shall thereafter
continue in full force and effect and the terms hereof (including without
limitation all of the provisions of this Section 4) shall be applicable to the
stock, securities, cash or property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any rights pursuant hereto.
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(c) The provisions of this Section 4.4 are in addition
to and not in lieu of the other provisions of Section 4 hereof.
4.5. NOTICE OF ADJUSTMENT. In addition to any other notice
required hereunder, not less than 10 nor more than 60 days prior to the record
date or effective date, as the case may be, of any action which would require an
adjustment or readjustment pursuant to this Article IV, the Company shall give
notice to each Holder of such event, describing such event in reasonable detail
and specifying the record date or effective date, as the case may be, and, if
determinable, the required adjustment and the computation thereof. If the
required adjustment is not determinable at the time of such notice, the Company
shall give notice to each Holder of such adjustment and computation promptly
after such adjustment becomes determinable.
4.6. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
(b) any capital reorganization of the Company,
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person,
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company, or
(d) any issuance of any Common Stock or Common Stock
Equivalents other than upon the conversions of shares of Series A Preferred
Stock or the grant of stock options to the officers, directors, employees of the
Company pursuant to the Stock Option Plan or the exercise thereof (or any
currently outstanding stock options),
the Company will mail to the holder of this Warrant a notice specifying (i) the
date or expected date on which any record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation, winding-up or Sale of the Company is to take
place, the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction and (iii)
the date of such issuance, together with a description of the security so issued
and the consideration received by the Company therefor. Such notice shall be
mailed promptly after the decision is made to take any of the actions specified
in (a)-(d) above.
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ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the
following respective meanings:
"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" shall mean (a) if any Common Stock is listed or
admitted to trading on a national securities exchange or Nasdaq, a day on which
the principal national securities exchange Nasdaq on which such class of Common
Stock are listed or admitted to trading is open for business or (b) if Common
Stock is not so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Common Stock" means the common stock, $.01 par value, of the
Company.
"Common Stock Equivalents" shall have the meaning set forth in
Section 4.3(b).
"Company" shall have the meaning set forth in the first
paragraph of this Warrant.
"Consideration Per Share" shall have the meaning set forth in
Section 4.3(d).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Securities and Exchange Commission (or its successor)
thereunder, all as the same shall be in effect at the time.
"Exercise Price" shall mean $.01 per share of Common Stock,
adjusted as contemplated herein.
"Extraordinary Common Stock Event" shall have the meaning set
forth in Section 4.3(g).
"Holder" shall have the meaning set forth in the first
paragraph of this Warrant.
"Market Price" at any date shall be deemed to be the last
reported sale price of the Common Stock on such date, or, in case no such
reported sale takes place on such day, the average of the last reported sales
prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or if any such exchange
on which the Common Stock is listed is not its principal trading market, the
last reported sale price as furnished by the NASD through the Nasdaq National
Market or SmallCap Market, or, if applicable, the OTC Bulletin Board, or if the
Common Stock is not listed or admitted to trading on the Nasdaq National Market
or SmallCap
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Market or OTC Bulletin Board or similar organization, as determined in good
faith by resolution of the Board of Directors of the Company, based on the best
information available to it.
"NASD" means the National Association of Securities Dealers,
Inc.
"Nasdaq" means The National Association of Securities Dealers,
Inc. Automated Quotation System.
"Person" means any individual, corporation, limited liability
company, partnership, limited liability partnership, joint venture or other
entity.
"Requisite Holders" means, as of any date of determination,
persons holding outstanding Warrants entitling them to purchase a majority of
the Common Stock issuable upon exercise of the Warrants originally represented
hereby.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Securities and Exchange Commission (or its successor)
thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated April 12, 1999 between the Company and Little Meadow Corp.
"Shares" shall have the meaning set forth in the Securities
Purchase Agreement.
"Value" of the portion of this Warrant being converted shall
equal the remainder derived from subtracting (a) the Exercise Price (as adjusted
as provided herein) multiplied by the number of shares of Common Stock
underlying the portion of this Warrant being converted from (b) the Market Price
of the shares of Common Stock multiplied by the number of shares of Common Stock
underlying the portion of this Warrant being converted.
"Warrant or Warrants" means this Warrant and any Warrant
issued to a transferee of all or any part of this Warrant.
ARTICLE VI
MISCELLANEOUS
6.1. NOTICES. All notices or other communications required
hereby shall be in writing and shall be sent either by (a) courier, or (b) by
telecopy as well as by registered or certified mail, and shall be regarded as
properly given in the case of a courier upon actual delivery to the proper place
of address; in the case of telecopy, on the day following the date of
transmission if properly addressed and sent without transmission error to the
correct number and receipt is confirmed by telephone within 48 hours of the
transmission; in the case of a letter for which a telecopy could not be
successfully transmitted or receipt of which could not be confirmed as herein
provided, three (3) days after the registered or certified mailing date if the
letter is
-12-
<PAGE>
properly addressed and postage prepaid; and shall be regarded as properly
addressed if sent to the parties and their representatives at the addresses
given below:
To the Company: Delicious Brands, Inc.
2070 Maple Street
Des Plaines, IL 60018
Attention: Michael J. Kirby, President and
Chief Executive Officer
Facsimile: (847) 699-5928
Confirmation: (847) 699-3200
With a copy to: Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Steven Wolosky, Esq.
Facsimile: (212) 755-1467
Confirmation: (212) 753-7200
To the Holder: Little Meadow Corp.
c/o Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, NY 10153
Attention: Russell Glass
Facsimile: (212) 750-5807
Confirmation: (212) 702-4300
With a copy to: Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, NY 10036
Attention: Jonathan Klein, Esq.
Facsimile: (212) 626-0799
Confirmation: (212) 626-0879
or such other address as any of the above may have furnished to the other
parties in writing in compliance with the terms of this Section.
6.2. WAIVERS: AMENDMENTS. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the Requisite Holders.
Any such amendment, modification or waiver effected
pursuant to this Section shall be binding upon the Holders of all Warrants and
Common Stock issued upon
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<PAGE>
exercise thereof, upon each future holder thereof and upon the Company. In the
event of any such amendment, modification or waiver, the Company shall give
prompt notice thereof to all Holders and, if appropriate, notation thereof shall
be made on all Warrants thereafter surrendered for registration of transfer or
exchange.
No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other
circumstances.
6.3. GOVERNING LAW. This Warrant shall be construed in
accordance with and governed by the laws of the State of New York without regard
to principles of conflicts of law.
6.4. SURVIVAL OF AGREEMENTS; REPRESENTATIONS AND WARRANTIES,
ETC. All representations, warranties and covenants made by the Company herein or
in any certificate or other instrument delivered by or on behalf of it in
connection with the Warrants shall be considered to have been relied upon by the
Holder and shall survive the issuance and delivery of the Warrants, regardless
of any investigation made by the Holder, and shall continue in full force and
effect so long as any Warrant is outstanding.
6.5. COVENANTS TO BIND SUCCESSOR AND ASSIGNS. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.
6.6. SEVERABILITY. In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
6.7. SECTION HEADINGS. The sections headings used herein are
for convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
6.8. NO IMPAIRMENT. The Company shall not by any action
including, without limitation, amending its organizational documents 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 of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Stock upon the exercise of this Warrant, and (b) use
its commercially reasonable best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
-14-
<PAGE>
IN WITNESS WHEREOF, Delicious Brands, Inc. has caused this
Warrant to be executed in its corporate name by one of its officers thereunto
duly authorized, and attested by its Secretary or an Assistant Secretary, all as
of the day and year first above written.
DELICIOUS BRANDS, INC.
By: /s/ Michael J. Kirby
---------------------------------
Name: Michael J. Kirby
Title: President and Chief Executive
Officer
Attest:
/s/ Jeffry W. Weiner
- -------------------------
Name: Jeffry W. Weiner
Title: Secretary
-15-
<PAGE>
FORM OF EXERCISE NOTICE
(To be executed upon exercise of Warrant)
TO:
The undersigned hereby irrevocably elects to exercise the
right to purchase represented by the attached Warrant for, and to purchase
thereunder, __________________ Common Stock, as provided for therein, and
tenders herewith payment of the Exercise Price in full in accordance with the
terms of the attached warrant.
Please issue a certificate or certificates for such Common
Stock in the following name or names and denominations:
If said number of Common Stock shall not be all the Common
Stock issuable upon exercise of the attached Warrant, a new Warrant is to be
issued in the name of the undersigned for the balance remaining of such Common
Stock.
Dated: _____________, _____
---------------------------------
Note: The above signature should correspond exactly with the name on
the face of the attached Warrant or with the name of the
assignee appearing in the assignment form below.
-16-
<PAGE>
FORM OF CONVERSION NOTICE
(To be executed upon conversion of Warrant)
TO:
The undersigned hereby irrevocably converts the attached
Warrant with respect to shares of Common Stock which such holder would be
entitled to receive upon the conversion hereof.
Please issue a certificate or certificates for such Common
Stock in the following name or names and denominations:
If said number of Common Stock shall not be all the Common
Stock issuable upon conversion of the attached Warrant, a new Warrant is to be
issued in the name of the undersigned for the balance remaining of such Common
Stock.
Dated: _____________, _____
---------------------------------
Note: The above signature should correspond exactly with the name on
the face of the attached Warrant or with the name of the
assignee appearing in the assignment form below.
-17-
<PAGE>
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ________________________________ hereby
sells, assigns and transfers unto __________________ the attached Warrant,
together with all rights, title and interest therein, and does hereby
irrevocably constitute and appoint ____________________ attorney to transfer
said Warrant on the books of , with full power of substitution in the premises.
---------------------------------
Note: The above signature should
correspond exactly with the name
on the face of the attached
Warrant.
-18-
------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
dated April 12, 1999
by and between
DELICIOUS BRANDS, INC.
and
LITTLE MEADOW CORP.
------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES....................................1
1.01 Purchase and Sale..........................................1
1.02 The Conversion Shares......................................2
1.03 Delivery of Securities.....................................2
1.04 Purchase Price.............................................2
1.05 Closing....................................................2
ARTICLE II
CONDITIONS TO PURCHASER OBLIGATIONS...................................2
2.01 Documentation at Closing...................................2
2.02 Consents and Waivers.......................................3
2.03 Directors..................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................4
3.01 Organization and Standing of the Company...................4
3.02 Corporate Action...........................................4
3.03 Governmental Approvals.....................................5
3.04 Litigation.................................................5
3.05 Certain Agreements of Officers and Employees...............5
3.06 Compliance with Other Instruments..........................5
3.07 Title to Assets, Patents...................................6
3.08 SEC Documents; Financial Statements........................6
3.09 Absence of Certain Developments............................7
3.10 Taxes......................................................8
3.11 Benefit Plans; Labor Relations.............................9
3.12 Transactions with Affiliates..............................10
3.13 Assumptions or Guaranties of Indebtedness of Other
Persons..................................................10
3.14 Investments in Other Persons..............................10
3.15 Securities Act............................................10
3.16 Capitalization; Status of Capital Stock...................10
3.17 Registration Rights.......................................11
3.18 Insurance.................................................11
3.19 Books and Records.........................................12
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<PAGE>
3.20 Material Agreements.......................................12
3.21 Environmental and Safety Laws.............................12
3.22 U.S. Real Property Holding Corporation....................12
3.23 Compliance................................................12
3.24 Brokers or Finders........................................13
3.25 Disclosure................................................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................13
4.01 Organization and Standing of the Company..................13
4.02 Corporate Action..........................................13
4.03 Investment Representations................................13
4.04 Access to Information.....................................14
4.05 Sophistication and Knowledge..............................14
4.06 Transfer Restrictions Imposed by Securities Laws..........14
4.07 Lack of Liquidity.........................................15
4.08 Accredited Investor Status................................15
4.09 Brokers or Finders........................................15
ARTICLE V
COVENANTS OF THE COMPANY.............................................15
5.01 Inspection................................................15
5.02 Indemnification...........................................15
5.03 Use of Proceeds...........................................16
5.04 Third Party Registration Rights...........................16
ARTICLE VI
REGISTRATION RIGHTS..................................................17
6.01 Piggy-Back Registrations..................................17
6.02 Demand Registration.......................................18
6.03 Registrations on Form S-3.................................19
6.04 Effectiveness.............................................19
6.05 Indemnification by the Company............................19
6.06 Indemnification by Holders of Registrable Shares..........21
6.07 Exchange Act Registration.................................23
6.08 Damages...................................................23
6.09 Further Obligations of the Company........................23
6.10 Expenses..................................................25
6.11 Transferability...........................................25
6.12 Mergers, Etc..............................................25
ii
<PAGE>
ARTICLE VII
INDEMNIFICATION......................................................26
7.01 Indemnification of the Purchaser by the Company...........26
7.02 Indemnification of the Company by the Purchaser...........26
7.03 Right to Defend, Etc......................................27
7.04 Tax Effect................................................27
ARTICLE VIII
GLOSSARY ...........................................................28
8.01 Certain Defined Terms.....................................28
8.02 Accounting Terms..........................................31
ARTICLE IX
MISCELLANEOUS........................................................31
9.01 "Lock-Up" Agreement.......................................31
9.02 No Waiver; Cumulative Remedies............................31
9.03 Amendments, Waivers and Consents..........................32
9.04 Addresses for Notices.....................................32
9.05 Costs, Expenses and Taxes.................................33
9.06 Effectiveness; Binding Effect; Assignment.................33
9.07 Survival of Representations and Warranties................33
9.08 Prior Agreements..........................................33
9.09 Severability..............................................34
9.10 Governing Law.............................................34
9.11 Headings; References......................................34
9.12 Counterparts..............................................34
9.13 Further Assurances........................................34
9.14 Transfer..................................................34
iii
<PAGE>
EXHIBITS
1.01(A) Form of Certificate of Designation
1.01(B) Form of Warrant
2.01(b) Form of Opinion of Counsel to Company
5.02(a) Form of Indemnification Agreement
iv
<PAGE>
SCHEDULES
3.04 Litigation
3.05(b) Certain Employee/Consultant Agreements
3.07(a) Title to Assets, Patents
3.07(b) Intellectual Property Rights; Claims
3.08(c) Liabilities
3.08(d) Certain Changes Subsequent to September 30, 1998
3.09 Certain Developments
3.10 Taxes
3.11(a) Benefit Plans
3.12 Certain Transactions with Affiliates
3.16 Capitalization; Status of Capital Stock
3.17 Registration Rights
318(b) Directors and Officers Liability Policy
3.20 Material Agreements
3.24 Broker or Finder Commission
v
<PAGE>
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement, dated April 12, 1999, by and
between Delicious Brands, Inc. a Delaware corporation having its principal
executive offices at 2070 Maple Street, Des Plaines, Illinois 60018 (the
"Company"), and Little Meadow Corp., a Delaware corporation having its business
address at One Wall Street Court, Suite 980, New York, New York 10005 (the
"Purchaser").
WITNESSETH:
WHEREAS, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, shares of
Series B Convertible Preferred Stock, par value $.01 per share (the "Series B
Stock"), of the Company and warrants to purchase shares of Common Stock, par
value $.01 per share (the "Common Stock"), on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
agreements contained herein, the parties hereby agree as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.01 PURCHASE AND SALE. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to issue and sell to
the Purchaser, and the Purchaser agrees to purchase from the Company, at the
Closing (such capitalized term and all other capitalized terms used herein and
not separately defined herein shall have the respective meanings ascribed to
them in Article VIII hereof): (a) 35,000 shares of Series B Stock; and (b)
warrants to purchase, subject to the Equitable Adjustments contained therein,
700,000 shares of Common Stock at an initial exercise price of $.01 per share
for a period of ten (10) years following the date of issuance of such warrants
(the "Warrants"). The Series B Stock shall have the designation, rights and
other terms and provisions set forth in the Certificate of Designation attached
hereto as EXHIBIT 1.01(A) (the "Certificate of Designation"), which rights and
terms include, without limitation: (i) the right of the Holders of Series B
Stock to elect two (2) members of the Board of Directors of the Company (the
"Board"); (ii) the right of the holder of each share of Series B Stock to
convert each such share into five (5) shares of Common Stock (subject to
Equitable Adjustments) at any time or from time to time; and (iii) the right of
the holder of each share of Series B Stock to vote on all matters presented to
the holders of Common Stock on the basis of five (5) votes for each share of
Series B Stock (subject to Equitable Adjustment). The Warrants shall be in the
form attached hereto as EXHIBIT 1.01(B).
<PAGE>
1.02 THE CONVERSION SHARES. The Company has authorized and has
reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of Common Stock to satisfy the rights of: (a)
conversion of the holders of the Series B Stock; and (b) the holders of the
Warrants. Any shares of Common Stock issuable upon conversion of the Series B
Stock are herein referred to as the "Conversion Shares". Any shares of Common
Stock issuable upon exercise of the Warrants are herein referred to as the
"Warrant Shares".
1.03 DELIVERY OF SECURITIES. At the Closing, the Company shall
deliver to the Purchaser, or will cause to be delivered to the Purchaser,
certificates representing the number of shares of Series B Stock referred to in
Section 1.01 above and the Warrants, each registered in the name of the
Purchaser.
1.04 PURCHASE PRICE. The purchase price to be paid by the
Purchaser to the Company in full consideration for the issuance and sale of the
Series B Stock and the Warrants shall be one million seven hundred and fifty
thousand Dollars ($1,750,000) (the "Purchase Price") payable by wire transfer in
immediately available funds to an account designated by the Company prior to the
Closing.
1.05 CLOSING. The closing of the transactions to be effected
hereunder (the "Closing") will be held at the offices of Gordon Altman Butowsky
Weitzen Shalov & Wein, 114 West 47th Street, New York, New York 10036, or such
other location as the parties may agree to, at 10:00 a.m., New York City time,
on April 12, 1999, or such other date and time as shall be mutually acceptable
to the parties.
ARTICLE II
CONDITIONS TO PURCHASER OBLIGATIONS
The obligation of the Purchaser to purchase and pay for the
Series B Stock and the Warrants to be purchased by it at the Closing is subject
to the satisfaction prior to the Closing of each of the following conditions,
unless waived in writing by the Purchaser:
2.01 DOCUMENTATION AT CLOSING. The Purchaser shall have
received, prior to or at the Closing, all of the following materials, each in
form and substance satisfactory to the Purchaser and its counsel, and each of
the following events shall have occurred, or each of the following documents
shall have been delivered, prior to or simultaneous with the Closing:
(a) Copies of: (i) the Certificate of Incorporation of the
Company, as amended or restated to date, together with such evidence as may be
available of the filing thereof; (ii) the resolutions of the Board providing for
the approval of the Certificate of Designation, the approval of the Transaction
Documents, the issuance of the Series B Stock and the Warrants, and all other
2
<PAGE>
agreements or matters contemplated hereby or executed in connection herewith
(including, without limitation, resolutions (1) approving of the Purchaser and
each of its Affiliates and associates (including, without limitation, Carl C.
Icahn and any Person directly or indirectly controlled by Mr. Icahn ) becoming
an interested stockholder (as such term is defined in Section 203 of the DGCL
("Section 203")) pursuant to the transactions contemplated by this Agreement;
and (2) acknowledging that any future transactions between any one or more of
the Company and its subsidiaries, on the one hand, and any one or more of the
Purchaser, its Affiliates and associates (including, without limitation, Carl C.
Icahn and any Person directly or indirectly controlled by Mr. Icahn), on the
other hand, shall not be subject to the provisions of Section 203); and (iii)
the By-laws of the Company, all of which shall have been certified by the
Secretary of the Company, as of the date of the Closing, to be true, complete
and correct; and certified copies of all documents evidencing other necessary
corporate or other action and governmental approvals, if any, required to be
obtained at or prior to the Closing with respect to this Agreement and the
issuance of the shares of Series B Stock and the Warrants.
(b) The favorable opinion of counsel for the Company, dated
the date of the Closing, in the form attached as EXHIBIT 2.01(B).
(c) (i) A certificate of the Secretary or an Assistant
Secretary of the Company, dated the date of the Closing, which shall certify the
names of the officers of the Company authorized to sign: (i) this Agreement;
(ii) the certificates for the Series B Stock; (iii) the Warrants; and (iv) the
other documents, instruments or certificates to be delivered pursuant to this
Agreement by the Company or any of its officers, together with the incumbency of
such officers, and the true specimen signatures of such officers.
(d) A Certificate of the Secretary of State of the State of
Delaware, dated a recent date, as to the due incorporation and good standing of
the Company.
(e) A copy of the Certificate of Designation certified by the
Secretary of State of the State of Delaware as having been filed with the
Secretary of State of the State of Delaware.
2.02 CONSENTS AND WAIVERS. The Company shall have obtained any
consents or waivers necessary to be obtained at or prior to the Closing to
execute and deliver the Transaction Documents (as defined below) and the other
agreements and instruments executed and delivered by the Company in connection
herewith, to issue the Series B Stock and the Warrants and to carry out the
transactions contemplated hereby and thereby, and such consents and waivers
shall be in full force and effect at the Closing. All corporate and other action
and governmental filings necessary to effectuate the terms of the Transaction
Documents and the other agreements and instruments executed and delivered by the
Company in connection herewith and the issuance of the Series B Stock and the
Warrants shall have been made or taken.
2.03 DIRECTORS. The Board immediately following the Closing
shall consist of seven (7) members; each of Geordie Hebard and Russell Glass
shall have been elected to the Board as
3
<PAGE>
designees of the holders of the Series B Stock; and one of the foregoing
directors designated by the Purchaser shall have been appointed to each of the
committees of the Board unless such director would cause such committee to not
be in compliance with such committee's applicable director qualification
requirements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as
follows:
3.01 ORGANIZATION AND STANDING OF THE COMPANY. The Company is
a duly organized and validly existing corporation in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority: (i) for the ownership and operation of its properties; (ii) for the
carrying on of its business as now conducted and as now proposed to be
conducted; (iii) to execute and deliver this Agreement and other instruments,
warrants, agreements and documents contemplated herein (collectively with this
Agreement, the "Transaction Documents"); (iv) to issue, sell and deliver the
Series B Stock and the Warrants and to issue and deliver the Conversion Shares
upon conversion of the Series B Stock and the Warrant Shares upon exercise of
the Warrants; and (v) to perform its other obligations pursuant hereto and
thereto. The Company is duly licensed or qualified and in good standing as a
foreign corporation authorized to do business in all jurisdictions wherein the
character of the property owned or leased or the nature of the activities
conducted by it makes such licensing or qualification necessary, other than in
those jurisdictions where the failure to be so licensed or qualified or in good
standing does not, individually or in the aggregate, have a Material Adverse
Effect (as defined below).
3.02 CORPORATE ACTION. The Transaction Documents have been
duly authorized, executed and delivered by the Company and constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except to the extent limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors rights and the general principles of equity. The Series B Stock, the
Conversion Shares and the Warrant Shares have been duly authorized. The
issuance, sale and delivery of the Series B Stock and the issuance and delivery
of the Conversion Shares upon conversion of the Series B Stock and the Warrant
Shares upon exercise of the Warrants have been duly authorized by all required
corporate action on the part of the Company. The Series B Stock, the Conversion
Shares and Warrant Shares, when issued and paid for in accordance with the
Transaction Documents, will be validly issued, fully paid and nonassessable,
with no personal liability attaching to the ownership thereof and will be free
and clear of all liens, charges, restrictions, claims and encumbrances imposed
by or through the Company, except as expressly set forth in the Transaction
Documents. The Conversion Shares and the Warrant Shares have been duly reserved
for issuance upon conversion of the Series B Stock and the exercises of the
Warrants, respectively.
4
<PAGE>
3.03 GOVERNMENTAL APPROVALS. Except for the filing of any
notice prior to the Closing that may be required under applicable state and/or
federal securities laws (which, if required, shall be filed by the Company on a
timely basis), no authorization, consent, approval, license, exemption of or
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for, or in connection with, the execution and delivery by the Company
of this Agreement, for the offer, issue, sale, execution or delivery of the
Series B Stock or the Warrants, or for the performance by the Company of its
obligations under the Transaction Documents or under the Shares.
3.04 LITIGATION. Except as disclosed in SCHEDULE 3.04 or in
the Company SEC Documents, there is no litigation or governmental proceeding or
investigation pending or, to the best knowledge of the Company, threatened
against the Company or affecting any of its properties or assets or against any
Key Employee relating to the Company or its business, nor, to the best knowledge
of the Company, has there occurred any event or does there exist any condition
on the basis of which any litigation, proceeding or investigation might properly
be instituted. Neither the Company nor, to the best knowledge of the Company,
any Key Employee is in default with respect to any order, writ, injunction,
decree, ruling or decision of any court, commission, board or other government
agency, to the extent that such default might have a material adverse effect on
the business, assets, liabilities, operations, Intellectual Property Rights,
management or financial condition of the Company (a "Material Adverse Effect").
There are no actions or proceedings pending or, to the Company's best knowledge,
threatened (or any basis therefor known to the Company) against the Company
which might result, either in any case or in the aggregate, have a Material
Adverse Effect, or which might call into question the validity of any of the
Transaction Documents, any of the Series B Stock, the Warrants or any action
taken or to be taken pursuant hereto or thereto. Without limitation to the
foregoing representations, to the extent not described in the Company SEC
Documents a brief summary of the Company's litigation and the current status
thereof is set forth on SCHEDULE 3.04.
3.05 CERTAIN AGREEMENTS OF OFFICERS AND EMPLOYEES. To the best
of the Company's knowledge, no Key Employee is, or, is now anticipated to be, in
violation of any material term of any employment contract, patent disclosure
agreement, proprietary information agreement, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or agreement or any restrictive covenant, relating to the right of any
such Key Employee to be employed or engaged by the Company because of the nature
of the business conducted or to be conducted by the Company or relating to the
use of trade secrets or proprietary information of others, and to the Company's
best knowledge and belief, the continued employment or engagement of the
Company's Key Employees does not subject the Company or the Purchaser to any
liability with respect to any of the foregoing matters.
3.06 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is in
compliance in all respects with the terms and provisions of its Certificate of
Incorporation and By-laws, each as amended and/or restated to date, and in all
respects with the material terms and provisions of all mortgages, indentures,
leases, agreements and other instruments by which it is bound or to which it
5
<PAGE>
or any of its properties or assets are subject, except to the extent that the
failure to so comply with any such provision of any such mortgage, indenture,
lease or agreement would not have a Material Adverse Effect. The Company is in
compliance in all material respects with all judgments, decrees, governmental
orders, laws, statutes, rules or regulations by which it is bound or to which it
or any of its properties or assets are subject. Neither the execution and
delivery of the Transaction Documents nor the issuance of the Series B Stock,
the Conversion Shares, the Warrants or the Warrant Shares, nor the consummation
or performance of any transaction contemplated hereby or thereby, has
constituted or resulted in or will constitute or result in a default or
violation of, create a conflict with, trigger any "change of control" or other
right of any Person under, or require any consent, waiver, release or approval
under or with respect to, any term or provision of any of the foregoing
documents, instruments, judgments, agreements, decrees, orders, statutes, rules
and regulations.
3.07 TITLE TO ASSETS, PATENTS. (a) Except as set forth on
SCHEDULE 3.07(A) hereof, the Company has good and marketable title in fee to
such of its fixed assets as are real property, and good and merchantable title
to all of its other assets, now carried on its books, which assets consist of
those reflected in the most recent balance sheet of the Company included as part
of the Company 10-Q, or acquired since the date of such balance sheet (except
personal property disposed of since said date in the ordinary course of
business) free of any mortgages, pledges, charges, liens, security interests or
other encumbrances.
(b) The Company owns or has a valid right to use the
Intellectual Property Rights being used to conduct its business as now operated
and as now proposed by the Company to be operated; and the conduct of its
business as now operated and as now proposed to be operated does not and will
not conflict with or infringe upon the intellectual property rights of others.
Except as set forth on SCHEDULE 3.07(B), no claim is pending or, to the best of
the Company's knowledge, threatened against the Company and/or its officers,
employees and consultants to the effect that any such Intellectual Property
Right owned or licensed by the Company, or which the Company otherwise has the
right to use, is invalid or unenforceable by the Company.
3.08 SEC DOCUMENTS; FINANCIAL STATEMENTS. (a) The Company has
filed all forms, reports and documents required to be filed by the Company with
the Commission and has heretofore delivered to the Purchaser, in the form filed
with the Commission, its Registration Statement on Form S-1 filed with the
Commission on April 23, 1998, as amended to date (the "Company S-1"), its
Quarterly Report on Form 10-Q for the period ending September 30, 1998 (the
"Company 10-Q" and, collectively with the Company S-1, the "Company SEC
Documents"). As of their respective dates: (i) the Company SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission thereunder
applicable to such Company SEC Documents; and (ii) none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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(b) The financial statements of the Company included in the
Company SEC Documents (the "Financial Statements") complied as to form in all
material respects with the published rules and regulations of the Commission
with respect thereto, were prepared in accordance with generally accepted
accounting principles as applied in the United States of America ("GAAP")
consistently applied during the period involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Rule 10-01 of Regulation S-X of the Commission) and fairly present in accordance
with applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring audit adjustments) the financial position of
the Company as at their respective dates and the results of operations and the
cash flows of the Company for the periods then ended.
(c) Except as set forth on SCHEDULE 3.08(C) hereto, the
Company has no liability or obligation, absolute, accrued, contingent or
otherwise, and whether due or to become due, that is not reflected in the
Financial Statements or incurred in the ordinary course of business since the
date of the Financial Statements, whether or not such liability would be
required to be provided for in accordance with GAAP.
(d) Except as set forth in SCHEDULE 3.08(D), since September
30, 1998, (i) there has been no material adverse change in the business, assets,
operations, affairs, prospects or financial condition of the Company; (ii)
neither the business, financial condition, operations, prospects or affairs of
the Company nor any of its properties or assets, including without limitation,
its Intellectual Property Rights, have been materially adversely affected as the
result of any legislative or regulatory change, any revocation or change in any
franchise, permit, license or right to do business, or any other event or
occurrence, whether or not insured against; and (iii) the Company has not
entered into any material transaction other than in the ordinary course of
business, made any distribution on its capital stock, or redeemed or repurchased
or declared any distribution on, any of its capital stock.
3.09 ABSENCE OF CERTAIN DEVELOPMENTS. Without limiting
anything contained in Section 3.08(d), except as provided in SCHEDULE 3.09 or
the Company SEC Documents, since September 30, 1998 the Company has not:
(a) issued any stock, bonds or other corporate securities or
any rights, options or warrants with respect thereto, other than options to
purchase 4,500 shares of Common Stock granted to directors of the Company
pursuant to a formula stock option plan;
(b) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's business;
(c) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
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(d) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
(e) mortgaged or pledged any of its assets, tangible or
intangible, or subjected them to any lien, charge or other encumbrance, except
liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of business
consistent with past practice;
(g) sold, assigned or transferred any Intellectual Property
Rights or disclosed any proprietary confidential information to any persons
except to potential customers, investors or partners or collaborators in the
ordinary course of business consistent with past practice;
(h) suffered any substantial losses (other than losses from
operations for financial reporting purposes) or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(i) made any changes in employee compensation except in the
ordinary course of business consistent with past practices;
(j) made capital expenditures or commitments therefor that
aggregate in excess of $50,000;
(k) entered into any other transaction other than in the
ordinary course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;
(l) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(m) experienced any problems with labor or management in
connection with the terms and conditions of their employment; or
(n) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company.
3.10 TAXES. The Company has filed all Returns (as hereinafter
defined) required to be filed with taxing authorities prior to the date hereof
or has duly obtained extensions of time for the filing thereof. The Company has
paid all Taxes (as hereinafter defined) shown as due on such Returns that were
filed and has paid all Taxes imposed on or assessed against the Company. The
provisions for Taxes payable, if any, are shown on the Financial Statements and
are sufficient for all accrued and unpaid Taxes, whether or not disputed, and
for all periods to and including the dates of
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such Financial Statements. None of the federal income tax returns of the Company
have been audited by the Internal Revenue Service. The Company knows of no
additional assessments, adjustments or contingent tax liability (whether federal
or state) pending or threatened for any period, or of any basis for any such
assessment, adjustment or contingency. Except as set forth on SCHEDULE 3.10, (i)
no issues have been raised (and are currently pending) by any taxing authority
in connection with any of the Returns or Taxes asserted as due from the Company,
except for issues that, singly or in the aggregate, would not have a Material
Adverse Effect taken as a whole, and (ii) no waivers of statutes of limitation
with respect to the Returns or collection of Taxes have been given by or
requested from the Company. The term "Taxes" means all federal, state, local,
foreign, and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatever, together with any interest and any penalties,
additions to tax, or additional amounts with respect thereto. The term "Returns"
means all returns, declarations, reports, statements, and other documents
required to be filed in respect to Taxes. Neither the Company nor, to the best
of the Company's knowledge, any of its stockholders, has ever filed a consent
pertaining to the Company pursuant to section 341(f) of the Code relating to
collapsible corporations.
3.11 BENEFIT PLANS; LABOR RELATIONS.
(a) Other than as set forth in the Company SEC Documents, the
Company neither maintains, sponsors nor contributes to, nor is it required to
contribute to, any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan" or "multi-employer plan" as such terms
are defined in Sections 3(2), 3(1) and 3(37), respectfully, of ERISA ("ERISA
Plans"). The Company does not maintain or contribute to, and has at no time
maintained or contributed to, a defined benefit plan, as defined in Section
3(35) of ERISA. If the Company does maintain or contribute to a defined benefit
plan, any termination of the plan on the date hereof would not give rise to
liability under Title IV or ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, which would subject the
Company to any tax penalty for prohibited transactions and which has not
adequately been corrected. Each ERISA Plan is in compliance with all material
reporting, disclosure and other requirements of the Code and ERISA as they
relate to any such ERISA Plan. Determination letters have been received from the
Internal Revenue Service with respect to each ERISA Plan which is intended to
comply with Code Section 401(a), stating that such ERISA Plan and the attendant
trust are qualified thereunder. The Company has never completely or partially
withdrawn from a "multi-employer plan." The Company has made all payments to the
Local 734 Pension Fund required to be made pursuant to the collective bargaining
agreement with Teamsters Local 734.
(b) Other than as set forth in the Company SEC Documents, none
of the Company's employees is covered by any labor or collective bargaining
agreement and, to the Company's knowledge, there is no activity involving any
employees of the Company seeking to certify a collective bargaining unit or
engaging in any other organizational activity. There are no pending,
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or to the knowledge of the Company, threatened strikes, work stoppages,
slowdowns, lockouts, arbitrations or other labor disputes against the Company.
There are no pending or, to the Company's knowledge, threatened, complaints,
charges, claims, lawsuits, administrative proceedings, reviews, or
investigations by any person or Governmental Entity against the Company with
respect to any violation or alleged violation of any applicable Federal, state
or local laws, rules or regulations: (i) prohibiting discrimination on any
basis, including, without limitation, on the basis of race, color, religion,
sex, sexual orientation, disability, national origin or age; or (ii) relating to
employment or labor, including, without limitation, those related to
immigration, mass layoff, wages or hours.
3.12 TRANSACTIONS WITH AFFILIATES. Except as described in the
Company SEC Documents or set forth in SCHEDULE 3.12, there are no loans, leases,
royalty agreements or other continuing transactions between (a) the Company or
any of its customers or suppliers, and (b) any officer, employee, consultant or
director of the Company or any Person owning five percent (5%) or more of the
capital stock of the Company or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder.
3.13 ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER
PERSONS. The Company has not assumed, guaranteed, endorsed, or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss), any Indebtedness of any other Person except
as disclosed in the Company SEC Documents.
3.14 INVESTMENTS IN OTHER PERSONS. Except as set forth in the
Company SEC Documents, the Company has not made any loans or advances to any
Person which is outstanding on the date of this Agreement in excess of $20,000
in the aggregate, nor is it committed or obligated to make any such loan or
advance, nor has or does the Company own any capital stock, assets comprising
the business of, obligations of, or any interest in, any Person. The Company
does not currently have any Subsidiaries.
3.15 SECURITIES ACT. The Company has complied and will comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Shares and the Warrants hereunder. Neither the
Company nor anyone acting on its behalf has or will sell, offer to sell or
solicit offers to buy any such security or similar securities to, or solicit
offers with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any Person, so as to bring the issuance and
sale of the Series B Stock under the registration provisions of the Securities
Act and applicable state securities laws.
3.16 CAPITALIZATION; STATUS OF CAPITAL STOCK. As of the
Closing, the Company will have a total authorized capitalization consisting of
(a) 25,000,000 shares of Common Stock, $.01 par value, and (b) 1,000,000 shares
of Preferred Stock, $.01 par value, of which 245,000 shares have
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been designated as Series A Preferred Stock and 35,000 shares will be designated
as Series B Stock. As of the Closing, 4,440,835 shares of Common Stock and
189,334 shares of Series A Preferred Stock will be issued and outstanding, and,
without giving effect to the transactions contemplated hereby, no shares of
Series B Stock will be issued or outstanding, other than such as shall be issued
at the Closing. All the outstanding shares of capital stock of the Company have
been duly authorized, and are validly issued, fully paid and non-assessable.
Schedule 3.16 sets forth all of the shares of Common Stock that are reserved for
issuance upon exercise of outstanding stock options and warrants (in each case
subject to being Equitably Adjusted). Except as set forth on SCHEDULE 3.16, no
options, warrants, conversion rights, subscriptions or purchase rights of any
nature to acquire from the Company, or commitments of the Company to issue,
shares of capital stock or other securities are authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue shares or
rights to acquire any of its capital stock or other securities. Except as
described in the Company SEC Documents or set forth in SCHEDULE 3.16, none of
the Company's outstanding securities or authorized capital stock or the Series B
Stock is subject to any rights of redemption, repurchase, rights of first
refusal, preemptive rights or other similar rights, whether contractual,
statutory or otherwise, for the benefit of the Company, any stockholder, or any
other Person. Except as described in the Company SEC Documents or as set forth
in SCHEDULE 3.16, there are no restrictions on the transfer of shares of capital
stock of the Company other than those imposed by relevant federal and state
securities laws and as otherwise contemplated by this Agreement. Except as
described in the Company SEC Documents or as set forth in SCHEDULE 3.16, there
are no agreements, understandings, trusts or other collaborative arrangements or
understandings concerning the voting or transfer of the capital stock of the
Company. The offer and sale of all capital stock and other securities of the
Company issued before the Closing complied with or were exempt from all
applicable federal and state securities laws and no stockholder has a right of
rescission or damages with respect thereto. Except as described in the Company
SEC Documents, the Company does not have any stock option plans. The Company
does not have outstanding, and has no obligation to grant or issue, any "phantom
stock" or other right measured by the profits, revenues or results of operations
of the Company or any portion thereof, or any similar rights. The Company has
not adopted any rights plans or similar "poison pill" arrangements.
3.17 REGISTRATION RIGHTS. Except as described in the Company
SEC Documents or as set forth on SCHEDULE 3.17 hereto, no holders of any
securities of the Company or of any options or warrants of the Company
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
3.18 INSURANCE. (a) The Company maintains insurance covering
the Company's properties and business adequate and customary for the type and
scope of the properties, assets and business, and similar to companies of
comparable size and condition similarly situated in the same industry in which
the Company operates.
(b) Schedule 3.18(b) sets forth a true and correct description
of the Company's Directors and Officers liability policy (the "D&O Policy"). The
D&O Policy is in full
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force and effect and not subject to rejection or recession by the insurance
company issuing such policy. The Company has complied with all of the terms of
the D&O Policy applicable to it. All of the information (including, without
limitation, financial information) provided by the Company to the insurance
company issuing the D&O Policy, including, without limitation, all information
provided to such insurance company as part of the application process for such
policy, was true, correct and complete in all material respects when so
provided.
3.19 BOOKS AND RECORDS. The books of account, ledgers, order
books, records and documents of the Company accurately and completely reflect
all material information relating to the business of the Company, the location
and collection of its assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company.
3.20 MATERIAL AGREEMENTS. The Company SEC Documents include as
exhibits thereto all material contracts and agreements to which the Company was
a party or by which the Company or its assets was otherwise bound as of the date
of the Company SEC Documents to which they are exhibits (the "Filed
Agreements"). Except for the Filed Agreements or as set forth in SCHEDULE 3.20,
the Company is not a party to any written or oral contract or instrument,
agreement, commitment, obligation, plan or arrangement which: (a) is material to
the Company or its business; and/or (b) in accordance with the provisions of the
Securities Act or the Exchange Act, as applicable, were required to be filed as
an exhibit to any Company SEC Document when such Company SEC Document was filed
by the Company with the Commission (any such contract, instrument, agreement,
commitment, obligation, plan or arrangement, together with the Filed Agreements,
are referred to herein as the "Material Agreements"). The Company, and to the
best of the Company's knowledge, each other party thereto, have in all material
respects performed all the obligations required to be performed by them to date,
have received no notice of default and are not in default under any Material
Agreements. Except as set forth in SCHEDULE 3.20, each of the Material
Agreements is in full force and effect with no default, anticipated or
threatened default or failure of performance or observance of any obligations or
conditions contained therein on the part of the Company or, to the Company's
knowledge, any other party to any such Material Agreement, and neither the
Company nor, to the Company's best knowledge, any other party to any such
agreement has provided any notice of default or of its intention to terminate
these agreements.
3.21 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational safety and health, except where any such violation,
individually or in the aggregate, would not have a Material Adverse Effect, and
to the best of its knowledge after due investigation, no material expenditures
will be required in order to comply with any such statute, law or regulation.
3.22 U.S. REAL PROPERTY HOLDING CORPORATION. The Company is
not now and has never been a "United States Real Property Holding Corporation"
as defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service.
3.23 COMPLIANCE. All of the assets, products and services of
the Company
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(including, without limitation, any computer programs provided or created by the
Company to or for any other Person) are Millennium Compliant, except where the
failure of the assets, products and services of the Company to be Millennium
Compliant, individually or in the aggregate, would not have a Material Adverse
Effect.
3.24 BROKERS OR FINDERS. Except for Network 1 Financial
Securities, Inc., which is entitled to the commission set forth on SCHEDULE
3.24, no Person has or will have, as a result of the transactions contemplated
by this Agreement, any right, interest or valid claim against or upon the
Company for any commission, fee or other compensation as a finder or broker
because of any act or omission by the Company or its respective agents.
3.25 DISCLOSURE. Neither the Transaction Documents, nor any
other agreement, document, certificate, statement, whether oral or written,
furnished to the Purchaser or its counsel by or on behalf of the Company in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances in which made, not misleading. There is no fact within the
knowledge of the Company or any of its executive officers executing this
Agreement on behalf of the Company that has not been disclosed herein or in
writing by them to the Purchaser that may have a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
4.01 ORGANIZATION AND STANDING OF THE COMPANY. The Purchaser
is a duly organized and validly existing corporation in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority: (i) for the ownership and operation of its properties; (ii) for the
carrying on of its business as now conducted and as now proposed to be
conducted; (iii) to execute and deliver this Agreement and other Transaction
Documents to which it is a party.
4.02 CORPORATE ACTION. The Transaction Documents to which
Purchaser is a party have been duly authorized, executed and delivered by the
Purchaser and constitute the legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, except to the extent limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors rights and the general
principles of equity..
4.03 INVESTMENT REPRESENTATIONS. The Purchaser is acquiring
the Shares and Warrants for its own account for the purpose of investment and
not with a view to distribution or resale thereof except pursuant to
registration under the Securities Act or exemption therefrom. The Purchaser
understands and agrees that, until registered under the Securities Act or
transferred
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pursuant to the provisions of Rule 144 or Rule 144A as promulgated by the
Commission, all certificates evidencing any of the Shares or Warrants, whether
upon initial issuance or upon any transfer thereof, shall bear a legend,
prominently stamped or printed thereon, reading substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT
TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION
OF COUNSEL, REASONABLY SATISFACTORY TO DELICIOUS BRANDS, INC.
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
Each such certificate shall also bear a legend indicating that such shares are
subject to a lock-up agreement, if issued prior to the expiration of the lock-up
period provided for in Section 9.01 of this Agreement.
4.04 ACCESS TO INFORMATION. The Purchaser or its
representative during the course of this transaction, and prior to the purchase
of any Series B Stock or the Warrants, has had the opportunity to ask questions
of and receive answers from management of the Company concerning the terms and
conditions of the offering of the Series B Stock, the Warrants and the
additional information, documents, records and books relative to its business,
assets, financial condition, results of operations and liabilities (contingent
or otherwise) of the Company.
4.05 SOPHISTICATION AND KNOWLEDGE. The Purchaser or its
representative has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the purchase of
the Series B Stock and the Warrants; and the Purchaser can bear the economic
risks of investment in the Series B Stock and the Warrants and can afford a
complete loss of its investment.
4.06 TRANSFER RESTRICTIONS IMPOSED BY SECURITIES LAWS. The
Purchaser understands that neither the Shares nor the Warrants have been
registered under the Securities Act and applicable state securities laws, and,
therefore, cannot be resold unless they are subsequently registered under the
Securities Act and applicable state securities laws or unless an exemption from
such registration is available. The Purchaser shall not resell or otherwise
dispose of all or any part of the Shares or Warrants purchased by the Purchaser,
except as permitted by law, including, without limitation, any regulations under
the Securities Act and applicable state securities laws; the Purchaser
understands that the Company does not have any present intention and is under no
obligation to register the Shares or the Warrants under the Securities Act and
applicable state securities laws, except as provided in Article VI and the
Purchaser understands that Rule 144 or Rule 144A under the
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Securities Act may not be available as a basis for exemption from registration
of the Shares thereunder.
4.07 LACK OF LIQUIDITY. The Purchaser has no present need for
liquidity in connection with its purchase of the Series B Stock.
4.08 ACCREDITED INVESTOR STATUS. The Purchaser is an
"Accredited Investor" as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act.
4.09 BROKERS OR FINDERS. No Person has or will have, as a
result of the transactions contemplated by this Agreement, any right, interest
or valid claim against or upon the Company for any commission, fee or other
compensation as a finder or broker because of any act or omission by Purchaser
or its agents.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 INSPECTION. Until such time as the Purchaser ceases to
beneficially own (as defined in Rule 13d-3 promulgated under the Exchange Act)
at least the Requisite Shares, the Company shall permit authorized
representatives of the Purchaser to visit and inspect any of the properties of
the Company, including its books of account (and to make copies thereof and take
extracts therefrom), and to discuss its affairs, finances and accounts with its
officers, employees, independent accountants, consultants and attorneys, all at
such reasonable times and as often as may be reasonably requested, subject to
the execution of a confidentiality agreement reasonably acceptable in form and
substance to the Company by such representatives of the Purchaser, which the
Purchaser shall make reasonable efforts to obtain.
5.02 INDEMNIFICATION. (a) Without in any way limiting anything
contained in Article VII, after the Closing, the Company shall, to the fullest
extent permitted under applicable law, indemnify and hold harmless each director
(including those listed in Section 2.08)), of the Company appointed by the
Purchaser against all costs and expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and settlement amounts paid in
connection with any claim, action, suit, proceeding or investigation (whether
arising before or after the Closing), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as director, until the expiration of the statute of limitations
relating thereto (and shall pay any expenses in advance of the final disposition
of such action or proceeding to each such director to the fullest extent
permitted under the DGCL, upon receipt from such director to whom expenses are
advanced of any undertaking to repay such advances required under the DGCL). In
the event of any such claim, action, suit, proceeding or investigation, the
Company shall pay the reasonable fees and expenses of counsel selected by such
director promptly after statements therefor are received and (ii) the Company
shall cooperate in the defense of any such matter; PROVIDED, HOWEVER, that the
Company
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shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably delayed or withheld) and PROVIDED,
FURTHER, that the Company shall not be obligated pursuant to this Section 5.02
to pay the fees and expenses of more than one counsel (plus appropriate local
counsel) for all such directors in any single action except to the extent that
two or more of such directors shall have conflicting interests in the outcome of
such action, in which case such additional counsel (including local counsel) as
may be required to avoid any such conflict or likely conflict may be retained by
the directors at the expense of the Company; and PROVIDED FURTHER that, in the
event that any claim for indemnification is asserted or made within the period
prior to the expiration of the applicable statute of limitations, all rights to
indemnification in respect of such claim shall continue until the disposition of
such claim. Contemporaneously with the Closing, the Company shall enter into an
indemnification agreement substantially in the form of EXHIBIT 5.02(A) (the
"Indemnification Agreement") with each of those persons identified as the
Purchaser's designees as directors of the Company in Section 2.03. Promptly
following the appointment or election of any person to replace any such person
as a director of the Company, the Company shall enter into an Indemnification
Agreement with such replacement. To the extent that the provisions of this
Section 5.02 and the provisions of the Indemnification Agreement conflict, as
between the Company and the director or potential director which is a party
thereto, the terms of the Indemnification Agreement shall govern.
(b) Until such time as the Purchaser no longer has the power
to elect two directors, voting separately from the holders of Common Stock, the
Company shall maintain the D&O Policy and such other policies of Directors and
Officers liability insurance adequate and customary for companies of comparable
size (taking into account, among other things, the market capitalization of the
Company) and condition similarly situated in the same industry in which the
Company operates.
(c) In the event the Company or its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger;
or (ii) transfers all or substantially all of its properties and assets to any
Person, then, and in each such case, proper provisions shall be made so that the
successors and assigns of the Company shall assume the obligations set forth in
this Section 5.02.
(d) This Section 5.02 is intended to be for the benefit of,
and shall be enforceable by, the directors appointed or elected by the Purchaser
and their respective heirs and personal representatives.
5.03 USE OF PROCEEDS. The Company shall use the cash proceeds,
if any, from the sale of the Series B Stock and the Warrants for working
capital, to repay indebtedness and other general corporate purposes.
5.04 THIRD PARTY REGISTRATION RIGHTS. From and after the date
hereof but only for such period of time as the Purchaser beneficially owns (as
defined in Rule 13d-3 promulgated under the Exchange Act) at least the Requisite
Shares, without the consent of the Purchaser, the Company shall not grant to any
Person demand or other similar types of registration rights, including, without
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limitation, any registration rights of the type contemplated by Section 6.02,
except in connection with the Company's issuance or sale of its securities as
consideration for its acquisition of assets or securities of a Person, in which
case the Company shall notify the Purchaser of such transactions, which shall be
deemed given when the directors elected by the holders of the Series B Stock,
voting separately as a class, are notified by the Company of any such proposed
transaction.
ARTICLE VI
REGISTRATION RIGHTS
6.01 PIGGY-BACK REGISTRATIONS. If at any time the Company
shall determine to register for its own account or the account of others under
the Securities Act (including pursuant a demand for registration of any
stockholder of the Company) any of its equity securities, other than on Form S-4
or Form S-8 or their then equivalents relating to shares of Common Stock to be
issued solely in connection with any acquisition of any entity or business or
shares of Common Stock issuable in connection with stock option or other
employee benefit plans, it shall send to each holder of Registrable Shares who
is entitled to registration rights under this Section 6.01 written notice of
such determination and, if within twenty (20) days after receipt of such notice,
such holder shall so request in writing, the Company shall use its best efforts
to include in such registration statement all or any part of the Registrable
Shares such holder requests to be registered. In the event that any registration
pursuant to this Section 6.01 shall be an underwritten public offering, the
number of Registrable Shares to be included in such offering may be reduced if
and to the extent that the managing underwriter or underwriters, if any, of such
offering shall provide a written opinion that inclusion of the Registerable
Shares would adversely affect the marketing of the securities to be sold by the
Company therein. In such event, the Company shall include in the registration
statement the number of shares of Common Stock that the Company is so advised
can be sold in such offering in the following priority: (i) first, all shares of
Common Stock to be sold by any other stockholder who has exercised his demand or
similar right to require the Company to file a registration statement with
respect to all or a portion of the shares of Common Stock held by such
stockholder, in each case so long as such demand or similar right is effective
as of the date of the Closing (including, without limitation, those granted
under Section 6.02); (ii) second, all shares of Common Stock proposed to be
included in such registration statement by the Company; (iii) third, all shares
of Common Stock proposed to be included in such registration statement by
holders of Common Stock having piggyback registration rights outstanding on the
date hereof ("Existing Piggyback Rights") (including, without limitation, those
granted in this Section 6.01); and (iv) fourth, all other Common Stock proposed
to be included in such registration statement by other holders thereof, PRO
RATA, based on the number of shares of the Common Stock proposed to be included
by the Company and each such stockholder, as the case may be; PROVIDED, HOWEVER,
that, to the extent that any Existing Piggyback Rights provide to the holders
thereof the right to register shares of Common Stock with or on a priority more
favorable to those provided to the holders of Registerable Shares above, holders
of the Registrable Shares shall have the right to have their Registrable Shares
so registered on the same basis as such holders. No incidental right under this
Section 6.01 shall be construed to limit any
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registration required under Section 6.02. The obligations of the Company to the
Purchaser under this Section 6.01 may be waived by the Purchaser at any time.
Anything herein to the contrary notwithstanding, no other registration rights
(demand or piggy-back) shall be granted by the Company to any Person if such
registration rights have the effect of, in anyway, limiting or restricting the
rights granted under Section 6.01, 6.02 or 6.03 (including the priority for
registration thereof).
6.02 DEMAND REGISTRATION. (a) If at any time after August 12,
1999, holders of at least 20% of the issued and outstanding Registrable Shares
who are entitled to registration rights under this Section 6.02 shall notify the
Company in writing that it or they intend to offer or cause to be offered for
public sale Registrable Shares held by such holders which shares constitute at
least twenty percent (20%) of the then outstanding Registrable Shares, then the
Company will so notify all holders of Registrable Shares. Upon written request
of any holder given within twenty (20) days after the receipt by such holder
from the Company of such notification, the Company will use its best efforts to
cause such of the Registrable Shares as may be requested by any holder thereof
(including the holder or holders giving the initial notice of intent to offer)
to be registered under the Securities Act as expeditiously as possible;
PROVIDED, HOWEVER, that the Company shall not be obligated to request
acceleration of the effectiveness of such registration statement prior to
November 13, 1999. If the method of distribution of the Registrable Shares by
the holders thereof shall be an underwritten public offering, the majority of
the holders of the Registrable Shares to be so registered may designate the
managing underwriter of such offering subject to the approval of the Company,
which approval shall not be unreasonably withheld. The Company shall not be
required to file a registration statement with the Commission pursuant to this
Section 6.02 at any time while another registration statement (other than on
Form S-3 or S-8) of the Company has been filed with the Commission and is not
yet effective or within 90 days after the effective date of another registration
statement (other than on Form S-3 or S-8) filed by the Company with the
Commission. The Company shall not be required to effect more than one
registration during any 180 day period pursuant to this Section 6.02. In
connection with any request by any holder of Registrable Securities for
registration thereof pursuant to this Section, the Company shall have the right
to defer the filing of a registration statement with the Commission for up to 30
days after such filing would otherwise be required hereunder if the Company
shall furnish to the holders requesting such registration a certificate approved
by the Board of Directors stating that, in the good faith judgment of the
Company, it would be detrimental to the interests of the Company for such
registration statement to be filed at such time.
(b) The Company shall be entitled to include in any
registration statement referred to in this Section 6.02, for sale in accordance
with the method of disposition specified by the holder requesting registration
pursuant to 6.02(a), shares of Common Stock to be sold by other selling
stockholders or by the Company for its own account, except as and to the extent
that, in the opinion of the managing underwriter (if such method of disposition
shall be an underwritten public offering), such inclusion would adversely affect
the marketing of the Registrable Shares to be sold.
(c) The Purchaser, and each subsequent holder of Registrable
Shares, if any, agrees that if the Company determines that there are material
developments which the Company reasonably determines, based on advice of
counsel, require the filing of a post-effective amendment
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to the Registration Statement, then each holder of Registered Shares agrees to
refrain from selling any Registrable Shares until the post-effective amendment
is declared effective. The Company agrees to file and attempt to have declared
effective such post-effective amendment as soon as possible. Except as set forth
in Section 6.10, the Company shall not be deemed to have effected a registration
pursuant to this Section 6.02 unless and until such registration is declared
effective.
6.03 REGISTRATIONS ON FORM S-3. In addition to the rights
provided the holder of Registrable Shares in Sections 6.01 and 6.02, if the
registration of Registrable Shares under the Securities Act can be effected on
Form S-3 (or any similar form promulgated by the Commission), then upon the
written request of one or more holders of Registrable Shares who hold an
aggregate of at least 20% of the issued and outstanding Registrable Shares are
entitled to registration rights under this Section 6.03 for the registration of
Registrable Shares held by such holders, the Company will so notify each holder
of Registrable Shares and then will, as expeditiously as possible, use its best
efforts to effect qualification and registration under the Securities Act on
Form S-3 of all or such portion of the Registrable Shares as the holder or
holders shall specify in the initial request to the Company or upon written
request of a holder to the Company given within fifteen (15) days after the
receipt by the holder from the Company of such notification; PROVIDED, HOWEVER,
that such Registrable Shares so registered pursuant to this Section 6.03 shall
constitute at least 20% of the then outstanding Registrable shares; and
PROVIDED, FURTHER, that the Company shall not be required to effect more than
one (1) registration during any 180 day period pursuant to this Section 6.03.
Subject to the foregoing, no registration of Registrable Shares pursuant to this
Section 6.03 shall be construed to limit any registration required under Section
6.01 or 6.02.
6.04 EFFECTIVENESS. The Company will use its best efforts to
maintain the effectiveness for up to 90 days (or such shorter period of time as
the underwriters need to complete the distribution of the registered offering,
or one year in the case of a "shelf" registration statement on Form S-3) of any
registration statement pursuant to which any of the Registrable Shares are being
offered, and from time to time will amend or supplement such registration
statement and the prospectus contained therein to the extent necessary to comply
with the Securities Act and any applicable state securities statute or
regulation. The Company will also provide each holder of Registrable Shares with
as many copies of the prospectus contained in any such registration statement as
it may reasonably request.
6.05 INDEMNIFICATION BY THE COMPANY. (a) In the event that the
Company registers any of the Registrable Shares under the Securities Act, the
Company will indemnify and hold harmless each holder and each underwriter of the
Registrable Shares (including their officers, directors, affiliates and
partners) so registered (including any broker or dealer through whom such shares
may be sold) and each Person, if any, who controls such holder or any such
underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of them become
subject under the Securities Act, applicable state securities laws or under any
other statute or at common law or otherwise, as incurred, and, except as
hereinafter provided, will reimburse each such holder, each such underwriter and
each such controlling Person, if any, for any legal or other
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expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, as incurred, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, in any preliminary or amended preliminary prospectus or in the final
prospectus (or the registration statement or prospectus as from time to time
amended or supplemented by the Company) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act or any state securities laws applicable to
the Company and relating to action or inaction required of the Company in
connection with such registration, UNLESS (i) such untrue statement or alleged
untrue statement or omission or alleged omission was made in such registration
statement, preliminary or amended preliminary prospectus or final prospectus in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by any such holder of Registrable Shares (in the
case of indemnification of such holder), any such underwriter (in the case of
indemnification of such underwriter) or any such controlling Person (in the case
of indemnification of such controlling person) expressly for use therein, or
UNLESS (ii) in the case of a sale directly by such holder of Registrable Shares
(including a sale of such Registrable Shares through any underwriter retained by
such holder of Registrable Shares to engage in a distribution solely on behalf
of such holder of Registrable Shares), such untrue statement or alleged untrue
statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus copies of which were
delivered to such holder of Registrable Shares or such underwriter on a timely
basis, and such holder of Registrable Shares failed to deliver a copy of the
final or amended prospectus at or prior to the confirmation for the sale of the
Registerable Shares to the person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the Securities Act.
(b) Promptly after receipt by any holder of Registrable
Shares, any underwriter or any controlling Person of notice of the commencement
of any action in respect of which indemnity may be sought against the Company,
such holder of Registrable Shares, or such underwriter or such controlling
person, as the case may be, will notify the Company in writing of the
commencement thereof (PROVIDED, that failure by any such person to so notify the
Company shall not relieve the Company from any liability it may have hereunder
to any other Person entitled to claim indemnity or contribution hereunder) and,
subject to the provisions hereinafter stated, the Company shall be entitled to
assume the defense of such action (including the employment of counsel, who
shall be counsel reasonably satisfactory to such holder of Registrable Shares,
such underwriter or such controlling Person, as the case may be), and the
payment of expenses insofar as such action shall relate to any alleged liability
in respect of which indemnity may be sought against the Company.
(c) Such holder of Registrable Shares, any such underwriter or
any such controlling Person shall have the right to employ separate counsel in
any such action and to participate in the defense thereof but the fees and
expenses of such counsel subsequent to any assumption of the defense by the
Company shall not be at the expense of the Company unless the employment of such
counsel has been specifically authorized in writing by the Company. The
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Company shall not be liable to indemnify any Person for any settlement of any
such loss, claim, damage, expense, liability or action effected without the
Company's written consent. The Company shall not, except with the approval of
each party being indemnified under this Section 6.05, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to the parties being so
indemnified of a release from all liability in respect to such claim or
litigation.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which any holder of
Registrable Shares exercising rights under this Article VI , or any controlling
Person of any such holder, makes a claim for indemnification pursuant to this
Section 6.05 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section 6.05
provides for indemnification in such case, then, the Company and such holder
will contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and of
the holder of Registrable Shares on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the holder of Registrable Shares on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company on the one
hand or by the holder of Registrable Shares on the other, and each party's
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; PROVIDED, HOWEVER, that, in any such case,
(A) no such holder will be required to contribute any amount in excess of the
public offering price of all such Registrable Shares offered by it pursuant to
such registration statement, net of any underwriting discounts or commissions
paid by such holder; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
6.06 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SHARES. (a) In
the event that the Company registers any of the Registrable Shares under the
Securities Act, each holder of the Registrable Shares so registered will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each underwriter of the Registrable Shares so registered (including
any broker or dealer through whom such of the shares may be sold) and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, expenses or liabilities, joint or several, to which
they or any of them may become subject under the Securities Act, applicable
state securities laws or under any other statute or at common law or otherwise,
and, except as hereinafter provided, will reimburse the Company and each such
director, officer, underwriter or controlling Person for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims,
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damages, expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement, in any preliminary or amended preliminary prospectus or
in the final prospectus (or in the registration statement or prospectus as from
time to time amended or supplemented) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by such holder of Registrable Shares expressly
for use therein; PROVIDED, HOWEVER, that such holder's obligations hereunder
shall be limited to an amount equal to the aggregate public offering price of
the Registrable Shares sold by such holder in such registration, net of any
underwriting discounts or commissions paid by such holder.
(b) Promptly after receipt of notice of the commencement of
any action in respect of which indemnity may be sought against such holder of
Registrable Shares hereunder, the Company will notify such holder of Registrable
Shares in writing of the commencement thereof (PROVIDED, that failure by the
Company to so notify such holder shall not relieve such holder from any
liability it may have hereunder to any other Person entitled to claim indemnity
or contribution hereunder), and such holder of Registrable Shares shall, subject
to the provisions hereinafter stated, be entitled to assume the defense of such
action (including the employment of counsel, who shall be counsel reasonably
satisfactory to the Company) and the payment of expenses insofar as such action
shall relate to the alleged liability in respect of which indemnity may be
sought against such holder of Registrable Shares. The Company and each such
director, officer, underwriter or controlling Person shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel subsequent to any assumption
of the defense by such holder of Registrable Shares shall not be at the expense
of such holder of Registrable Shares unless employment of such counsel has been
specifically authorized in writing by such holder of Registrable Shares. Such
holder of Registrable Shares shall not be liable to indemnify any Person for any
settlement of any such loss, claim, damage, expense, or liability or action
effected without such holder's written consent.
(c) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which the Company or
another Person entitled to indemnification pursuant to this Section 6.06 makes a
claim for indemnification pursuant to this Section 6.06, but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding that this Section 6.06 provides for indemnification, in such
case, then, the Company and such holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and of the holder of Registrable Shares on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
holder of Registrable Shares on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue
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statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company on the one hand or by the
holder of Registrable Shares on the other, and each party's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; PROVIDED, HOWEVER, that, in any such case, (i) no such
holder will be required to contribute any amount in excess of the public
offering price of all such Registrable Shares offered by it pursuant to such
registration statement, net of any underwriting discounts or commissions paid by
such holder; and (ii) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
6.07 EXCHANGE ACT REGISTRATION. So long as the Company at any
time shall list any class of equity securities of the type which may be issued
upon the conversion of the Series B Stock or the exercise of the Warrants on any
national securities exchange or obtain authorization for shares of such class to
be quoted on an automated quotation system and shall register such class of
equity securities under the Exchange Act, the Company will, at its expense,
simultaneously list on such exchange or qualify for trading on such automated
quotation system and maintain such listing or authorization of, the Shares of
such class. So long as the Company is subject to the reporting requirements of
either Section 13 or Section 15(d) of the Exchange Act, the Company will use its
best efforts to timely file with the Commission such information as the
Commission may require under either of said Sections; and in such event, the
Company shall use its best efforts to take all action as may be required as a
condition to the availability of Rule 144 or Rule 144A under the Securities Act
(or any successor exemptive rule hereafter in effect) with respect to such
Common Stock. The Company shall furnish to any holder of Registrable Shares
forthwith upon request a written statement by the Company as to its compliance
with the reporting requirements of Rule 144. The Company agrees to use its best
efforts to facilitate and expedite transfers of the Shares pursuant to Rule 144
under the Securities Act, which efforts shall include timely notice to its
transfer agent to expedite such transfers of Shares.
6.08 DAMAGES. The Company recognizes and agrees that the
holder of Registrable Shares will not have an adequate remedy if the Company
fails to comply with this Article VI and that damages may not be readily
ascertainable, and the Company expressly agrees that, in the event of such
failure, it shall not oppose an application by the holder of Registrable Shares
or any other Person entitled to the benefits of this Article VI requiring
specific performance of any and all provisions hereof or enjoining the Company
from continuing to commit any such breach of this Article so long as such holder
of Registrable Shares is not in breach of any provision of this Agreement or any
agreement contemplated herein.
6.09 FURTHER OBLIGATIONS OF THE COMPANY. Whenever under the
preceding Sections of this Article VI, the Company is required hereunder to
register Registrable Shares, it agrees that it shall also do the following:
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(a) Furnish to each selling holder such copies of each
preliminary and final prospectus and such other documents as said holder may
reasonably request to facilitate the public offering of its Registrable Shares;
(b) Use its best efforts to register or qualify the
Registrable Shares covered by said registration statement under the applicable
securities or "blue sky" laws of such jurisdictions as any selling holder may
reasonably request; PROVIDED, HOWEVER, that the Company shall not be obligated
to qualify to do business in any jurisdictions where it is not then so
qualified, to subject itself to taxation in connection with any such
registration or qualification of such Registrable Shares or to take any action
which would subject it to the service of process in suits other than those
arising out of the offer or sale of the securities covered by the registration
statement in any jurisdiction where it is not then so subject;
(c) Permit each selling holder of Registrable Shares or such
holder's counsel or other representatives to inspect and copy such corporate
documents and records as may reasonably be requested by them;
(d) Furnish to each selling holder of Registrable Shares a
copy of all documents filed with and all correspondence from or to the
Commission in connection with any such offering of securities;
(e) Use its best efforts to insure the obtaining of all
necessary approvals from the NASD;
(f) To cause all Registrable Shares so registered pursuant
hereto to be listed on any securities exchange or authorized for quotation in
any automated quotation system on or in which outstanding shares of such class
are listed or authorized for quotation at the time such registration is declared
effective by the Commission;
(g) Designate a transfer agent and registrar for the class or
classes of shares which include such Registrable Shares and obtain a CUSIP
number for such class or classes of shares, in each case not later than the date
such registration is declared effective by the Commission; and
(h) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earning statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
registration statement covering the Initial Public Offering, which earning
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder.
Whenever under the preceding Sections of this Article VI the
holders of Registrable Shares are registering such shares pursuant to any
registration statement, each such holder agrees to (a) timely provide to the
Company, at its request, such information and materials as it may reasonably
request in order to effect the registration of such Registrable Shares and (b)
convert all Series B
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Stock into the shares of Common Stock included in any registration statement,
such conversion to be effective at or before the closing of such offering
pursuant to such registration statement.
6.10 EXPENSES. In the case of each registration effected under
Section 6.01, 6.02 or 6.03, the Company shall bear all reasonable costs and
expenses of each such registration on behalf of the selling holders of
Registrable Shares, including, but not limited to, the Company's printing, legal
and accounting fees and expenses, Commission and NASD filing fees and "Blue Sky"
fees; PROVIDED, HOWEVER, that the Company shall have no obligation to pay or
otherwise bear any portion of the underwriters' commissions or discounts
attributable to the Registrable Shares being offered and sold by the holders of
the Registrable Shares, or the fees and expenses of counsel for the selling
holders of Registrable Shares in connection with the registration of the
Registrable Shares. The Company shall pay all expenses of the holders of the
Registrable Shares in connection with any registration initiated pursuant to
this Article VI which is withdrawn or abandoned at the request of the Company,
except if such withdrawal or abandonment is caused by the fraud, material
misstatement or omission of a material fact by any holder of Registrable Shares
to be included in such registration, in which case such expenses shall be paid
by the holder or holders who have caused such withdrawal or abandonment. If a
registration requested by holders of Registrable Shares pursuant to Section 6.02
shall be withdrawn prior to becoming effective under the Securities Act at the
request of the holders of all Registrable Shares included therein, at such
holders' written request, the Company shall pay the expenses of two such
withdrawn registrations to the extent provided in the first sentence of this
Section 6.10; PROVIDED, HOWEVER, that if a registration statement is withdrawn
by reason of the fact that, prior to effectiveness of such registration
statement, the registration statement filed or to be filed with the Commission
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, and the Company shall have failed, within a reasonable
time after receipt of written notice thereof from any such holder to take
reasonable measures to correct such deficiency, such holders shall not be
responsible for the costs of such registration (other than expenses described in
the proviso to the first sentence of this Section 6.10).
6.11 TRANSFERABILITY. (a) For all purposes of Article VI of
this Agreement, a Purchaser or assignee thereof who becomes a party to this
Agreement in accordance with Section 6.11(b) hereof shall be deemed at any
particular time to be the holder of all Registrable Securities of which such
Person shall at such time be the "beneficial owner," determined in accordance
with Rule 13d-3 under the Exchange Act.
(b) For all purposes of Article VI of this Agreement, the
holder of Registrable Shares shall include not only the Purchaser but any
assignee or transferee of the Registrable Shares; PROVIDED, HOWEVER, that such
assignee or transferee agrees in writing to be bound by all of the provisions of
this Article VI.
6.12 MERGERS, ETC. The Company shall not, directly or
indirectly, enter into any merger, consolidation or reorganization in which the
Company shall not be the surviving corporation unless the proposed surviving
corporation shall, prior to such merger, consolidation or
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reorganization, agree in writing to assume the obligations of the Company under
Article VI of this Agreement, and for that purpose references hereunder to
Registrable Shares shall be deemed to be references to the securities which the
Purchaser would be entitled to receive in exchange for Registrable Shares under
any such merger, consolidation or reorganization; PROVIDED, HOWEVER, that the
provisions of this Section 6.12 shall not apply in the event of any merger,
consolidation, or reorganization in which the Company is not the surviving
corporation if all stockholders are entitled to receive in exchange for their
Registrable Shares consideration consisting solely of (a) cash or (b) securities
of the acquiring corporation which may be immediately sold to the public without
registration under the Securities Act.
ARTICLE VII
INDEMNIFICATION
7.01 INDEMNIFICATION OF THE PURCHASER BY THE COMPANY. The
Company hereby cove nants and agrees with the Purchaser that the Company shall
indemnify the Purchaser, its directors and officers, and their respective
successors and assigns (individually a "Purchaser Indemnified Party") and hold
them harmless from, against and in respect of any and all costs, losses, claims,
liabilities, fines, penalties, damages and expenses (including, without
limitation, court costs and reasonable fees and disbursements of counsel
incurred by a Purchaser Indemnified Party in any action or proceeding between
the Company and a Purchaser Indemnified Party or between a Purchaser Indemnified
Party and any third party or otherwise) (collectively "Losses") resulting from
or arising out of:
(a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or any other
Transaction Document; or
(b) any action, suit, proceeding, compromise, settlement,
assessment or judgment arising out of or incident to any of the matters
indemnified against in this Section 7.01; or
(c) any action, suit, proceeding, compromise, settlement,
assessment or judgment arising out of or in connection with this Agreement or
the transactions contemplated by this Agreement, including, without limitation,
any action, suit, proceeding, compromise, settlement, assessment or judgement
asserted by any stockholder against the Company and/or the Purchaser.
7.02 INDEMNIFICATION OF THE COMPANY BY THE PURCHASER. The
Purchaser covenants and agrees with the Company that it shall indemnify the
Company and its directors and officers and each of their successors and assigns
(individually a "Company Indemnified Party") and hold them harmless from,
against and in respect of any and all Losses resulting from or arising out of:
(a) any breach of any of the representations, warranties,
covenants or agreements made by the Purchaser in this Agreement or any other
Transaction Document; or
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(b) any action, suit, proceeding, compromise, settlement,
assessment or judgment arising out of or incident to any of the matters
indemnified against in this Section 7.02.
7.03 RIGHT TO DEFEND, ETC. If the facts giving rise to any
such indemnification pursuant to this Article VII shall involve any actual claim
or demand by any third party against a Purchaser Indemnified Party or a Company
Indemnified Party, as the case may be (an "Indemnified Party") the party
required to indemnify such Indemnified Party pursuant to Sections 7.01 or 7.02,
as the case may be (the "Indemnifying Party") shall be entitled to notice of and
entitled (without prejudice to the right of any Indemnified Party to participate
at its own expense through counsel of its own choosing) to defend or prosecute
such claim at its expense and through counsel of its own choosing if it gives
written notice of its intention to do so no later than the 15th day following
receipt of such notice; PROVIDED, HOWEVER, that if the defendants in any action
shall include both a Indemnify ing Party and an Indemnified Party and the
Indemnified Party shall have been advised by its counsel that the counsel
selected by the Indemnifying Party has a conflict of interest because of the
availability of different or additional defenses to the Indemnified Party, the
Indemnified Party shall have the right to select separate counsel to participate
in the defense of such action on its behalf, at the expense of the Indemnifying
Party. The failure so to notify an Indemnifying Party shall not relieve it of
any liability which it may have to any Indemnified Party except to the extent to
which such liability may have been mitigated as a result of the timely receipt
of such notice. The Indemnified Party shall cooperate fully in the defense of
such claim and shall make available to the Indemnifying Party pertinent
information under its control relating thereto, but shall be entitled to be
reimbursed, as provided in this Article VII, for all out-of-pocket costs and
expenses payable to third parties incurred by it in connection therewith,
including, without limitation, reasonable fees and disbursements of counsel. If
any Indemnifying Party assumes the defense of any such claims, the Indemnifying
Party will hold the Indemnified Party harmless from and against any and all
damages arising out of any settlement approved by such Indemnifying Party or any
judgment in connection with such claim or litigation. Payment by an Indemnifying
Party to an Indemnified Party shall be made within ten (10) days after demand,
unless there is a claim or demand by a third party in which event payment shall
be made within ten (10) days after final judgment, settlement or comprise, as
the case may be.
7.04 TAX EFFECT. The amount of any indemnification due to an
Indemnified Party pursuant to Section 7.01 or 7.02, as the case may be, shall be
calculated after taking into account the amount of all insurance, cash or other
direct financial benefits payable to such Indemnified Party (in cluding any such
benefits payable by third parties) and after taking into account the United
States federal, state and local and foreign national, provincial and local tax
benefits or detriments to the Indemnified Party, as the case may be, calculated
assuming the Indemnified Party were a taxpayer subject to tax at the highest
marginal rate in effect when the payment is made, of the payments made in
respect of such loss, claim, demand, cost or expense giving rise to the
indemnification and the payments, including indemnification payments made in
respect thereto.
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ARTICLE VIII
GLOSSARY
8.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accredited Investor" has the meaning ascribed to it in Rule
501 under the Securities Act.
"Affiliate" of any person means a Person controlling,
controlled by or under common control with, any such Person.
"Agreement" means this Securities Purchase Agreement as from
time to time amended and in effect between the parties, including all Schedules
and Exhibits hereto.
"Board of Directors" or "Board" means the board of directors
of the Company as constituted from time to time.
"Certificate of Designation" has the meaning ascribed to it in
Section 1.01.
"Closing" has the meaning ascribed to it in Section 1.05.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act or the Exchange Act.
"Common Stock" means the Company's Common Stock, $.01 par
value per share.
"Company" means Delicious Brands, Inc., a Delaware
corporation, and its successors and assigns.
"Company Indemnified Party" has the meaning ascribed to it in
Section 7.02.
"Company SEC Documents" has the meaning ascribed to it in
Section 3.08.
"Company S-1" has the meaning ascribed to it in Section 3.08.
"Company 10-Q" has the meaning ascribed to it in Section 3.08.
"Conversion Shares" has the meaning ascribed to it in Section
1.02.
"DGCL" means the General Corporation Law of the State of
Delaware.
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"D&O Policy" has the meaning ascribed to it in Section 3.18.
"Equitable Adjustments" means the equitable adjustments made
whenever there shall occur a stock dividend, stock split, combination,
reorganization, recapitalization, reclassification, or other similar event
involving a change in the capital structure of the Company.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission (or of any other Federal agency then administering the Exchange Act)
thereunder, all as the same shall be in effect at the time.
"Existing Piggyback Rights" has the meaning ascribed to it in
Section 6.01.
"Fiduciary Indemnified Parties" has the meaning ascribed to it
in Section 5.03.
"Filed Agreements" has the meaning ascribed to it in Section
3.20.
"Financial Statements" has the meaning ascribed to it in
Section 3.08.
"GAAP" has the meaning ascribed to it in Section 3.08.
"Indebtedness" means (a) any liability for borrowed money or
evidenced by a note or similar obligation given in connection with the
acquisition of any property or other assets (other than trade accounts payable
incurred in the ordinary course of business); (b) all guaranties, endorsements
and other contingent obligations, in respect of Indebtedness of others, whether
or not the same are or should be reflected in the Company's balance sheet (or
the notes thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business, and (c) all obligations under leases required to be capitalized in
accordance with GAAP.
"Indemnified Party" has the meaning ascribed to it in Section
7.03
"Indemnifying Party" has the meaning ascribed to it in Section
7.03.
"Intellectual Property Rights" means any and all, whether
domestic or foreign, patents, patent applications, patent right, trade secrets,
confidential business information, formula, processes, laboratory notebooks,
algorithms, copyrights, mask works, claims of infringement against third
parties, licenses, permits, license rights, contract rights with employees,
consultants and third parties, trademarks, trademark rights, inventions and
discoveries, and all other intellectual property, including, without limitation,
all other such rights generally classified as intangible, intellectual property
assets in accordance with GAAP.
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"Key Employee" means and includes the following persons, if
any: the Company's chairman of the board, chief executive officer, chief
operating officer, president, chief financial officer, executive vice president,
vice president and director of sales and marketing.
"Losses" has the meaning ascribed to it in Section 7.01.
"Material Adverse Effect" has the meaning ascribed to it in
Section 3.04.
"Material Agreements" has the meaning ascribed to it in
Section 3.20.
"Millennium Compliant" means the ability to provide the
following functions: consistently handle date information before, during and
after January 1, 2000, including, but not limited to, accepting date input,
providing the date output, and performing calculations on dates or portions of
dates; function accurately and without interruption before, during and after
January 1, 2000, without any change in operations associated with the advent of
the new century; respond to two-digit date input in a way that resolves any
ambiguity as to century in a disclosed, defined and predetermined manner; and
store and provide output of date information in ways that are unambiguous as to
century.
"NASD" means the National Association of Securities Dealers,
Inc.
"Person" or "person" means an individual, corporation,
partnership, joint venture, trust, university, or unincorporated organization,
or a government, or any agency or political subdivision thereof.
"Purchase Price" has the meaning ascribed to it in Section
1.04.
"Purchaser" means Little Meadow Corp., a Delaware corporation.
"Purchaser Indemnified Party" has the meaning ascribed to it
in Section 7.01.
"Registrable Shares" means and includes (a) the Conversion
Shares and Warrant Shares. Wherever reference is made in this Agreement to a
request or consent of holders of a certain percentage of Registrable Shares, the
determination of such percentage and the holdings of such person shall include
the Conversion Shares and Warrant Shares even if such conversion has not yet
been effected.
"Requesting Holder" has the meaning ascribed to it in Section
6.01(b).
"Requisite Shares" means the lesser of 5% of the outstanding
shares of the Company's Common Stock or 5% of the Shares.
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"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
(or of any other federal agency then administering the Securities Act)
thereunder, all as the same shall be in effect at the time.
"Section 203" has the meaning ascribed to it in Section 2.01.
"Series B Stock" means the Series B Convertible Preferred
Stock, $.01 par value per share, of the Company having the rights, powers,
privileges and preferences set forth in the Certificate of Designation.
"Shares" means, collectively, the Series B Stock, the
Conversion Shares and the Warrant Shares.
"Subsidiary" or "Subsidiaries" means any Person of which the
Company directly or indirectly owns at the time at least fifty percent (50%) of
the outstanding voting or economic interest.
"Transaction Documents" has the meaning ascribed to it in
Section 3.01.
"Warrants" has the meaning ascribed to it in Section 1.01.
"Warrant Shares" means shares of Common Stock issuable upon
the exercise or conversion of a Warrant, as defined in Section 1.01.
8.02 ACCOUNTING TERMS. All accounting terms not specifically
defined herein or in any of the Transaction Documents shall be construed in
accordance with GAAP, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles.
ARTICLE IX
MISCELLANEOUS
9.01 "LOCK-UP" AGREEMENT. The Purchaser agrees that prior to
November 12, 1999, without the consent of the Company, the Purchaser will not
sell any Series B Stock. The Company may impose stop-transfer instructions with
respect to the Series B Stock subject to the foregoing restrictions until
November 12, 1999.
9.02 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on
the part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
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9.03 AMENDMENTS, WAIVERS AND CONSENTS. Any provision in the
Agreement to the contrary notwithstanding, and except as hereinafter provided,
changes in, termination or amendments of or additions to this Agreement may be
made, and compliance with any covenant or provision set forth herein may be
omitted or waived, if the Company (a) shall obtain consent thereto in writing
from the holder or holders of at least a majority in interest of the Series B
Shares (on a Common Stock equivalent basis) and Conversion Shares in the
aggregate issued upon conversion thereof and (b) shall deliver copies of such
consent in writing to any holders who did not execute such consent; PROVIDED
that no consents shall be effective to reduce the percentage in interest of the
Shares the consent of the holders of which is required under this Section 9.03.
Any waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
9.04 ADDRESSES FOR NOTICES. All notices or other
communications required hereby shall be in writing and shall be sent either by
(a) courier, or (b) by telecopy as well as by registered or certified mail, and
shall be regarded as properly given in the case of a courier upon actual
delivery to the proper place of address; in the case of telecopy, on the day
following the date of transmission if properly addressed and sent without
transmission error to the correct number and receipt is confirmed by telephone
within 48 hours of the transmission; in the case of a letter for which a
telecopy could not be successfully transmitted or receipt of which could not be
confirmed as herein provided, three (3) days after the registered or certified
mailing date if the letter is properly addressed and postage prepaid; and shall
be regarded as properly addressed if sent to the parties and their
representatives at the addresses given below:
To the Company: Delicious Brands, Inc.
2070 Maple Street
Des Plaines, IL 60018
Attention: Michael J. Kirby, President
and Chief Executive Officer
Facsimile: (847) 699-5928
Confirmation: (847) 699-3200
With a copy to: Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Steven Wolosky, Esq.
Facsimile: (212) 755-1467
Confirmation: (212) 753-7200
To the Purchaser: Little Meadow Corp.
c/o Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, NY 10153
Attention: Russell Glass
Facsimile: (212) 750-5807
Confirmation: (212) 702-4300
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With a copy to: Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, NY 10036
Attention: Jonathan Klein, Esq.
Facsimile: (212) 626-0799
Confirmation: (212) 626-0879
or such other address as any of the above may have furnished to the other
parties in writing in compliance with the terms of this Section.
9.05 COSTS, EXPENSES AND TAXES. The Company shall pay all fees
and disbursements of counsel to the Purchaser incurred in connection with the
negotiation, drafting and completion of the Transaction Documents and all
related matters and transactions. The Company shall pay any and all stamp, or
other similar taxes payable or determined to be payable except for any income
taxes of the Purchaser in connection with the execution and delivery of this
Agreement, the issuance of any securities and the other instruments and
documents to be delivered hereunder or thereunder, and agrees to save the
Purchaser harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes.
9.06 EFFECTIVENESS; BINDING EFFECT; ASSIGNMENT. This Agreement
shall be binding upon and inure to the benefit of the Company, the Purchaser and
their respective successors and assigns; PROVIDED, THAT, the Company may not
assign any of its rights or obligations under this Agreement without the prior
written consent of the Purchaser. The Purchaser may assign all or any part of
its rights and obligations hereunder to any person who acquires any Shares or
Warrants owned by the Purchaser. Any such assignment shall operate to release
the Purchaser from its liabilities and obligations under this Agreement, other
than its indemnification obligations under Article VII, with respect to the
Shares and Warrants, as applicable, so sold or assigned. A person to whom all or
a part of the Purchaser's rights are so assigned, whether by Purchaser or by a
subsequent person, may, if so agreed to by the Purchaser, become a party to this
Agreement, entitled to those rights and benefits set forth herein applicable to
the Purchaser or such Shares or Warrants. The foregoing is in addition to, and
not in limitation of, all other rights, powers and privileges of the Purchaser.
9.07 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in the Transaction Documents, the Shares, or
any other instrument or document delivered in connection herewith or therewith,
shall survive the execution and delivery hereof or thereof.
9.08 PRIOR AGREEMENTS. The Transaction Documents executed and
delivered in connection herewith constitute the entire agreement between the
parties and supersede any prior understandings or agreements concerning the
subject matter hereof.
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9.09 SEVERABILITY. The provisions of the Transaction Documents
are severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of a provision
contained therein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of such Transaction
Document and the terms of the Shares shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of a provision, had never
been contained herein, and such provisions or part reformed so that it would be
valid, legal and enforceable to the maximum extent possible.
9.10 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York, and
without giving effect to its choice of laws provisions.
9.11 HEADINGS; REFERENCES. Article, section and subsection
headings in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose. All
references herein to "Articles", "Sections", "Exhibits" or "Schedules" shall be
deemed to references to Articles or Section hereof and to Exhibits or Schedules
hereto unless otherwise indicated.
9.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
9.13 FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, the Company and the
Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of the Transaction Documents and
the Shares.
9.14 TRANSFER. Nothing in the Transaction Documents or the
Shares shall restrict the right and ability of the Purchaser or its Affiliates
to transfer, and the Purchaser is hereby granted the right to transfer, any
rights, powers or privileges of or under the Transaction Documents or the Shares
(subject to all restrictions of any applicable U.S. Federal or state securities
laws) to its Affiliates. The foregoing is in addition to, and not in limitation
of, all other rights, powers and privileges of the Purchaser.
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IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be executed as of the date first above written.
DELICIOUS BRANDS, INC.
By:/s/ Michael J. Kirby
------------------------
Name: Michael J. Kirby
Title: President and Chief
Executive Officer
LITTLE MEADOW CORP.
By:/s/ Edward E. Mattner
-----------------------
Name: Edward E. Mattner
Title: President
35
[Delicious Brands, Inc. Letterhead]
FOR IMMEDIATE RELEASE
---------------------
CONTACT: Michael Kirby, CEO or
Jeff Weiner, CFO
Delicious Brands, Inc.
Telephone: (847) 699-3200
RE: NASDAQ Ticker Symbol DBSI
DATE: April 14, 1999
DELICIOUS BRANDS, INC. ANNOUNCES
ICAHN ENTITY PURCHASES SUBSTANTIAL OWNERSHIP INTEREST
Des Plaines, Illinois, Delicious Brands, Inc. (NASDAQ Symbol - DBSI)
announced today that through a privately negotiated transaction an investment
entity affiliated with Carl Icahn and Icahn Associates Corp. has purchased an
equity stake in Delicious Brands and will be appointing two directors to the
Company's Board of Directors, including Russell Glass, President of Icahn
Associates Corp. Upon closing of the transaction the investment entity may be
deemed to be the beneficial owner of approximately 16% of the Company's common
stock. Terms of this transaction will be available in the Company's 8-K filing
with the Securities and Exchange Commission, which the Company intends to file
shortly.
Mr. Michael Kirby, the President of Delicious Brands, Inc. said: "We
believe our company has significant growth opportunity through distribution
channel expansion, new product line extension, and consolidation via tuck-in
acquisitions. We are very encouraged by Mr. Icahn's investment in Delicious
Brands and look forward to our continuing relationship with Icahn Associates."
Delicious Brands is the fifth largest U.S. branded cookie company
(according to IRI Scan Track analysis as of December 31, 1998) and markets such
well known brands as Delicious, Frookie, Salerno and Mama's.
* * * * * *
Note: This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements are dependent
on a number of factors which could cause actual results to differ materially
from those expressed or implied in the forward-looking statements.
