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): August 30, 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 August 30, 1999, Delicious Brands Inc., a Delaware
Corporation (NASDAQ: DBSI) (the "Company"), issued and sold non-negotiable
unsecured convertible promissory notes (individually, a "Note" and,
collectively, the "Notes"), $5,250,000 aggregate principal amount, in a private
securities transaction. The Notes accrue interest at a rate of 8% per annum and
the principal and interest are due on August 30, 2000. The principal amount of
the Notes is convertible at the holder's option into shares of common stock of
the Company, $.01 par value per share ("Common Stock"), at a conversion rate of
$5.00 per share. The conversion of the Notes is subject to certain conditions,
including a limitation on the aggregate principal amount of the Notes that is
convertible into shares of Common Stock, such that the aggregate number of
shares of Common Stock issuable pursuant to the conversion of the Notes must
represent 19% or less of (i) the issued and outstanding shares of Common Stock
and (ii) the outstanding voting power of the Company's securities. For
additional information, reference is made to (i) the Note Purchase Agreement,
which is incorporated herein by reference and is attached hereto as Exhibit 10.1
and (ii) a form of Note, which is incorporated herein by reference and is
attached hereto as Exhibit 4.1.
On September 10, 1999, the Board of Directors of the Company appointed
Thomas Guinan as the Company's Chief Executive Officer and President. Mr. Guinan
was also elected to the Board of Directors.
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Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits
Exhibit No. Exhibit
4.1 Form of 8% Non-Negotiable Unsecured Convertible
Promissory Note, dated August 30, 1999.
10.1 Note Purchase Agreement, dated August 30, 1999, by
and between Delicious Brands, Inc. and the Purchasers
(as defined therein).
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<PAGE>
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.
(Registrant)
Dated: September 15, 1999 By: /s/ Jeffry W. Weiner
-----------------------------------------
Name: Jeffry W. Weiner
Title: Executive Vice President and
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
4.1 Form of 8% Non-Negotiable Unsecured Convertible
Promissory Note, dated August 30, 1999.
10.1 Note Purchase Agreement, dated August 30, 1999, by
and between Delicious Brands, Inc. and the Purchasers
(as defined therein).
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING
OBTAINED THE WRITTEN OPINION OF COUNSEL TO DELICIOUS BRANDS, INC. (THE
"CORPORATION"), OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE CORPORATION, THAT
THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE
SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR OTHER STATE SECURITIES
LAW.
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS PURSUANT TO AN AGREEMENT AMONG THE
SECURITYHOLDER, DELICIOUS BRANDS, INC. AND NETWORK 1 FINANCIAL SECURITIES, INC.,
WHICH AGREEMENT IS ON FILE WITH DELICIOUS BRANDS, INC. AND CONTINENTAL STOCK
TRANSFER & TRUST COMPANY, FROM WHICH A COPY IS AVAILABLE UPON REQUEST AND
WITHOUT CHARGE.
No. 1
August 30, 1999 $__________
8% Non-Negotiable Unsecured Convertible Promissory Note
Delicious Brands, Inc., a Delaware corporation ("Borrower" and
"Company"), for value received hereby promises to pay to _________
("Noteholder"), by wire transfer of immediately available funds the principal
sum of _________________ ($_________) ("Note Amount"), as provided herein in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts.
This note (the "Note") is one of the duly authorized notes of
Borrower (the "Notes") referred to in the Note Purchase Agreement (the
"Agreement") dated as of August 30, 1999 among Borrower and the Investors listed
on Schedule A thereto. The Note is not transferable or assignable by Noteholder
or any transferee of Noteholder except in accordance with the terms and
conditions of the Agreement; provided that such transfer or assignment is made
in compliance with the Securities Act of 1933, as amended, and any applicable
state and foreign securities laws. Borrower agrees to issue to Noteholder or any
transferee of Noteholder from time to time a replacement note or notes in the
form hereof and in such denominations as the Noteholder or any transferee of
Noteholder may request to facilitate such transfers and assignments. In
addition, after delivery of an
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indemnification agreement in form and substance satisfactory to Borrower,
Borrower also agrees to issue a replacement note if this Note has been lost,
stolen, mutilated or destroyed.
Borrower shall keep at its principal office a register (the
"Register") in which shall be entered the name and address of the registered
holder of this Note and of all transfers of this Note. References to the
"Noteholders" shall mean the persons listed in the Register as the payees of the
Notes. The ownership of this Note shall be proven by the Register. For the
purpose of paying principal and any interest on this Note, Borrower shall be
entitled to rely on the name and address in the Register.
1. Terms of Note. Interest on the Note Amount shall accrue at a rate of 8% per
annum. Except as set forth in Section 2(i), interest on the Note Amount and the
Note Amount shall be due and payable on the one-year anniversary of the date
first written above.
2. Conversion of Note. The Noteholder shall have the right, at such Noteholder's
option, at any time prior to maturity of this Note, to convert all, but not less
than all of the Note Amount into shares of common stock, $.01 par value per
share (the "Common Stock," with the shares of Common Stock underlying the
conversion of the Note Amount hereinafter referred to as the "Shares"), of the
Borrower if, as of the date of proposed conversion:
(a) The Company has obtained the approval of
The Nasdaq Stock Market of the Company's
additional listing application in respect of
of the Shares; and
(b) The aggregate number of Shares issued
and/or issuable pursuant to the conversion
of the Notes represent less than 19% of (i)
the issued and outstanding shares of Common
Stock and (ii) the outstanding voting power
of the Company's securities (the number of
votes which may be cast by holders of those
securities outstanding which entitle the
holders thereof to vote generally on all
matters submitted to the Company's security
holders for a vote) ("Voting Power");
provided, however, if the aggregate number
of Shares issued or issuable pursuant to the
conversion of the Notes equals and/or
exceeds 19% of (i) the issued and
outstanding shares of Common Stock and (ii)
the Voting Power of the Company's
securities, then the Noteholders may convert
the portion of the Note Amount that would
represent an aggregate 19% of (i) the issued
and outstanding shares of Common Stock and
(ii) the Voting Power of the Company's
securities.
(i) Upon conversion, all accrued but unpaid interest as of the
date of conversion of the Notes shall be payable by the Borrower.
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(ii) The number of shares of Common Stock into which the Note
Amount will be convertible will be determined by dividing the Note Amount by
five dollars ($5.00) subject to adjustment in accordance with this Section 2.
(iii) Before Noteholder shall be entitled to convert the Note
Amount into shares of Common Stock, such holder shall surrender the Note
therefor, duly endorsed, at the office of the Borrower, and shall give written
notice to the Borrower at its principal corporate office, of the election to
convert the Note and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. The
Borrower shall, as soon as practicable thereafter, issue and deliver at such
office to such Noteholder, or to the nominee or nominees of such Noteholder, 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 Note 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.
(iv) The number of shares of Common Stock into which the Note
Amount is convertible shall be subject to adjustment from time to time as
follows:
a. In the event the Borrower should at any time or
from time to time after the date on which the Notes are issued (the "Note
Issuance Date") fix a record date for the effectuation of a split or subdivision
of the outstanding shares of Common Stock or the determination of holders of
Common Stock entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or Common Stock equivalents without payment of
any consideration by such holder for the additional shares of Common Stock or
the Common Stock equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the number of shares of Common Stock issuable upon conversion of the
Note Amount shall be increased in proportion to such increase in the aggregate
number of shares of Common Stock outstanding and those issuable with respect to
such Common Stock equivalents.
b. If the number of shares of Common Stock
outstanding at any time after the Note Issuance Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the number of shares of Common Stock issuable
upon conversion of the Note Amount shall be decreased in proportion to such
decrease in outstanding shares.
(v) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 2),
provision shall be made so that the Noteholder shall thereafter be entitled to
receive upon conversion of the Note Amount the number of shares of stock
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or other securities or property of the Borrower or otherwise, to which a holder
of Common Stock would have been entitled on such recapitalization. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Section 2 with respect to the rights of the Noteholder after the
recapitalization to the end that the provisions of this Section 2 (including
adjustment of the number of shares issuable upon conversion of the Note Amount)
shall be applicable after that event as nearly equivalent as may be practicable.
(vi) If any capital reorganization or reclassification of the
capital stock of the Borrower, or consolidation or merger of the Borrower with
and into another corporation, or the sale of all or substantially all of its
assets to another corporation, shall be effected while the Note is outstanding
in such a manner that holders of shares of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification,
consolidation, merger or sale, lawful and adequate provision shall be made
whereby the Noteholder shall thereafter have the right to receive upon the basis
and upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon conversion of the Note
Amount, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock immediately theretofore
so receivable had such reorganization or reclassification, consolidation, merger
or sale not taken place, and in such case appropriate provision shall be made
with respect to the rights and interests of the Noteholder to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the number of shares of Common Stock issuable upon conversion thereof) shall
thereafter be applicable, as nearly as may be possible, in relation to any
shares of stock, securities or assets thereafter deliverable upon the conversion
of such Note Amount.
(vii) (A) No fractional shares shall be issued upon the
conversion of the Note Amount. In lieu of any fractional shares to which the
Noteholder would otherwise be entitled, the Borrower shall make a cash payment
equal to the product of $5.00 (subject to adjustment pursuant to this Section 2)
multiplied by such fraction.
(B) Upon the occurrence of each adjustment or
readjustment of the number of shares of Common Stock issuable upon conversion of
the Note Amount pursuant to this Section 2, the Borrower, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each Noteholder a statement setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Borrower shall, upon the written
request at any time of Noteholder, furnish or cause to be furnished to such
Noteholder a like certificate setting forth (A) such adjustment and readjustment
and (B) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the Note
Amount.
(viii) The Borrower 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 Note Amount, such number of its
shares of Common Stock as shall from time to time be sufficient to
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<PAGE>
effect the conversion of Note Amount; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of the Note Amount, in addition to such other remedies as shall
be available to the Noteholder, the Borrower will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to these
provisions.
(ix) The Borrower shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Borrower upon conversion of the Note; provided, however,
that the Borrower 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 Noteholder in respect of which
such shares are being issued.
(x) All shares of Common Stock which may be issued in
connection with the conversion provisions set forth herein will, upon issuance
by the Borrower, be validly issued, fully paid and nonassessable and free from
all taxes, liens or charges with respect thereto.
(xi) Any notice required by the provisions of this Section 2
to be given to the Noteholder shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at his
address appearing on the Register.
3. Legends. The Purchaser understands and acknowledges that the Shares shall
bear a legend substantially follows until (i) such securities shall have been
registered under the Securities Act and effectively been disposed of in
accordance with an effective registration statement thereunder; or (ii) in the
opinion of counsel for the Company such securities may be sold without
registration under the Securities Act as well as any applicable "Blue Sky" or
state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS
CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO
A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE
WRITTEN OPINION OF COUNSEL TO DELICIOUS BRANDS, INC. (THE
"CORPORATION"), OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE
CORPORATION, THAT THE
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<PAGE>
PROPOSED DISPOSITION IS CONSISTENT WITH ALL
APPLICABLE PROVISIONS OF THE SECURITIES ACT AS
WELL AS ANY APPLICABLE "BLUE SKY" OR OTHER STATE
SECURITIES LAW."
Furthermore, pursuant to an agreement entered into between each Purchaser and
the Company (the "Lock-up Agreement"), the Shares shall bear the legend set
forth below, for such period as the Lockup Agreement is in effect:
"THE SALE OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS PURSUANT TO AN AGREEMENT
AMONG THE SECURITYHOLDER, DELICIOUS BRANDS, INC.
AND NETWORK 1 FINANCIAL SECURITIES, INC., WHICH
AGREEMENT IS ON FILE WITH DELICIOUS BRANDS, INC.
AND CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, FROM WHICH A COPY IS AVAILABLE UPON
REQUEST AND WITHOUT CHARGE."
4. No Waiver. No failure on the part of Noteholder to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
5. Costs; Expenses. Upon the occurrence of an Event of Default or at any time
thereafter, Borrower promises to pay all costs of collection of this Note
including, but not limited to, reasonable attorney's fees paid or incurred by
Noteholder on account of such collection, whether or not suit is filed with
respect thereto and whether such cost or expense is paid or incurred, or to be
paid or incurred, prior to or after the entry of judgment.
6. Amendment; Modification. This Note may be modified with the written consent
of Borrower and of Noteholders of more than 50% of the aggregate Note Amount of
the Notes then outstanding. The holders of more than 50% of the aggregate Note
Amount of the Notes then outstanding may waive compliance by Borrower of any
provision of this Note. However, without the consent of each Noteholder
affected, an amendment, supplement or waiver may not:
(i) reduce the amount of Notes whose holders must consent
to an amendment, supplement or waiver;
(ii) reduce the rate of or extend the time for payment of
interest on any Note;
(iii) reduce the principal of or extend the fixed maturity
of any Note or alter the redemption provisions with
respect thereto;
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<PAGE>
(iv) waive a default in the payment of the principal of or
interest on any Note; or
(v) make any Note payable in money other than that stated
in the Note.
After an amendment under this Section becomes effective,
Borrower shall mail to the Noteholders a notice briefly describing the
amendment.
7. Waivers. Borrower hereby waives all rights of setoff and counterclaims which
may arise under the Agreement or otherwise and all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor and notices of acceptance of this Note, and all other demands
whatsoever, and covenants that this Note will not be discharged except by
complete payment in full in cash.
8. Events of Default. As used herein, the term "Event of Default" shall mean and
include any one or more of the following events:
(i) Borrower shall file a petition in bankruptcy or for
reorganization or for an arrangement pursuant to any
present or future state or federal bankruptcy act or
under any similar federal or state law (hereinafter
"Bankruptcy Law"), or shall be adjudicated a bankrupt
or insolvent, or shall make a general assignment for
the benefit of its creditors, or shall be unable to
pay its debts generally as they become due; or, if an
order for relief under any bankruptcy law shall be
filed in any court and such petition or answer shall
not be discharged or denied within sixty (60) days
after the filing thereof; or, if a receiver, trustee
or liquidator of Borrower or of all or substantially
all of the assets of Borrower shall be appointed in
any proceeding brought against Borrower and shall not
be discharged within sixty (60) days of such
appointment or if Borrower shall consent to or
acquiesce in such appointment; or
(ii) Borrower shall liquidate, dissolve, terminate or
suspend its business operations.
9. Acceleration. Upon the occurrence of an Event of Default, the entire Note
Amount, and all accrued but unpaid interest thereon, shall at once become due
and payable at the option of Noteholder, upon written notice to Borrower.
Noteholder may exercise this option to accelerate during any Event of Default by
Borrower regardless of any prior forbearance.
10. Prepayment. Borrower may prepay the Note Amount, and all interest accrued
but unpaid thereon, in full or in part without penalty at any time. Any partial
prepayment shall be applied against the Note Amount outstanding and shall not
postpone the due date hereof, unless Noteholder shall otherwise agree in
writing.
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11. Application of Payments. All payments and prepayments shall, at the option
of Noteholder, be applied first to any costs of collection and second to any
accrued but unpaid interest and the Note Amount.
12. Notices. All notices, requests, demands and other communications which are
required or may be given under this Note shall be given pursuant to the terms
and at the addresses set forth in Section 4(b) of the Agreement.
13. Severability. If any term or other provision of this Note is invalid,
illegal or incapable of being enforced by virtue of any rule of law, or public
policy, all other conditions and provisions of this Note shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, Borrower and Noteholder shall negotiate
in good faith to modify this Note so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
14. Governing Law; Forum. THIS NOTE AND THE LEGAL RELATIONS BETWEEN THE PARTIES
HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW RULES OF SUCH STATE. EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN THE STATE OF NEW YORK
OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT LEGALLY
POSSIBLE, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING.
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<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be
executed as of the date first above written.
DELICIOUS BRANDS, INC.
By:
------------------------------------
Name: Michael Kirby
Title: President and Chief Executive Officer
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NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT, made and entered as of this 30th day
of August, 1999 (the "Agreement"), by and among DELICIOUS BRANDS, INC., a
Delaware corporation (the "Company"), and the purchasers set forth on Schedule A
attached hereto (each a "Purchaser" and, collectively, the "Purchasers").
WITNESSETH:
WHEREAS, the Company desires to issue and sell, and the
Purchasers desire to purchase, all upon the terms and subject to the conditions
set forth in this Agreement, unsecured convertible promissory notes
(individually, a "Note" and, collectively, the "Notes") in the aggregate
principal amount of $5,250,000, each bearing interest at the rate of 8% per
annum.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements of the parties herein contained, the parties
hereby agree as follows:
1. Purchase and Sale of Notes.
1.1 Sale and Issuance of Notes. Subject to the terms
and conditions of this Agreement, each Purchaser severally and not jointly
agrees to purchase at the Closing (as defined below), and the Company agrees to
sell and issue to each Purchaser at the Closing, a Note of this Company in the
form attached hereto as Exhibit A. Each Purchaser shall purchase a Note in the
principal amount set forth opposite the Purchaser's name on Schedule A attached
hereto.
1.2 Closing. The purchase and sale of the Notes shall
take place at 10:00 a.m. on August 30, 1999, at the offices of Olshan Grundman
Frome Rosenzweig & Wolosky LLP, 505 Park Avenue, New York, New York 10022-1170
or at such other time and place as shall be mutually agreed upon between the
Purchasers and the Company (the "Closing"). At the Closing, the Company shall
deliver to each Purchaser a Note against receipt of a certified check or a wire
transfer of the loan amount to an account that will have been designated by the
Company not less than one (1) business day prior to the date of the Closing.
2. Representations, Warranties and Covenants of the Company.
The Company represents warrants and covenants to the Purchasers as follows:
2.1 Corporate Organization. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as and in the
places where such properties are now owned, operated and leased or such business
is now being conducted.
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2.2 Authorization. The Company has the necessary
corporate power and authority to enter into this Agreement and to assume and
perform its obligations hereunder. The execution and delivery of this Agreement
and the performance by the Company of its obligations hereunder have been duly
authorized by the Board of Directors of the Company. This Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company enforceable against it in accordance with its
terms, subject to (i) applicable bankruptcy, insolvency, reorganization and
moratorium laws, (ii) other laws of general application affecting the
enforcement of creditors' rights generally and general principles of equity,
(iii) the discretion of the court before which any proceeding therefor may be
brought, and (iv) as rights to indemnity may be limited by federal or state
securities laws or by public policy.
2.3 Approvals and Consents. No action, approval,
consent or authorization, including, but not limited to, any action, approval,
consent or authorization by any governmental or quasi-governmental agency,
commission, board, bureau, or instrumentality is necessary or required as to the
Company in order to constitute this Agreement as a valid, binding and
enforceable obligation of the Company in accordance with its terms, except for
the consent of each of Network 1 Financial Securities, Inc. ("Network 1") and
U.S. Bancorp Republic Commercial Finance, Inc., both of which the Company has
obtained.
2.4 Commissions; Use of Proceeds. Network 1 will earn
a 10% fee on the gross proceeds of this transaction, and another financial
consultant to the Company may receive a 5% fee from the gross proceeds of this
transaction. The net proceeds received by the Company from this transaction will
be allocated to repay indebtedness and for general corporate purposes including
acquisitions, trade payables and working capital. The proceeds allocated to
general corporate purposes may be utilized in the discretion of the Board of
Directors of the Company.
3. Representations and Warranties of the Purchasers. Each of
the Purchasers represents and warrants to the Company as to itself as follows:
3.1 Organization and Existence. To the extent
indicated on the signature pages hereto, such Purchaser is either (i) a limited
partnership duly organized and validly existing under the laws of its respective
state of formation, (ii) a limited liability company duly organized and validly
existing under the laws of its respective state of formation, (iii) a
corporation duly organized and validly existing under the laws of its respective
state of incorporation or (iv) an individual. Each Purchaser represents that it
was not organized for the purpose of making an investment in the Company.
3.2 Authorization. The execution, delivery and
performance of this Agreement, by such Purchaser and the consummation by such
Purchaser of the transactions contemplated hereby and thereby are within the
powers of such Purchaser and have been duly authorized by all necessary
individual, corporate, partnership or limited liability company action, as
appropriate, on the part of such Purchaser. This Agreement has been duly
executed and delivered by such Purchaser and constitutes a legal, valid and
binding obligation of the Purchaser enforceable
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against such Purchaser in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization and moratorium laws, (ii) other laws of
general application affecting the enforcement of creditors' rights generally and
general principles of equity, (iii) the discretion of the court before which any
proceeding therefor may be brought, and (iv) as rights to indemnity may be
limited by federal or state securities laws or by public policy.
3.3 Approvals and Consents. No action, approval,
consent or authorization, including, but not limited to, any action, approval,
consent or authorization by any governmental or quasi-governmental agency,
commission, board, bureau, or instrumentality is necessary or required as to
such Purchaser in order to constitute this Agreement as a valid, binding and
enforceable obligation of such Purchaser in accordance with its terms.
3.4 Investment. Such Purchaser is acquiring the Note
being purchased by it for its own account as principal, not as a nominee or
agent, for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof in whole or in part and no other
person or entity has a direct or indirect beneficial interest in such Note. Such
Purchaser does not have any contract, undertaking, agreement or arrangement with
any person or entity to sell, transfer or grant participations to such person or
entity or to any third person or entity with respect to any of such Note.
3.5 Exemption From Registration. Such Purchaser
acknowledges that the offering and sale of the Notes (the "Offering") is
intended to be exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), by virtue of Section 4(2) of the Securities Act
and the provisions of Regulation D promulgated thereunder ("Regulation D"). In
furtherance thereof, such Purchaser represents and warrants to the Company as
follows:
(i) Such Purchaser realizes that the basis for the
exemption may not be present if, notwithstanding any
representations and/or warranties to the contrary
herein contained, such Purchaser has in mind merely
acquiring the Note for a fixed or determinable period
in the future;
(ii) Such Purchaser has the financial ability to bear
the economic risk of his investment, has adequate
means for providing for its current needs and
contingencies and has no need for liquidity with
respect to its investment in the Company; and
(iii) Such Purchaser has such knowledge and
experience in financial, and business matters as to
be capable of evaluating the merits and risks of an
investment in the Notes.
3.6 Accredited Investor. Such Purchaser is an
"accredited investor," as that term is defined in Rule 501 of Regulation D.
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3.7 Available Information. Such Purchaser:
(i) Has been furnished with any and all documents
that may have been made available by the Company upon
request of the Purchaser for a reasonable time prior
to the date hereof including, but not limited to,
those documents set forth on Annex A hereto;
(ii) Has been provided an opportunity for a
reasonable time prior to the date hereof to obtain
additional information concerning the Offering, the
Company and all other information to the extent the
Company possesses such information or can acquire it
without unreasonable effort or expense;
(iii) Has been given the opportunity for a reasonable
time prior to the date hereof to ask questions of,
and receive answers from, the Company or its
representatives concerning the terms and conditions
of the Offering and other matters pertaining to an
investment in the Notes, or that which was otherwise
provided in order for them to evaluate the merits and
risks of a purchase of the Notes to the extent the
Company possesses such information or can acquire it
without unreasonable effort or expense;
(iv) Has not been furnished with any oral
representation or oral information in connection with
the Offering; and
(v) Has determined that the Note is a suitable
investment for such Purchaser and that at this time
such Purchaser could bear a complete loss of such
investment.
3.8 Purchaser Representative. Such Purchaser is not
relying on any statements or representations made by the Company or its
affiliates or any purchaser representative with respect to economic
considerations involved in an investment in the Notes.
3.9 Transfer Restrictions. Such Purchaser will not
sell or otherwise transfer a Note without registration under the Securities Act
or an exemption therefrom and such Purchaser fully understands and agrees that
such Purchaser must bear the economic risk of such Purchaser's purchase because,
among other reasons, the Notes have not been registered under the Securities Act
or under the securities laws of any state and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of unless they are subsequently
registered under the Securities Act and under the applicable securities laws of
such states, or unless exemptions from such registration requirements are
available. In particular, such Purchaser is aware that the Notes are "restricted
securities," as such term is defined in Rule 144 promulgated under the
Securities Act. Such Purchaser also understands that the Company is under no
obligation to register the Notes on such Purchaser's behalf or to assist such
Purchaser in complying with any exemption from the registration requirements of
the Securities Act or applicable state securities laws. Such Purchaser further
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understands that sales or transfers of the Notes are further restricted by state
securities laws and the provisions of this Agreement.
3.10 Entire Agreement. No representations or
warranties have been made to such Purchaser by the Company, or any officer,
director, employee, agent, affiliate or subsidiary of the Company other than
those contained herein, and in subscribing for a Note such Purchaser is not
relying upon any representations other than those contained herein.
3.11 Purchaser Information. Any information that such
Purchaser has heretofore furnished or is simultaneously herewith furnishing to
the Company with respect to such Purchaser's financial position and business
experience is correct and complete as of the date of this Agreement and, if
there should be any material change in such information, such Purchaser will
immediately furnish revised or corrected information to the Company.
3.12 Legends. The Purchaser understands and
acknowledges that the Notes and the Shares (as defined in the Notes and used
hereinafter) shall bear a legend substantially follows until (i) such securities
shall have been registered under the Securities Act and effectively been
disposed of in accordance with an effective registration statement thereunder;
or (ii) in the opinion of counsel for the Company such securities may be sold
without registration under the Securities Act as well as any applicable "Blue
Sky" or state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS
CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO
A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE
WRITTEN OPINION OF COUNSEL TO DELICIOUS BRANDS, INC. (THE
"CORPORATION"), OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE
CORPORATION, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH
ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY
APPLICABLE "BLUE SKY" OR OTHER STATE SECURITIES LAW."
Furthermore, pursuant to an agreement entered into between each Purchaser and
the Company (the "Lock-up Agreement"), the Notes and the Shares shall bear the
legend set forth below, for such period as the Lock-up Agreement is in effect:
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"THE SALE OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS PURSUANT TO AN AGREEMENT
AMONG THE SECURITYHOLDER, DELICIOUS BRANDS, INC.
AND NETWORK 1 FINANCIAL SECURITIES, INC., WHICH
AGREEMENT IS ON FILE WITH DELICIOUS BRANDS, INC.
AND CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, FROM WHICH A COPY IS AVAILABLE UPON
REQUEST AND WITHOUT CHARGE."
3.13 Purchaser Address. The address set forth on the
signature pages of this Agreement is such Purchaser's true and correct business,
residence or domicile address.
3.14 Non-Marketable Investments. Such Purchaser's
overall commitment to investments that are not readily marketable is not
disproportionate to such Purchaser's net worth, and an investment in the Notes
will not cause such overall commitment to become excessive.
3.15 Finders. Such Purchaser represents and warrants
that such Purchaser has not retained any finder, broker, agent, financial
advisor or other intermediary in connection with the transactions contemplated
by this Agreement and agrees to indemnify and hold harmless the Company, its
officers, directors, affiliates, subsidiaries, employees and agents from
liability for any compensation to any such intermediary retained by such
Purchaser and the fees and expenses of defending against such liability or
alleged liability.
3.16 Survival. The foregoing representations,
warranties and agreements shall survive the execution of this Agreement.
4. General Provisions.
(a) Entire Agreement; Amendment and Waiver. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter contained herein and supersedes all prior oral or
written agreements, if any, between the parties hereto with respect to such
subject matter and, except as otherwise expressly provided herein, is not
intended to confer upon any other person any rights or remedies hereunder. Any
amendments hereto or modifications hereof must be made in writing and executed
by each of the parties hereto. Any failure by the Company or the Purchasers to
enforce any rights hereunder shall not be deemed a waiver of such rights.
(b) Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given (i) upon personal delivery to the party to be
notified, (ii) four (4) days after deposit with the United States Post Office,
by registered or certified mail, postage prepaid, or (iii) one day after deposit
with a reputable overnight courier service and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties, with a copy (which shall not constitute
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notice) for the Company to Olshan Grundman Frome Rosenzweig & Wolosky LLP, 505
Park Avenue, New York, New York 10022-1170, Attention: Steven Wolosky, Esq.
(c) Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware without
giving effect to conflict of laws principles.
(d) Binding Effect; Assignment. This Agreement and
the various rights and obligations arising hereunder shall inure to the benefit
of and be binding upon the Company and the Purchasers and each of their
respective successors and assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be transferred or assigned (by
operation of law or otherwise) by any of the parties hereto without the prior
written consent of the other parties hereto. Any transfer or assignment of any
of the rights, interests or obligations hereunder in violation of the terms
hereof shall be void and of no force or effect.
(e) Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
(f) Headings. The headings or captions contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(g) Pronouns. Whenever the pronouns "it" or "its" are
used herein, they shall also be deemed to mean "he" or "his" or "she" or "hers"
whenever applicable. Words in the singular shall be read and construed as though
in the plural and words in the plural shall be read and construed as though in
the singular in all cases where they would so apply.
(h) Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by virtue of
any rule of law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the maximum extent possible.
(i) Information Confidential. Each Purchaser
acknowledges that the information received by it pursuant hereto may be
confidential and is for his use only. Such Purchaser agrees that it will not use
such information in violation of the Securities Exchange Act of 1934, as
amended, or reproduce, disclose or disseminate such information to any other
person , unless the Company has made such information available to the public
generally.
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(j) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
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[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
COMPANY:
DELICIOUS BRANDS, INC.
By:
----------------------------------------
Name: Michael J. Kirby
Title: President & Chief Executive Officer
Address: 2070 Maple Street
Des Plaines, IL 60018
PURCHASERS:
---------------------------------------------
Name:
Address:
---------------------------------------------
Name:
Address:
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SCHEDULE A
SCHEDULE OF PURCHASERS
Purchaser Principal Amount of Note
M. Douglas Adkins $2,000,000
Horace T. Ardinger $3,250,000
Total $5,250,000
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ANNEX A
1. Quarterly Report on Form 10-Q for the period ended September 30, 1998
2. Annual Report on Form 10-K for the year ended December 31, 1998, as
amended
3. Quarterly Report on Form 10-Q for the period ended March 31, 1999
4. Current Report on Form 8-K dated April 14, 1999
5. Quarterly Report on Form 10-Q for the period ended June 30, 1999
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EXHIBIT A
FORM OF NOTE
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