SCHEDULE 14C
(Rule 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ____)
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-5(d)(1))
[ ] Definitive Information Statement
DELICIOUS BRANDS, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
____________________.
(2) Aggregate number of securities to which transaction applies:
_______________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $26.68
million -- sale price .
(4) Proposed maximum aggregate value of transaction: $26.68 million.
(5) Total fee paid: $5,336.
[ ] Fee previously paid with preliminary materials.
<PAGE>
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:___________________.
(2) Form, Schedule or Registration Statement No.: ___________________.
(3) Filing Party:__________________________.
(4) Date Filed: ___________________________.
-ii-
<PAGE>
DELICIOUS BRANDS INC.
2070 Maple Street
Des Plaines, Illinois 60018
April __, 2000
Dear Stockholder,
We are sending the enclosed Information Statement to stockholders of
Delicious Brands Inc., a Delaware corporation ("Delicious"), in connection with
action taken by written consent of the stockholders (the "Written Consent") with
respect to the two proposals set forth below. We are not soliciting proxies in
connection with the Written Consent, and you do not have to send us proxies.
The proposals, subject of the enclosed Information Statement, are as
follows:
1. A proposal to approve and adopt the proposed sale for cash, to BF
USB, Inc. ("BF"), a Delaware corporation, of substantially all of the assets and
business of Delicious (including any business conducted through subsidiaries)
(the "Proposed Sale").
2. A proposal to approve a change of Delicious' name to "Next
Generation Technology Holdings, Inc." or such other name as shall be determined
by the Board of Directors of Delicious (the "Name Change").
OUR BOARD OF DIRECTORS HAS FULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE PROPOSED SALE AND DETERMINED THAT THE PROPOSED SALE IS FAIR
AND IN THE BEST INTERESTS OF DELICIOUS AND ITS STOCKHOLDERS. YOUR BOARD OF
DIRECTORS HAS APPROVED AND ADOPTED THE PROPOSED SALE.
YOUR BOARD OF DIRECTORS HAS APPROVED AND ADOPTED THE NAME CHANGE.
In arriving at its recommendation, our Board gave careful consideration
to a number of factors, as described in the enclosed Information Statement,
including the opinion of its financial advisor, Valuemetrics, Inc.
("Valuemetrics"), to the effect that the consideration to be received by
Delicious is fair, from a financial point of view, to Delicious and holders of
its outstanding capital stock. The written opinion of Valuemetrics is attached
as Appendix B to the enclosed Information Statement. You are urged to read the
opinion in its entirety for a description of the assumptions made, the matters
considered and procedures followed by Valuemetrics.
-iii-
<PAGE>
Stockholders holding in excess of approximately 51% of Delicious'
outstanding capital stock entitled to vote with respect to the two proposals
have executed written consents in favor of the two proposals listed above as of
the date of this Information Statement. However, the proposals listed above will
not be effected until at least 20 days after this Information Statement has
first been sent to stockholders.
By Order of the Board of Directors,
T. J. Guinan
President and Chief Executive Officer
---------------------
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
The date of this Information Statement is April __, 1999
-iv-
<PAGE>
DELICIOUS BRANDS, INC.
-----------------
INFORMATION STATEMENT
---------------
CONSENT OF STOCKHOLDERS IN LIEU OF SPECIAL MEETING
We are sending this Information Statement to stockholders of Delicious
Brands, Inc., a Delaware corporation ("Delicious"), in connection with action
taken by written consent of the stockholders (the "Written Consent") with
respect to the two proposals set forth below. We are not soliciting proxies in
connection with the Written Consent, and you do not need to send us a proxy.
This Information Statement is first being mailed to stockholders of Delicious on
or about May l, 2000.
The proposals, subject of the enclosed Information Statement, are as
follows:
1. A proposal to approve and adopt the proposed sale for cash, to BF
USB, Inc., a Delaware corporation ("BF"), of substantially all of the assets and
business of Delicious (including any business conducted through subsidiaries)
(the "Proposed Sale").
2. A proposal to approve a change of Delicious' name to "Next
Generation Technology Holdings, Inc." or such other name as shall be determined
by the Board of Directors of Delicious (the "Name Change").
Only stockholders of record at the close of business on April 14, 2000
will be entitled to receive notice of the Written Consent.
Our principal executive office is located at 2070 Maple Street, Des
Plaines, IL 60018. The telephone number of our principal executive office is
(847) 699-3200.
By Order of the Board of Directors,
T. J. Guinan
President and Chief Executive Officer
---------------------
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
April __, 2000
<PAGE>
DELICIOUS BRANDS INC.
2070 Maple Street
Des Plaines, IL 60018
---------------------
INFORMATION STATEMENT
---------------------
We are sending this Information Statement to holders of the outstanding
shares of common stock, par value $.01 per share and holders of the outstanding
shares of preferred stock, Series B, C and D, par value $.01 per share, of
Delicious Brands Inc., a Delaware corporation, in connection with action taken
by written consent of the stockholders for (i) the sale of substantially all of
the assets and business of Delicious (including any business conducted through
subsidiaries) for cash, to BF USB, Inc., a Delaware corporation, pursuant to an
Asset Purchase Agreement, dated as of April 5, 2000, between Delicious and BF
USB; and (ii) an amendment to Delicious' charter to reflect a change in name to
"Next Generation Technology Holdings, Inc." or such other name as shall be
determined by our Board of Directors. A copy of the Purchase Agreement is
attached to this Information Statement as Appendix A.
BF USB will pay us $26.68 million, less a $1.7 million working capital
adjustment and subject to future adjustment based on the closing balance sheet.
A portion, $5.336 million, of the purchase price will be deposited by BF USB
into an escrow account as an indemnification reserve amount to cover possible
indemnification claims against Delicious that may arise under the terms of the
Purchase Agreement and the related Escrow Agreement.
---------------------
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
---------------------
In conformity with the Delaware General Corporation Law and our
Certificate of Incorporation, the affirmative vote of the holders of a majority
of the outstanding shares of capital stock entitled to vote is required to
approve the proposed sale and the name change. In accordance with the Delaware
law, holders of a majority of the outstanding shares of capital stock have
executed written consents approving the proposed sale and the name change.
ACCORDINGLY, WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY. FOR THAT REASON, NO PROXY CARD HAS BEEN ENCLOSED AND NO MEETING OF
STOCKHOLDERS WILL BE HELD TO CONSIDER APPROVAL OF THE PROPOSED SALE OR THE NAME
CHANGE. The proposed sale will not be consummated, and the name change will not
become effective, until at least twenty (20) days after the mailing of this
Information Statement.
-2-
<PAGE>
WE ARE FURNISHING YOU THIS INFORMATION STATEMENT FOR INFORMATION
PURPOSES ONLY. This Information Statement is first being mailed on or about May
l, 2000 to the holders of record of our common stock and preferred stock as of
the close of business on April 14, 2000 (the "Record Date"). As of the Record
Date, 5,702,865 shares of common stock were outstanding, 35,000 shares of Series
B Preferred Stock were outstanding, 170,038 shares of Series C Preferred Stock
were outstanding and 100,000 shares of Series D Preferred Stock were
outstanding. Each share of Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock is entitled to vote on an as converted basis on the
two proposals and is entitled to 7.1808, 10 and 10 votes respectively for each
share of such shares of preferred stock that is outstanding. The shares of
Series A Preferred Stock are not entitled to vote on either proposal.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, which requires us to file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "SEC"). You may inspect and request copies of our reports, proxy statements
and other information filed by us at the public reference facilities at the
SEC's office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at the SEC's Regional Office at Seven World Trade Center, Suite
1300, New York, New York 10048 and at the SEC's Regional Office at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may also obtain a copy
of such material from the Public Reference Section of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed
rates. Our reports, proxy statements and other information can also be inspected
and copied at the offices of The National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006 or be accessed electronically
by means of the SEC's home page on the Internet at http://www.sec.gov.
-3-
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION...............................................................1
SUMMARY....................................................................1
STOCKHOLDER WRITTEN CONSENT TO THE
PROPOSED SALE AND NAME CHANGE.........................................1
THE PROPOSED SALE..........................................................1
NAME CHANGE................................................................4
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............................5
PRO FORMA CONSOLIDATED BALANCE SHEET.......................................6
PRO FORMA STATEMENT OF OPERATIONS..........................................7
THE STOCKHOLDER WRITTEN CONSENT............................................8
RECORD DATE AND OUTSTANDING SHARES.........................................8
NO DISSENTERS' RIGHTS......................................................8
THE PROPOSED SALE..........................................................9
THE PURCHASE AGREEMENT.....................................................16
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................................23
NAME CHANGE................................................................25
APPENDIX -- ASSET PURCHASE AGREEMENT.......................................A-1
APPENDIX -- OPINION OF VALUEMETRICS, INC...................................B-1
-4-
<PAGE>
INTRODUCTION
We are furnishing this Information Statement to stockholders of
Delicious Brands, Inc. ("Delicious"), a Delaware corporation, in connection with
action taken by written consent of our stockholders with respect to the
following two proposals:
1. A proposal to approve and adopt the proposed sale for cash, to BF
USB, Inc. ("BF USB"), a Delaware corporation, of substantially all of the
operating assets and business of Delicious (including any business conducted
through subsidiaries).
2. A proposal to approve a change of Delicious' name to "Next
Generation Technology Holdings, Inc." or such other name as shall be determined
by our Board of Directors.
Pursuant to the written consent, our stockholders have approved (i) the
proposed sale for cash to BF USB, of substantially all of our assets and
business (including any business conducted through subsidiaries) under the terms
of an Asset Purchase Agreement between BF USB and Delicious dated as of April 5,
2000, a copy of which is attached hereto as Appendix A; and (ii) the change of
Delicious' name to "Next Generation Technology Holdings, Inc." or such other
name as our Board of Directors may decide.
SUMMARY
Because this is a summary it does not contain all the information that
may be important to you. You should read this entire Information Statement and
its appendices which contain the more detailed information.
STOCKHOLDER WRITTEN CONSENT TO THE PROPOSED SALE AND NAME CHANGE
Consent Required and Received. Section 271 of the Delaware General
Corporation Law requires the holders of a majority of the shares of outstanding
stock entitled to vote to approve the proposed sale and the name change.
Stockholders holding in excess of 51% of the outstanding capital stock of
Delicious who are entitled to vote on the proposed sale and name change
consented in writing to the proposed sale and the name change, satisfying the
requirements of Section 271. See "The Stockholder Written Consent."
THE PROPOSED SALE
We were founded in 1989 originally to market the Frookie cookie
product, one of the first all-natural, low-fat cookies produced with fruit juice
sweeteners. Through the acquisition of Delicious Cookie Company, Inc. in 1994,
we expanded our product offerings into three lines: (i) high-quality, value
priced snack products, (ii) licenses and co-branded snack products (i.e.,
packaged under both a licensed label and the Delicious label) and (iii)
all-natural snack products.
<PAGE>
All of our products are produced by independent food processors using our own
licensed and/or patented processes or formulas.
We develop, market and sell cookies, crackers and related food products
under the tradenames of: Delicious(R), Salerno(R), Mama's(R) and Frookie(R). We
sell these products primarily in the United States to independent direct-store
delivery distributors for resale to supermarkets and other retail outlets,
through large wholesalers to natural food stores and also directly to
supermarkets and other retail outlets.
Our principal executive office is located at 2070 Maple Street, Des
Plaines, Illinois 60018 and our telephone number is (847) 699-3200.
BF USB is a Delaware corporation and indirect subsidiary of Parmalat
Canada Ltd. engaged in the business of manufacturing and distributing cookies.
The principal executive offices of BF USB are located in St. Louis, Missouri.
Assets to Be Sold. We have agreed to sell substantially all of our
assets and business to BF USB. See "The Purchase Agreement -- Transferred
Business."
Purchase Price. BF USB will pay $26,680,000 in cash, less a $1,700,000
working capital adjustment, which may be further reduced based on possible
changes reflected in a closing balance sheet delivered 45 days after the closing
of the sale of assets. BF USB will deposit $5,336,000 of the purchase price into
an escrow account at closing. This deposit will be held for eighteen months to
cover any indemnification claims that may arise after closing. One-half of such
escrow amount, $2,668,000, will be released six months after the closing with
another $1,334,000 to be released twelve months after the Closing, less any
payments made for claims against the escrowed amount or notice of claim given.
See "The Purchase Agreement -- Purchase Price" and "The Purchase Agreement --
Escrow".
Closing of the Sale of the Transferred Business. The closing date of
the proposed sale will occur on a date as the parties may agree following the
satisfaction or waiver of the conditions contained in the Purchase Agreement.
See "The Purchase Agreement -- The Closing." We currently expect that, subject
to satisfaction or waiver of the conditions in the Purchase Agreement, the
closing will occur twenty (20) days after the mailing of this Information
Statement or as soon as possible after the expiration of the twenty days, but no
later than June 15, 2000.
Approval by the Board of Directors. Our Board of Directors believes
that the proposed sale is in the best interest of Delicious and our stockholders
and is fair to our unaffiliated stockholders. Our Board of Directors approved
the proposed sale. Our Board of Directors' approval of the proposed sale is
based upon a number of factors described in this Information Statement. See "The
Proposed Sale -- Delicious' Reasons for the Proposed Sale; Approval of the Board
of Directors and Opinion of Delicious' Financial Advisor."
-2-
<PAGE>
Use of Proceeds. The $26,680,000 purchase price will be reduced by
$1,700,000 reflecting a working capital adjustment. $5,336,000 will be deposited
by BF USB into an escrow account to provide for indemnification, if necessary,
and approximately $200,000 will be used to pay expenses related to the proposed
sale. We expect to use the remainder of the proceeds from the proposed sale to
(i) repay our bank debt and other debt as well as any liabilities not assumed by
BF USB, (ii) redeem our Series C Preferred Stock and (iii) redeem our Series D
Preferred Stock six months from the closing. We expect to have net cash of
$536,000 available at the closing after taking into account the payments of
$3,746,000 six months after closing assuming the release of one-half of the
escrow funds and redemption of the Series D Preferred Stock. Subsequent to the
closing of the proposed sale, our Board of Directors intends to explore entering
a new line of business. The Board of Directors has not identified any new line
of business at the present time. If our Board does not successfully identify a
new line of business, our Board of Directors may seek to liquidate our company
and pay out any net cash to the stockholders. See "The Proposed Sale -- Use of
Proceeds."
Certain Tax Consequences. The proposed sale will be a taxable
transaction to us for United States Federal income tax purposes and we will
recognize gain on the proposed sale under the Purchase Agreement. We do not
believe, however, that there will be any material tax payable by us because of
the net operating losses we previously incurred other than approximately
$250,000 in taxes resulting from the Alternative Minimum Tax. There will be no
United States Federal income taxes and no gain or loss will be recognized by our
stockholders as a result of the proposed sale. See "Certain Federal Income Tax
Consequences."
Conditions to the Proposed Sale. The obligations of Delicious and BF
USB to complete the proposed sale are subject to approval by our stockholders,
as well as the satisfaction or waiver of certain other conditions which are
normal in a transaction of this nature, including, among others:
o obtaining any necessary governmental approvals;
o insuring there are no orders of any court or governmental
entity that enjoin, restrain or prohibit the Purchase
Agreement or the completion of the proposed sale;
o the proposed sale must not be prohibited by any
injunction or order, or any action or proceeding pending
before any court or other governmental body seeking to
restrain, prohibit or invalidate the transactions
contemplated by the Purchase Agreement;
o the representations and warranties of Delicious and BF
USB must be true and correct;
o Delicious and BF USB shall have performed all of their
respective obligations under the Purchase Agreement;
o no material adverse effect shall have occurred; and
-3-
<PAGE>
o consents to the proposed sale of certain third parties
who have agreements with Delicious shall have been
received. See "The Purchase Agreement -- Conditions."
Termination. The Purchase Agreement may be terminated in certain
circumstances, including, among others, (i) by either party, if the transaction
contemplated by the Purchase Agreement is not completed by June 15, 2000; (ii)
by the mutual written agreement of the parties; (iii) by Delicious if prior to
the closing, our Board of Directors approves or accepts a superior proposal as
allowed by the terms of the Purchase Agreement; and (iv) by either Delicious or
BF USB, if prior to the closing there is a material breach of any of the
representations, warranties or covenants by the other party. See "The Purchase
Agreement -- Termination."
Interests of Certain Persons in the Proposed Sale. To the best of our
knowledge, no officer, director or holder of at least five percent (5%) of our
capital stock has a financial interest in the proposed sale that is different
from any other holder of our capital stock, except for certain 5% holders and
directors of Delicious who will receive a fee in connection with the proposed
sale and have shares of Series C and D Preferred Stock redeemed at closing
and/or six months after closing, respectively. See "Stock Ownership of Certain
Beneficial Owners and Management," "The Proposed Sale -- Interests of Certain
Persons in the Proposed Sale."
No Appraisal Rights. Under the Delaware law and our Certificate of
Incorporation, the holders of shares of our capital stock will not be entitled
to appraisal rights in connection with the proposed sale.
NAME CHANGE
Our Board of Directors recommends approval of the amendment to change
the name of Delicious to "Next Generation Technology Holdings, Inc." or such
other name as our Board of Directors may decide, so that we can fulfill our
obligation under the Purchase Agreement to sell and assign the name "Delicious
Brands, Inc." to BF USB.
-4-
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following are our selected historical financial data on a
consolidated basis for the years ended December 31, 1999, 1998, 1997, 1996 and
1995. You should read this selected historical consolidated financial data with
our Financial Statements, and with the Notes to Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in our 1999 Form 10K.
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands, except per share information)
1995 1996 1997 1998(1) 1999(1)
---- ---- ---- ------- -------
STATEMENT OF
OPERATIONS DATA
<S> <C> <C> <C> <C> <C>
Net Sales $52,722 $ 36,848 $30,665 $ 53,030 $ 41,086
Total Operating Expenses $16,326 $ 7,503 $ 8,419(2) $14,579 $15,847
Loss from Operations $ 5,859 $ 492 $ 2,947 $ 3,404 $ 6,433
Net (Loss) $(6,955) $ (898) $(3,398) $(5,308) $(7,635)
Net (Loss) Per Share $ (2.57) $ (.32) $ (1.16) $ (1.57) $ (1.70)
Weighted Average Number of
Common Shares Outstanding 2,704 2,814 2,934 3,390 4,537
BALANCE SHEET DATA:
Cash $ 48 $ 662 $ 808 $ 982 $ 601
Working Capital (Deficit) $ (2,870) $ (2,451) $ (4,363) $ (7,228) $ (10,015)
Total Assets $ 9,719 $ 7,592 $ 6,487 $ 19,226 $ 14,234
Long-term Debt (excluding $ 2,151 $ 2,110 $ 1,960 $ 0 $ 0
current portion)
Stockholders' equity (Deficit) $ (2,798) $ (2,349) $ (4,788) $ 2,856 $ 194
</TABLE>
(1) In April 1998, the Company acquired substantially all of the assets and
assumed certain liabilities of Salerno Foods, L.L.C. the results of
which are reflected herein.
(2) Reflects $1,548,000 restructuring charge recognized by the Company for
the year ended December 31, 1997 primarily consisting of the expending
of consulting and non-competition agreements the Company entered into
with former executive officers.
-5-
<PAGE>
Unaudited Pro Forma Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
(1) (2)
Insurance of Proceeds from (3)
Historical Common and Sale of Certain Use of Pro Forma
Balance Preferred Assets & Sale Proceeds Balances
as of 12/31/99 Stock Liabilities at Closing of 12/31/99
-------------- ----- ----------- ---------- -----------
Assets
<S> <C> <C> <C> <C> <C>
Cash $600,762 $18,196,000 ($16,975,316) $1,821,446
Special reserve fund $500,000 500,000
Escrow fund receivable 5,336,000 0 5,336,000
Accounts receivable, net 1,797,900 (1,797,900) 0 0
Inventory 1,043,400 (1,043,400) 0 0
Due from distributors 0 0 0
Prepaid expenses and other current
assets 247,761 (247,761) 0 0
----------------------------------------------------------------------
Total current assets 3,689,823 500,000 20,442,939 ($16,975,316) 7,657,446
----------------------------------------------------------------------
Property and equipment(net) 269,833 (269,833) 0 0
Other Assets:
Goodwill 9,460,852 (9,460,852) 0 0
Other 813,919 (813,919) 0 0
----------------------------------------------------------------------
10,274,771 (10,274,771) 0 0
----------------------------------------------------------------------
$14,234,427 $500,000 $ 9,898,335 ($16,975,316) $7,657,446
======================================================================
Liabilities and Stockholders' Equity
Bank loan payable $ 1,326,033 $(1,326,033$ -
Current portion of subordinated debt 5,643,332 (5,643,332) 0
Accounts payable 3,839,756 ($2,467,000) (838,906) (363,951) 169,899
Due to distributors 308,559 (81,667) 0 226,892
Accrued expenses 1,796,091 (125,000) (280,739) (500,000) 890,352
Income Taxes Payable 0 0 250,000 0 250,000
----------------------------------------------------------------------
Current portion of long-term liabilities 791,354 (100,000) (398,546) 292,808
----------------------------------------------------------------------
Total current liabilities 13,705,125 (2,692,000) (951,312) (8,231,862) 1,829,951
Long-term Liabilities:
Restructuring liability 335,454 (188,454) 147,000
Stockholders' Equity:
Preferred stock 6,617,428 3,673,000 (5,073,260) 5,217,168
Common stock 47,460 47,460
Additional paid-in capital 18,335,918 (481,000) (2,536,740) 15,318,178
Accumulated deficit (24,645,909) 10,849,647 ( 945,000) (14,741,262)
354,897 3,192,000 10,849,647 (8,555,000) 5,841,544
Less, common stock in treasury at cost (161,049) (161,049)
---------------------------------------------------------------------------
Total stockholders' equity 193,848 3,192,000 10,849,647 (8,555,000) 5,680,495
---------------------------------------------------------------------------
$14,234,427 $500,000 $ 9,898,335 ($16,975,316) $7,657,446
===========================================================================
</TABLE>
(1) Represents net proceeds received from the issuance of 12% Cumulative
Series C Preferred Stock and 12% Cumulative Series D Preferred Stock
and the exercise of a warrant by the holder of the Series B Preferred
Stock, all of which took place in 2000.
(2) Represents the proceeds expected to be received (net of fees, working
capital adjustments and the $5,336,000 escrow deposit) upon closing of
the transaction contemplated in the Purchase Agreement as well as
reflecting the disposition of assets, assumption of liabilities,
realized gain on sale and income tax liability.
(3) Represents disbursements of liabilities not assumed and the redemption
of 12% Cumulative Series B Preferred Stock.
-6-
<PAGE>
Unaudited Pro Forma Statement of Operations
December 31, 1999
<TABLE>
<CAPTION>
Historical Balances Pro Forma Balances
for the Year Proforma for the Year
Ended 12/31/99 Adjustment Ended 12/31/99
-------------- ---------- --------------
<S> <C> <C> <C>
Net Sales $ 41,085,899 $ (41,085,899)(a) $0
Cost of Sales 31,671,826 (31,671,826)(a) 0
-----------------------------------------------------------
Gross Profit 9,414,073 (9,414,073) 0
-----------------------------------------------------------
Selling general and administrative expenses 15,847,244 (15,447,244)(a) 400,000(b)
-----------------------------------------------------------
Loss from Operations (6,433,171) 6,033,171 (400,000)
Other Income and Expense (1,202,160) 1,581,228 379,068(c)
-----------------------------------------------------------
Loss before Provision for Income Taxes (7,635,331) 7,614,399 (20,932)
Provision for Income Taxes 0 0 0
Net Loss $ (7,635,331) $7,614,399 $(20,932)
===========================================================
Net Loss per Common Share:
Basic and Diluted $ (1.70) $ (0.00)
============= =========
Weighted Average Number of 4,537,265 1,005,780(d) 5,543,045
Common Share Outstanding
==========================================================
</TABLE>
(a) Represents the elimination of sales, costs of sales and all other
costs, including interest, associated with operating the Company in its
current business activities.
(b) Represents expenses to be incurred, including legal, accounting and
consulting fees, to administer the affairs of the Company.
(c) Represents interest income to be earned on funds on deposit.
(d) Represents the exercise of a warrant by the holder of the Series B
Preferred Stock which took place in April 2000.
-7-
<PAGE>
THE STOCKHOLDER WRITTEN CONSENT
Section 271 of the Delaware General Corporation Law permits a Delaware
corporation to sell all or substantially all of its assets if the sale is
approved by stockholders holding a majority of the shares entitled to vote
thereon. In addition, Section 242 of the Delaware law permits a Delaware
corporation to amend its certificate of incorporation if the amendment is
approved by stockholders holding a majority of the shares entitled to vote
thereon.
Stockholders holding in excess of 51% of our capital stock executed and
delivered their written consents to the proposed sale and the name change on or
about April __, 2000. The written consent executed and delivered by these
holders satisfies the stockholder approval requirements of Sections 271 and 242
of the Delaware law. Accordingly, no vote of any other stockholder is necessary
and stockholder votes are not being solicited by this Information Statement.
Subject to the terms and conditions of the Purchase Agreement, we
believe that the proposed sale will not be consummated any earlier than twenty
(20) days after the mailing of this Information Statement and following
satisfaction or waiver of the conditions contained in the Purchase Agreement.
See "The Purchase Agreement -- Conditions." The name change will become
effective no earlier than twenty (20) days after the mailing of this Information
Statement.
We are mailing this Information Statement is first being mailed to
stockholders on or about April -, 2000.
RECORD DATE AND OUTSTANDING SHARES
Our Board of Delicious has fixed the close of business on April 14,
2000 as the record date for the determination of the stockholders entitled to
notice of the written consent. Accordingly, only the holders of record of our
capital stock at the close of business on the record date will be entitled to
notice of the written consent. As of the record date, there were 5,702,865
shares of common stock outstanding held by holders of record, 35,000 shares of
Series B Preferred Stock outstanding held by one holder of record, 170,038
shares of Series C Preferred Stock held by four holders of record, 100,000
shares of Series D Preferred Stock held by four holders of record. Each share of
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
is entitled to 7.1808, 10, and 10 votes respectively on the proposed sale and
name change. The holders of Series A Preferred Stock are not entitled to vote on
either proposal.
NO DISSENTERS' RIGHTS
Any of our stockholders who do not approve of the proposed sale are not
entitled to appraisal or any other rights with respect to the proposed sale
under Delaware law or our Certificate of Incorporation.
-8-
<PAGE>
THE PROPOSED SALE
THE TERMS AND CONDITIONS OF THE PROPOSED SALE ARE CONTAINED IN THE
PURCHASE AGREEMENT, A COPY OF WHICH IS ATTACHED TO THIS INFORMATION STATEMENT AS
APPENDIX A AND IS INCORPORATED BY REFERENCE. The description in this Information
Statement of the terms and conditions of the proposed sale is qualified in its
entirety by, and made subject to, the more complete information set forth in the
Purchase Agreement. OUR STOCKHOLDERS ARE URGED TO, AND SHOULD, CAREFULLY READ
THE PURCHASE AGREEMENT IN ITS ENTIRETY.
GENERAL
The Purchase Agreement, which was executed and delivered by Delicious
and BF USB on April 5, 2000, provides, in part, for the sale of substantially
all of our assets and business for cash (including any business conducted
through subsidiaries) to BF USB and the assumption by BF USB of certain
liabilities of ours.
Under the Purchase Agreement, the consideration to be received by us
from BF USB totals $26.68 million in cash, less a $1.7 million working capital
adjustment and subject to further adjustment based upon the closing balance
sheet. A portion, $5.336 million, of the purchase price will be deposited by BF
USB with the escrow agent at the closing as an indemnification reserve amount.
See "The Purchase Agreement."
DELICIOUS
We develop, market and sell cookies, crackers and related food products
under the Delicious(R), Salerno(R), Mama's(R) and Frookie(R) labels. We sell
these products primarily in the United States (i) to independent direct-store
delivery distributors for resale to supermarkets and other retail outlets, (ii)
through large wholesalers to natural food stores and (iii) also directly to
supermarkets and other retail outlets.
Upon the consummation of the proposed sale, we will review various
potential opportunities including entering into a new industry and business or
possibly liquidating the company. The Board of Directors has not made a
determination on the matter at this time.
BF USB, INC.
BF USB is a Delaware corporation and indirect subsidiary of Parmalat
Canada Ltd. engaged in the business of manufacturing and distributing cookies.
BF USB's principal business and principal office is located in St. Louis,
Missouri.
BACKGROUND OF THE PROPOSED SALE
At its regular board meetings in May and June 1999, our Board of
Directors began to explore the viability of the our snack food business, given
the intense competition we face within the
-9-
<PAGE>
industry and our financial constraints. The Board was concerned about our
ongoing losses and increasing working capital deficit.
At a Board meeting on May 21, 1999, our Board discussed different
options for the company regarding the snack food business and directed our
management to investigate the possibility of selling the snack food business,
and potentially entering an entirely new business in a new market.
At its Board meeting on May 28, 1999, the directors instructed our
management to seek potential acquirors for the snack food business or a partial
sale of assets to allow us to (i) enhance stockholder value and (ii) to bring
our balance sheet in compliance with the minimum maintenance listing
requirements of the NASDAQ SmallCap Market. Mrs. Alison's, a major manufacturer
and co-packer of our products, is a subsidiary of BF USB which is an indirect
subsidiary of Parmalat Canada Limited. Our board was aware that Parmalat had
been very active in making acquisitions of dairy and bakery operations in the US
and Canada. Considering the already existing strategic relationship with BF USB,
through Ms Alison's, the Board felt Parmalat may have an interest in further
developing joint distribution opportunities or possibly purchasing some of our
assets.
In June 1999 our Board of Directors retained Condor Ventures, Inc., a
consulting firm, to assist it in evaluating our strategic options regarding the
snack food business, including the potential sale of the company. Shortly
thereafter, in early June 1999, Don Schmitt, Chairman of the Board, and Condor
Ventures, met with executives of BF USB to discuss whether they would be
interested in joint distribution opportunities and to ascertain BF USB's
interest in engaging in further discussions in connection with the potential
acquisition of our assets. At the same time, Condor and executives of the
company contacted other companies that had previously shown an interest in
acquiring the snack food business.
At the meeting with BF USB, they did express an interest in acquiring
our assets. Several meetings were held and extensive due diligence conducted.
The board of directors convened a special meeting on October 21, 1999 via
teleconference to discuss the proposal for the purchase of the snack food
business and determine if it would be in our best interest to pursue exclusive
arm's length discussions with BF USB. In late October 1999 the Board discussed,
reviewed and executed an exclusivity letter with Parmalat for the sale of our
assets.
At a scheduled Board of Directors meeting held on January 6, 2000, our
Board of Directors reviewed the terms of BF USB's proposal and directed our
management to seek a fairness opinion regarding the proposed sale from a
financial point of view. Therefore, drafts of the prosed agreement were
negotiated. Therefore, drafts of the proposed agreement were negotiated.
Delicious retained Valuemetrics, Inc. to provide such an opinion. On March 16,
2000, Valuemetrics gave its preliminary advice with regard to the proposed sale.
Thereafter the parties continued to negotiate the final terms of the Purchase
Agreement. On April 3, 2000, Valuemetrics gave its oral opinion to our Board of
Directors that the terms of the proposed sale were fair to us from a financial
point of view.
At the April 3rd meeting our Board of Directors approved and authorized
our management to enter into the Purchase Agreement to sell substantially all of
our assets and approved the name change pending a name being selected that can
be agreed upon.
-10-
<PAGE>
On April 5, 2000, Delicious and BF USB executed the Purchase Agreement.
OUR REASONS FOR THE PROPOSED SALE; APPROVAL BY THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED SALE IS IN THE BEST
INTEREST OF DELICIOUS AND OUR STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
HAS APPROVED THE PROPOSED SALE. The purchase price was negotiated on an arm's
length basis between our representatives and representatives of BF USB. Our
Board of Directors based its conclusion, in part, on the factors set forth
below.
(i) our goal to exit the snack food business to reduce continuing
losses from operations, declining sales and increasing stockholders' deficit;
(ii) the price and terms of the proposed sale, as reflected in the
Purchase Agreement;
(iii) the opinion of Valuemetrics to the Board of Directors of
Delicious that, subject to the matters set forth in its opinion, the
consideration to be received by Delicious in connection with the proposed sale
would be fair, from a financial point of view, to us.
Our business plan is to use the net cash proceeds from the proposed
sale (subject to any indemnity obligations and retained liabilities) estimated
to be $536,000 to develop a strategic plan to enter into a new line of business,
although our Board of Directors is only exploring opportunities and has not
identified any new line of business to date. If our Board of Directors does not
successfully identify a new line of business, our Board may seek to liquidate
the company and pay out any net cash to our stockholders.
The above information and factors considered by the Board are not
intended to be exhaustive, but includes material factors considered by the
Board. The Board did not attempt to quantify or otherwise assign relative
weights to the specific factors it considered or determine that any factor was
of particular importance. A determination of various weightings would, in the
view of the Board, be impractical. Rather, our Board viewed its position and
recommendations as being based on all of the information presented to, and
considered by, it. In addition, individual members of the Board may have given
different weight to different factors.
The holders of a majority of the outstanding shares of capital stock,
who are not affiliated with BF USB, have executed a written consent approving
the proposed sale, and accordingly no vote of any other stockholder is required
to approve the proposed sale and stockholder votes are not being solicited by
this Information Statement. See "The Stockholder Consent to the Proposed Sale."
Our directors and executive officers have informed us that, if such a vote of
the stockholders had been required, they would have voted their shares of
capital stock in favor of such transactions and would have recommended that our
stockholders vote in favor of such transactions.
OPINION OF OUR FINANCIAL ADVISOR
We retained Valuemetrics, Inc. to evaluate the terms of the Purchase
Agreement with BF USB and render an opinion as to its fairness from a financial
point of view of the consideration to
-11-
<PAGE>
be received in the proposed sale. On April 3, 2000, Valuemetrics rendered its
oral opinion to our Board of Directors. Valuemetrics' opinion was subsequently
confirmed in writing as of April 4, 2000, to the effect that, as of April 3,
2000, based on and subject to the matters stated in their opinion, the
consideration to be received by us under the Purchase Agreement as a whole is
fair, from a financial point of view, to us.
THE FULL TEXT OF VALUEMETRICS' WRITTEN OPINION DATED APRIL 4, 2000
SETTING FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITATIONS UPON THE
REVIEW CONDUCTED, IS ATTACHED AS APPENDIX B AND IS INCORPORATED BY REFERENCE.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION. HOLDERS OF OUR CAPITAL STOCK ARE URGED TO, AND SHOULD, READ THE OPINION
CAREFULLY. THE ENGAGEMENT OF VALUEMETRICS AND ITS OPINION ARE FOR THE BENEFIT OF
OUR BOARD OF DIRECTORS AND ITS OPINION WAS DELIVERED TO OUR BOARD OF DIRECTORS
IN CONNECTION WITH ITS CONSIDERATION OF THE PURCHASE AGREEMENT. VALUEMETRICS'
OPINION ADDRESSES ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY US
UNDER THE PURCHASE AGREEMENT FROM A FINANCIAL POINT OF VIEW, AND DOES NOT
ADDRESS ANY OTHER ASPECT OF THE PURCHASE AGREEMENT.
In connection with the Valuemetrics opinion, Valuemetrics among other
things: (i) reviewed the financial information contained in our Annual Report on
Form 10-K, for the year ended December 31, 1998 and the Form 10-Q's for the
quarters ended March 31, 1999, June 30, 1999 and September 30, 1999; (ii)
analyzed and discussed certain internally prepared financial statements and
other financial and operating data concerning the company; (iii) conducted due
diligence discussions with members of our senior management and advisors; (iv)
reviewed the historical market prices and trading activity for our common stock
and compared them with other publicly traded companies Valuemetrics felt would
be relevant and comparable to us; (v) compared our results of operations with
those of other peer companies; (vi) compared the financial terms of the Purchase
Agreement with the financial terms of certain other mergers and acquisitions to
the extent Valuemetrics found them to be relevant and comparable to the Purchase
Agreement; (vii) reviewed a draft of the Purchase Agreement dated March 21,
2000; and (viii) reviewed other financial studies and analyses and performed
such other investigations and took into account such other matters as
Valuemetrics deemed necessary, including its assessment of the general economic,
market and monetary conditions as of April 3, 2000.
In connection with its review and in arriving at its opinion,
Valuemetrics did not independently verify any information received from the
company and relied on and assumed that all such information was complete and
accurate in all material respects. With respect to any forecasts reviewed
relating to the prospects of the Company, Valuemetrics assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of our management as to its future financial performance.
Valuemetrics' opinion was rendered on the basis of securities market conditions
prevailing as of the market close on March 31, 2000 and on the conditions and
prospects, financial and otherwise, of Delicious as known to Valuemetrics on the
opinion date. Valuemetrics did not conduct, nor has it received copies of, any
independent valuation or appraisal of any of the assets of Delicious. In
addition, Valuemetrics has assumed, with our consent, that any
-12-
<PAGE>
of our material liabilities (contingent or otherwise, known or unknown) are as
set forth in our consolidated financial statements and other internally prepared
financial statements or described in the Purchase Agreement.
In delivering the Valuemetrics opinion to our Board of Directors,
Valuemetrics prepared and delivered to the Board of Directors certain written
materials containing various analyses and other information material to its
opinion. The following is a summary of these materials.
Transaction Review. The draft Purchase Agreement between Delicious and
BF USB, dated as of March 21, 2000, sets forth our net assets being sold. In
consideration for the transferred assets, BF USB will pay us at closing $26.68
million in cash, less a $1.7 million working capital adjustment at closing, and
subject to certain adjustments depending on the level of specific balance sheet
items at the time of closing: if our estimated closing working capital
balance/(deficit) is above or below the working capital set forth on the audited
closing balance sheet, a respective dollar-for-dollar increase or decrease will
be made to the purchase price. Valuemetrics assessed the fairness, from a
financial point of view, to holders of our capital stock, of BF USB's proposed
consideration for the transferred assets.
` Market Analysis. Valuemetrics reviewed general background information and
selected market trading data for Delicious relative to its peers, consisting of
nine publicly traded companies that develop, market and sell cookies, crackers
and other related snack foods: Eskimo Pie Corp., Hain Food Group Inc., J&J Snack
Foods Corp.' Keebler Foods Co., Lance Inc., Lincoln Snack Company, Poore
Brothers Inc., Ralcorp Holdings Inc. and Sherwood Brands Inc.
Valuemetrics reviewed the range of implied current market value for
Delicious' Company's assets through the application of various financial ratios
derived through its review of peer companies. Valuemetrics compared the values
of the peer companies to their 1999 financial results and estimates of their
2000 projected sales.
Valuemetrics considered the ranges of a variety of valuation metrics
for the peer companies including: (i) market capital to 1999 revenue ratios; and
(ii) market capital to projected 2000 revenue ratios. The valuation metric for
the peer companies representing the ratio of enterprise value divided by the
1999 revenues, ranges between 36% and 63% implying a Delicious equity enterprise
value of between $14.8 million and $27.4 million. The valuation metric for the
peer companies representing the ratio of market capital to projected 2000
revenues ranged between 54.3% and 72.2% implying an enterprise value for
Delicious of between $23.1 million and $31.9 million.
Valuemetrics also used merger and acquisition data form various market
transactions to develop multiples of enterprise value; developed similar
multiples of enterprise value for Delicious and compared the results of analyses
to determine the appropriateness of the purchase price.
The multiples for the sixteen peer companies with comparable
transactions representing the ratio of market capital to sales ranged between
.41x and 1.46x. The valuation metrics associated with other comparable peer
transactions representing the ratio of market capital to the trailing twelve
month revenue ratio based on a mergers and acquisition analysis using peer
company transactions
-13-
<PAGE>
ranged between 34.8% and 63.6%, implying a value for Delicious' assets between
$14.3 million and $26.1 million.
In its analysis, Valuemetrics also considered the total working capital
adjustment based upon projected information provided by Delicious. Valuemetrics
calculated the working capital to sales ratio of Delicious on a current and
historical basis and compared those ratios to those derived from the comparable
public peer companies and other industry data deemed reliable.
In reaching its conclusions as to the fairness of the consideration to
be received in the Purchase Agreement and in its presentation to the Board of
Directors, Valuemetrics did not rely on any single analysis or factor described
above, nor did it assign relative weights to the analyses or factors considered
by it, or make any conclusions as to how the results of any given analysis,
taken alone, supported its conclusions. The preparation of a fairness opinion is
a complete process and not necessarily susceptible to partial analyses or
summary description. Valuemetrics believes that its analyses must be considered
as a whole and that selecting portions of its analyses and of the factors
considered by it, without considering all factors and analyses, would create a
misleading view of the processes underlying the Valuemetrics opinion. The
analyses of Valuemetrics are not necessarily indicative of actual value or
future results, which may be significantly more or less favorable than suggested
by such analyses. Analyses relating to the values of companies do not purport to
be appraisals or valuations, nor do they necessarily reflect the price at which
companies may actually be sold. No company or transaction used in any analysis
for comparative purposes is identical to Delicious or the Purchase Agreement.
Accordingly, an analysis of the results is not mathematical; rather, it involves
complex considerations and subjective judgements concerning differences in the
various characteristics of the peer companies and other factors that could
affect the public trading value of the companies to which Delicious was
compared, and the terms of other peer company transactions to which the Purchase
Agreement was compared.
Valuemetrics is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, unlisted
securities, private placements and valuations for corporate and other purposes.
Our Board of Directors engaged Valuemetrics to render an opinion in
connection with the Purchase Agreement for which we will pay Valuemetrics a fee
of $45,000 for providing such opinion. Whether or not the Purchase Agreement is
consummated, we have agreed to pay Valuemetrics the $45,000 fee plus the
reasonable out-of-pocket expenses of Valuemetrics.
INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE
To the best of our knowledge, no officer, director, or holder of at
least five percent (5%) of our common stock has an interest, financial or
otherwise, in the proposed sale different from any other holder of our common
stock, except that Little Meadow Corp. and, indirectly, a director of Delicious
shall receive a fee in connection with the proposed sale at closing. The Series
C Preferred Stock will be redeemed at closing from the proceeds of the proposed
sale, including the Series C Preferred Stock held, on an as converted basis, by
certain five percent (5%) stockholders. The Series D Preferred Stock will be
redeemed six months after the closing from the proceeds of the proposed sale in
conjunction with the release of certain escrowed funds, including the Series D
Preferred Stock, on an as converted basis, by certain five percent (5%)
stockholders. See "Stock Ownership of Certain Beneficial Owners and Management".
-14-
<PAGE>
BUSINESS ACTIVITIES FOLLOWING THE PROPOSED SALE
We are presently operating in the snack food industry. After the
consummation of the proposed sale, we will no longer operate in the snack food
industry. We will explore and review our opportunities after the closing and may
seek to enter a new line of business. The Board of Directors has not identified
any new business at the present time. If the Board of Directors does not
successfully identify a new business, it may seek to liquidate Delicious and pay
out net cash to our stockholders.
USE OF PROCEEDS
We will principally use the proceeds of the sale to (i) repay our bank
debt and other debt as well as any liabilities not assumed by BF USB, (ii)
redeem our Series C Preferred Stock, (iii) redeem our Series D Preferred Stock
six months from the closing, and (iv) fund the expenses incurred in connection
with the Purchase Agreement. We expect to have net cash of $536,000 available at
the closing after taking into account the payments of $3,746,000 six months
after closing assuming the release of one-half of the escrow funds and
redemption of the Series D Preferred Stock. Subsequent to the closing of the
proposed sales, our Board of Directors intends to explore entering a new line of
business. The Board of Directors has not identified any new line of business at
the present time. If the Board does not successfully identifying a new line of
business, the Board of Directors may seek to liquidate Delicious and pay out any
net cash to the stockholders.
REGULATORY APPROVALS
We are not aware of any governmental or regulatory approvals required
in connection with the proposed sale other than compliance with applicable
securities laws, filings under the Delaware General Corporation Law, and
expiration of the applicable waiting periods under Hart-Scott Rodino Act of
1976, as amended.
ACCOUNTING TREATMENT/FEDERAL INCOME TAX CONSEQUENCES
The proposed sale will be accounted for as a sale of certain assets and
assumption of certain liabilities. The proposed sale will not have any material
federal income tax consequences to our stockholders. Upon consummation of the
proposed sale, we will recognize a financial reporting gain equal to the net
proceeds (the sum of the purchase price received less the expenses relating to
the proposed sale) less the closing net book value of the assets sold and
liabilities assumed by BF USB. We anticipate that there will be no material tax
payable because of the net operating losses we previously incurred, other than
approximately $250,000 in taxes resulting from the Alternative Minimum Tax.
There will be no United States Federal income taxes and no gain or loss will be
recognized by our stockholders as a result of the proposed sale.
-15-
<PAGE>
THE PURCHASE AGREEMENT
Delicious and BF USB are parties to the Purchase Agreement. The
following summarizes certain provisions of the Purchase Agreement. You should
carefully read the full text of the Purchase Agreement attached to this
Information Statement as Appendix A which is incorporated by reference into this
Information Statement.
PURCHASE PRICE
The Purchase Price for the transferred assets is $26.68 million, less a
$1.7 working capital adjustment plus the amount of the liabilities assumed by BF
USB, as determined and adjusted pursuant to the Purchase Agreement. At the
closing, BF USB will pay to us an amount equal to $19.6 million, plus or minus
any adjustments, and will deposit $5.336 million of the purchase price with the
Escrow Agent as provided under the terms of the Purchase Agreement. Within 45
days after the closing date, we will deliver to BF USB our audited closing
balance sheet. The closing balance sheet will be prepared in accordance with
generally accepted accounting principles applied on a basis consistent with the
method of preparation of our latest balance sheet.
There will be an adjustment to the purchase price based on the closing
working capital balance adjustment based on the closing balance sheet. If the
closing working capital balance adjustment as determined based on the closing
balance sheet is positive, the amount of the purchase price to be paid to us in
cash at the closing will be reduced on a dollar-for-dollar basis by that amount
with a reduction being made/released from the escrowed funds of $5,336,000 under
the terms of the Escrow Agreement, or in BF USB's discretion, requested directly
from the Company. If the closing working capital balance adjustment as
determined based on the closing balance sheet is negative, the amount of the
purchase price to be paid to us in cash at the closing will be increased on a
dollar-for-dollar basis by that amount with BF USB to pay that additional amount
to us within ten (10) business days of notice to BF USB that such amount is due.
Within 45 days after the closing, we are required to deliver to BF USB
our closing date balance sheet relating to the transferred assets and business.
The closing date balance sheet is required to be prepared in accordance with
generally accepted accounting principles applied on a basis consistent with that
of our most recently audited balance sheet. Within 30 days after the submission
of the audited closing date balance sheet and closing working capital balance
adjustment the parties are required to inform the other party in writing that
the audited closing date balance sheet is objectionable, otherwise, if no
objection is made, the audited closing date balance sheet will be final. If
objectionable, the parties shall in good faith attempt to resolve their
differences; if we are unable to resolve our differences, we shall submit the
dispute to an independent accounting firm mutually selected by both parties for
final determination of the dispute within 30 days of our submission.
TRANSFERRED ASSETS
The assets and business of Delicious which will be purchased by BF USB
generally include substantially all of our assets, including, but not limited
to: (a) inventories of raw materials, work in process, finished goods, office
supplies, maintenance supplies, packaging materials and similar
-16-
<PAGE>
items; (b) accounts, accounts receivable, notes and notes receivable; (c)
prepaid expenses, advance payments and security deposits existing on the closing
date; (d) all rights and benefits under the contracts assigned to BF USB; (e)
all operating data and records, including without limitation, books (other than
corporate minute and stock record books), records and accounts, correspondence,
research and development files, production records, technical, accounting,
manufacturing, quality control and procedural manuals, customer lists, customer
complaint files, sales and marketing literature, purchase orders and invoices
and employment records; (f) all machinery, equipment, tools, computers, computer
hardware and software, motor vehicles, tooling, packaging, production fixtures,
furniture and fixtures, leasehold improvements, work in progress and other
tangible assets, whether or not reflected as capital assets in accounting
records; (g) all right, title and interest in and to (including without
limitation the right to sue for and obtain remedies against past infringement
and rights of priority and protection of interests therein) all intangible
property rights, including but not limited to inventions, discoveries, trade
secrets, processes, formulas, know-how, patents, patent applications, any patent
application constituting an equivalent, counterpart, reissue, extension or
continuation (including without limitation, continuations-in-part, divisions,
and renewals, all letters patent granted thereon, all reissues, reexaminations)
of any applications, trade names, trademarks and service marks, trademark and
service mark registrations, applications for trademark and service marks
registrations, the goodwill symbolized by our trade names, trademarks and
service marks, trademark and service mark registrations and applications for
trademark and service mark registrations, copyrights, copyright registrations,
owned, or, where not owned, used and all right, title and interest in and to all
licenses and other agreements relating to any of the above kinds of property or
rights to any "know-how" or disclosure or use of ideas, in the United States and
worldwide, including but not limited to certain intangible property; (h) all
permits other than those permits which by law are not transferable; (i) all
non-competition agreements in our favor relating to the Worth's agreements; (j)
the name and all goodwill associated with the names "Delicious Brands,"
"Delicious Frookie Company," "Salerno Foods," "R.W. Frookies," "Mama's," and
"Vermont Upcountry Cocoa"; and (k) all other assets, properties, claims, rights
and interests which exist on the closing date, of every kind and nature and
description, whether intangible or intangible, real, personal or mixed wherever
located, which relate to or are used or held for use in connection with the
assets and business to be purchased.
EXCLUDED ASSETS
The transferred assets specifically exclude, and we will retain, the
following excluded assets: (a) cash and petty cash; (b) deferred tax benefits;
(c) insurance claims; (d) tax refunds; and (e) unutilized portion of a special
reserve fund of $500,000 set up by us upon the execution of the Purchase
Agreement to cover unanticipated expenses prior to closing.
LIABILITIES TO BE ASSUMED BY BF USB
At the closing, BF USB will assume the following liabilities,
obligations and commitments of Delicious which relate to the transferred assets:
(a) certain accounts, accounts payable, accrued expenses and notes and notes
payable; (b) all obligations of Delicious continuing after the closing under the
contracts assigned to BF USB which become due and payable or are required to be
performed after the closing date; and (c) certain other liabilities and
obligations of Delicious which relate to the transferred assets and business.
-17-
<PAGE>
EXCLUDED LIABILITIES
Except as otherwise provided in the Purchase Agreement, BF USB will not
assume any other of Delicious' liabilities of any nature currently existing or
incurred in the future, including without limitation: (a) our obligations and
liabilities arising under the Purchase Agreement; (b) any liability of ours for
taxes arising from our operations on or prior to the closing date or arising out
of the sale by us of the transferred assets and business pursuant to the
Purchase Agreement other than with respect to certain taxes or charges; (c) all
consulting, finders, investment banking, legal and similar fees and expenses
incurred by us in connection with the negotiation of the Purchase Agreement and
the consummation of the transactions contemplated; (d) any liability or
obligation, including, without limitation, any liability for our attorney's fees
or expenses, resulting from litigation, if any, which is disclosed in the
Purchase Agreement; (e) any liability or obligation to any employee or former
employee of ours or to any third party, under any pension, insurance, bonus,
profit-sharing or other employee benefit plan or arrangement or any obligation
relating to salaries, bonuses, vacation or severance pay, or any obligation
under any statute, rule or regulation, including without limitation ERISA
arising prior to closing; (f) any liability, contract, commitment or other
obligation of ours, known or unknown, fixed or contingent, the existence of
which is or will be a breach of any representation or warranty of ours contained
in or made under to the terms of the Purchase Agreement or which BF USB is not
assuming under the Purchase Agreement; (g) any infringement or alleged
infringement of any patent, trademark, trade name, copyright or other property
right of any other person or entity arising out of any action of ours on or
prior to the closing date; (h) any liability or obligation arising out of our
conduct in operating our business on or prior to the closing date, (including
without limitation liabilities or obligations arising out of any breach by us of
any provision of any of the contracts assigned to BF USB or out of our failure
to perform any contracts assigned in accordance with their terms prior to the
closing).
THE CLOSING
It is anticipated that the closing will take place at the offices of
BBLP-Pavia e Ansaldo, 460 Park Avenue, 21st Floor, New York, NY at 10:00 a.m.,
Eastern Time, on May 31, 2000, or at such other place, time or date as may be
mutually agreed upon by Delicious and BF USB. The transfer of the transferred
assets by Delicious to BF USB shall be deemed to occur at the close of business,
New York, NY time, on the date of the closing.
REPRESENTATIONS AND WARRANTIES OF DELICIOUS
We have made certain representations and warranties on behalf of
ourselves and our subsidiaries relating to, among other things, (i) corporate
organization; (ii) our authority relative to the Purchase Agreement; (iii)
capitalization; (iv) the ownership and condition of the transferred assets; (v)
our reports and financial statements under the Exchange Act; (vi) machinery
equipment, vehicles and personal property; (vii) the absence of undisclosed
liabilities; (viii) the existence of any litigation; (ix) inventory; (x) real
properties; (xi) capital leases; (xii) any change in our financial condition and
assets; (xiii) taxes; (xiv) accounts receivable and payables; (xv) our contracts
and commitments; (xvi) our employee relations and benefit plans; (xvii) labor
matters; (xviii) compliance with agreements and laws; (xix) trade names and
other intangible property; (xx) regulatory approvals; (xxi) the brokers used in
connection with the transactions contemplated by the Purchase Agreement; (xxii)
orders, commitments and returns;
-18-
<PAGE>
(xxiii) compliance with environmental laws; (xxiv) Year 2000 computer compliance
status; (xxv) the accuracy of information provided by us or on our behalf under
the Purchase Agreement; and (xxvi) insurance.
REPRESENTATIONS AND WARRANTIES OF BF USB
BF USB has made certain representations and warranties relating to,
among other things, (i) its corporate organization and authority; (ii) its
authority relative to the Purchase Agreement; (iii) the absence of brokers used
in connection with the transactions contemplated by the Purchase Agreement; (iv)
compliance with agreements and laws, (v) its efforts to continue certain
customary practices relating to termination of services with third party
manufacturers and suppliers; and (vi) its financial capacity to consummate the
Purchase Agreement.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of each party shall survive and
remain in full force and effect for two (2) years from the closing date.
INDEMNIFICATION
Pursuant to the Purchase Agreement, Delicious agrees to indemnify BF
USB from and against (i) any loss, liability or damage it may suffer after the
closing resulting from, arising out of, relating to, in the nature of or caused
by the breach (or alleged breach) of any untrue representation or breach of
warranty of covenant of ours; (ii) any loss, liability or damage it may suffer
resulting from, arising out of, relating to, in the nature of or caused by any
liability of ours which is not an assumed by BF USB; (iii) any loss, liability
or damage it may suffer resulting from or by reason of nonfulfillment of any
covenant, agreement or undertaking of ours which remains in effect after closing
and has not been waived in writing.
Pursuant to the Purchase Agreement, neither party has any obligation to
indemnify the other from and against any claim for loss or damage until the
loss, liability or damage suffered is in excess of a $125,000. If such claim
exceeds $125,000, then the claiming party shall be entitled to full
indemnification without regard to the $125,000 limitation. The maximum liability
arising out of the transaction contemplated by the Purchase Agreement may not
exceed the purchase price.
The parties agree to indemnify each other for the amount of the closing
working capital balance adjustment resulting in any shortfall or excess as the
case may be. Any shortfall shall result in a dollar for dollar reduction of the
purchase price in the amount of such shortfall which BF USB may seek by either
making a claim under the Escrow Agreement or directly in writing to Delicious.
Any excess shall result in a dollar for dollar increase to the purchase price
which Delicious shall demand in writing from BF USB. Payment of such shortfall
or excess shall be paid within 10 business days of receipt of notice or demand.
ESCROW
We agreed to escrow $5,336,000 of the purchase price for a period of
eighteen months, subject to the terms of an Escrow Agreement, to satisfy any
indemnification obligations that may arise under the Purchase Agreement. BF USB
-19-
<PAGE>
will deposit $5,336,000 into a designated escrow account on the closing date.
Six months after the closing date, one-half of the escrowed funds, or
$2,668,000, will be released to Delicious less any amounts paid for claims or of
which notice has been given under the terms of the Escrow Agreement. Twelve
months after the closing date, $1,334,000 of the funds will be released to
Delicious less any amounts paid for claims or of which notice has been given
under the terms of the Escrow Agreement. Upon expiration of the Escrow
Agreement, the remainder of the funds will be released to Delicious less any
amounts paid for claims or of which notice has been given under the terms of the
Escrow Agreement. Any funds withheld relating to claims for which notice was
given shall be held by the agent until the dispute relating to the claim is
resolved.
CONDITIONS TO THE PROPOSED SALE
Pursuant to the Purchase Agreement, the obligations of Delicious to
effect the proposed sale are subject to, among other things, (i) the
representations and warranties of BF USB contained in the Purchase Agreement,
and all certificates delivered to Delicious by BF USB on or prior to the closing
date, under the terms of the Purchase Agreement being true on and as of the
closing date; (ii) BF USB having performed and complied with all terms,
conditions, obligations, agreements and restrictions required to be performed
under the Purchase Agreement; (iii) BF USB having performed all corporate and
other proceedings required to be taken in order to authorize or carry out the
Purchase Agreement; (iv) no injunction or order prohibiting consummation of the
transactions contemplated by the Purchase Agreement, and no action or proceeding
pending before any court or other governmental body seeking to restrain,
prohibit or invalidate the transactions contemplated by the Purchase Agreement
or which might affect the right of Delicious to transfer the assets; (v) the
receipt of Delicious of an opinion from BF USB's counsel; (vi) receipt of
evidence of payment of Purchase Price in accordance with the Purchase Agreement;
(vii) the receipt of an executed Escrow Agreement for $5,336,000 escrowed funds
and a Reserve Escrow Agreement for $500,000 escrowed funds; and (viii) the
execution and delivery by BF USB of certificates, instruments, documents and
agreements Delicious may require.
Pursuant to the Purchase Agreement, the obligations of BF USB to effect
the proposed sale are subject to, among other things, (i) the representations
and warranties of Delicious contained in the Purchase Agreement, and all
certificates delivered to BF USB by Delicious on or prior to the closing date,
under the terms of the Purchase Agreement being true on and as of the closing
date; (ii) Delicious having performed and complied with all terms, conditions,
obligations, agreements and restrictions required to be performed under the
Purchase Agreement; (iii) Delicious having performed all corporate and other
proceedings required to be taken in order to authorize or carry out the Purchase
Agreement and to convey, assign, transfer and deliver the transferred assets;
(iv) the approval of all governmental agencies, departments, bureaus,
commissions or similar bodies, with which a filing or notification must be made
or given, or whose consent, authorization or approval is necessary under any
applicable law, rule, order or regulation for the consummation of the
transactions contemplated by the Purchase Agreement by Delicious; (v) the
receipt by BF USB of all requisite consents and approvals of all lenders,
lessors and other third parties whose consent or approval is required in order
for Delicious to consummate the transactions contemplated by the Purchase
Agreement; (vi) no injunction or order prohibiting consummation of the
transactions contemplated by the Purchase Agreement, and no action or proceeding
pending before any court or other governmental body seeking to restrain,
-20-
<PAGE>
prohibit or invalidate the transactions contemplated by the Purchase Agreement
or which might affect the right of Delicious to transfer the assets; (vii) the
execution by Delicious and BF USB of an Escrow Agreement for $5,336,000 escrowed
funds and a Reserve Escrow Agreement for $500,000 escrowed funds; (viii) the
execution and delivery of certain non-compete agreements by Delicious and
certain of its officers and consultants; (ix) the delivery of a Phase I
environmental report relating to Delicious' premises; (x) receipt of a copy of
Delicious' amendment of its Certificate of Incorporation and authority to do
business in certain states with regard to the change of its name; (xi) receipt
of a Bill of Sale relating to the transferred assets; and (xii) the execution
and delivery by Delicious of certificates, instruments, documents and agreements
BF USB may require.
NO SOLICITATIONS
Under the Purchase Agreement, Delicious may not take, (or authorize or
permit any financial advisor, accountant or other person retained by us or
acting for or on our behalf) to take, directly or indirectly, any action to
solicit, encourage, negotiate, assist or otherwise facilitate (including by
furnishing confidential information with respect to the transferred assets or
permitting access to the transferred assets and business) any alternate proposal
for acquisition of more than 50% of our outstanding capital stock, the sale of
all or substantially all of our assets, or a share exchange or other business
combination transaction in which we would not be the surviving entity. However,
if, at any time prior to the closing of the sale and purchase of the transferred
assets contemplated by the Purchase Agreement, our Board of Directors determines
in reasonable good faith, that it would be a violation of its fiduciary duties
to the Delicious' stockholders under applicable law not to do so, Delicious may,
in response to a superior proposal for acquisition or sale from a third party to
acquire, directly or indirectly (by means of a tender or exchange offer, merger,
consolidation, share exchange reorganization, stock or asset purchase or other
business combination transaction, recapitalization, liquidation, dissolution, or
similar transaction, or otherwise) of 50% or more of our stock or assets or all
or substantially all of our assets, furnish information to and participate in
negotiations with the third party making such superior proposal.
NON-COMPETE AND CONFIDENTIALITY
We agreed not to compete in the snack food industry relating to the
manufacturing, sale, distribution, franchising or marketing of snack food,
cookies, crackers or other baked foods for a period of five (5) years after the
closing date anywhere within the United States or Canada. We also agreed to hold
confidential all proprietary and confidential information and trade secrets
relating to the transferred assets and business sold to BF USB.
TERMINATION
The Purchase Agreement may be terminated in certain circumstances,
including, among others, (i) by either party, if the transactions contemplated
by the Purchase Agreement have not been consummated by June 15, 2000; (ii) by
the mutual written agreement of the parties; (iii) by Delicious if prior to the
closing, we approve or accept a superior proposal in compliance with the terms
of the Purchase Agreement; and (iv) by either Delicious or BF USB if prior to
the closing there is a material breach of any of the representations, warranties
or covenants by the other party.
-21-
<PAGE>
EFFECT OF TERMINATION
If the Purchase Agreement is terminated prior to Closing, it
immediately becomes void and there will be no liability or obligation on the
part of either Delicious or BF USB, or their subsidiaries and their respective
officers, directors or stockholders, except to the extent the termination
results from the willful breach by a party of any of its representations,
warranties or covenants set forth in the Purchase Agreement. However, if prior
to the closing, our Board of Directors approves or accepts a superior proposal
in compliance with the terms of the Purchase Agreement, we shall pay a breakup
fee of $1,500,000 to BF USB.
-22-
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This table sets forth the beneficial ownership of the following, as of
March 31, 2000: (i) the holders of our capital stock known by us to own
beneficially more than 5% of the outstanding shares of capital stock; and (ii)
each directors and executive officers holding shares of our capital stock; (iii)
and all of our directors and executive officers as a group holding shares of our
capital stock.
The number of shares of our capital stock beneficially owned by each
director or executive officer is determined under the rules of the SEC, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under the rules, beneficial ownership includes any shares which the
individual has sole or shared voting or investment power over and also any
shares which the individual has the right to acquire within 60 days after March
31, 2000 through the exercise of any stock option or other right. Unless
otherwise indicated, each person listed in this table has sole investment and
voting power of the shares corresponding to his name (or shares such power with
his or her spouse). The inclusion herein of any shares deemed to be beneficially
owned in this table is not an admission of beneficial ownership of those shares.
<TABLE>
<CAPTION>
Shares Percent of
Name and Address(1) Beneficially Owned(2) Class(2)
------------------- --------------------- --------
<S> <C> <C>
T. J. Guinan.................................................. 0 *
Jeffry W. Weiner(3)........................................... 75,000 *
Donald C. Schmitt(4).......................................... 564,250 5.0%
John H. Wyant(5).............................................. 28,250 *
Edward Sousa(6)............................................... 3,750 *
Michael P. Schall(7).......................................... 1,000 *
Russell D. Glass(8)........................................... 1,291,738 11.4%
Little Meadow Corp. (9)....................................... 1,291,238 11.4%
H.T. Ardinger(10)............................................. 2,076,715 18.4%
Douglas Akins(11)............................................. 1,938,780 17.2%
All directors and officers as a group ........................ 1,908,738 16.9%
(7 persons) (3)(4)(5)(6)(7)(8)
</TABLE>
- - ---------------
* Less than one percent (1%) of outstanding Common Stock.
(1) Except as otherwise indicated, the address for each of the named individuals
is c/o Delicious Brands, Inc., 2070 Maple Street, Des Plaines, Illinois 60018.
(2) Except as otherwise indicated, the stockholders listed in the table have
sole voting and investment power with respect to all shares of Common Stock
beneficially owned by them. Pursuant to the rules and regulations of the
Commission, shares of Common Stock that an individual or group has a right to
acquire within 60 days pursuant to the exercise of warrants or options
-23-
<PAGE>
are deemed to be outstanding for the purposes of computing the percentage
ownership of such individual or group, but are not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person shown in
the table.
(3) Consists of (i) 50,000 shares of Common Stock issuable upon exercise of
options exercisable through March 18, 2001, at a price of $6.00 per share and
(ii) 25,000 shares of Common Stock issuable upon exercise of options exercisable
through March 14, 2003, at a price of $6.00 per share.
(4) Includes (i) 25,000 shares of Common Stock issuable upon exercise of options
exercisable through November 8, 2004, at a price of $6.00 per share; (ii) 37,500
shares of Common Stock issuable upon exercise of options exercisable through
August 4, 2004 with respect to 6,500 shares, through December 31, 2004 with
respect to 1,500 shares, through December 31, 2005 with respect to 1,500 shares,
through December 31, 2006 with respect to 1,500 shares, through December 17,
2007 with respect to 25,000 shares and through December 31, 2 2007 with respect
to 1,500 shares, all at a price of $6.00 per share; (iii) 1,500 shares of Common
Stock issuable upon exercise of options exercisable through December 31, 2008,
at a price of $12.375 per share; (iv) 750 shares of Common Stock issuable upon
exercise of options exercisable through December 31, 2009 at a price of $1.50
per share; (v) 13,000 shares of Common Stock issuable upon exercise of warrants
exercisable through April 27, 2001, at a price of $4.00 per share, of which
warrants to purchase 4,000 shares of Common Stock are held by an individual
retirement account ("IRA") for the benefit of Mr. Schmitt, warrants to purchase
5,000 shares of Common Stock are held by Mr. Schmitt together with his wife and
4,000 shares are held by an IRA for the benefit of Mr. Schmitt's wife, of which
shares Mr. Schmitt disclaims beneficial ownership; (vi) 23,750 shares of Common
Stock issuable upon conversion of 23,750 shares of Series A Preferred Stock,
which automatically convert on August 1, 2001 if not earlier converted, of which
5,000 shares of Series A Preferred Stock are held by an IRA for the benefit of
Mr. Schmitt, 6,250 shares of Series A Preferred Stock are held by Mr. Schmitt
together with his wife and 5,000 shares of Series A Preferred Stock are held by
an IRA for the benefit of Mr. Schmitt's wife, and 7,500 shares of Series A
Preferred Stock held by a trust for the benefit of Ms. Ruth Schmitt of which Mr.
Schmitt is custodian; (vii) 150,000 shares of Common Stock issuable upon
conversion of 15,000 shares of Series C Preferred Stock; and (viii) 250,000
shares of Common Stock issuable upon conversion of 25,000 shares of Series D
Preferred Stock. Excludes (i) 37,900 shares of Common Stock held by Donald
Schmitt's adult children, of which shares Mr. Schmitt disclaims beneficial
ownership; (ii) 19,600 shares of Common Stock issuable upon exercise of warrants
exercisable through April 27, 2001, at a price of $4.00 per share, held by Mr.
Schmitt's adult children and his mother, of which shares Mr. Schmitt disclaims
beneficial ownership; and (iii) 28,750 shares of Common Stock issuable upon
conversion of 28,750 shares of Series A Preferred Stock, which automatically
convert on August 1, 2001 if not earlier converted, held by Mr. Schmitt's adult
children and his mother, of which shares Mr. Schmitt disclaims beneficial
ownership.
(5) Consists of (i) 6,250 shares of Common Stock issuable upon exercise of
options exercisable through December 9, 2000, at a price of $2.80 per share; and
(ii) 9,750 shares of Common Stock issuable upon exercise of options exercisable
through August 14, 2004 with respect to 6,500 shares, through December 31, 2004
with respect to 1,500 shares, through December 31, 2005 with respect to 750
shares and through December 21, 2007 with respect to 1,000 shares, all at a
price of $6.00 per share; (iii) 1,500 shares of Common Stock issuable upon
exercise of options exercisable through December 31, 2008, at a price of $12.375
per share; and (iv) 750 shares of Common Stock issuable upon exercise of options
through December 31, 2009 at a price of $1.50 per share.
(6) Consists of (i) 3,000 shares of Common Stock issuable upon exercise of
options exercisable through March 24, 2009 at a price of $10.25 per share; and
(ii) 750 shares of Common Stock issuable upon exercise of options through
December 31, 2009 at a price per share of $1.50 per share.
(7) Consists of (i) 1,000 shares of Common Stock issuable upon exercise of
options exercisable through February 10, 2009, at a price of $11.375 per share.
(8) Consists of 500 shares of Common Stock issuable upon exercise of options
exercisable through April 11, 2009, at a price of $10.75 per share; and (ii) Mr.
Glass as a director of Little Meadows Corp. is deemed to beneficially own
1,291,238 shares of Common Stock held by Little Meadows Corp which is reflected
in the table above.
-24-
<PAGE>
(9) Includes (i) 251,328 shares of Common Stock issuable upon conversion of
35,000 shares of Series B Preferred Stock; and (ii) 34,130 shares of Common
Stock issuable upon conversion of 3,413 shares of Series C Preferred Stock
issued in payment of the fee paid to Icahn Associates Corp., an affiliate of
Little Meadows Corp., in relation to services rendered in connection with the
Series C private placement.
(10) Includes (i) 1,000,000 shares of Common Stock issuable upon conversion of
100,000 shares of Series C Preferred Stock; (ii) 250,000 shares of Common Stock
issuable upon conversion of 25,000 shares of Series D Preferred Stock.; and
(iii) 650,000 shares of Common Stock issuable upon conversion of an 8%
convertible promissory note.
(11) Includes (i) 20,343 shares of Common Stock held in an IRA for the benefit
of Mr. Adkins; (ii) 750,000 shares of Common Stock issuable upon conversion of
75,000 shares of Series C Preferred Stock held in the name of the Baker Family
Trust which Mr. Adkins is the trustee and has sole voting power for the trust;
(iii) 250,000 shares of Common Stock issuable upon conversion of 25,000 shares
of Series D Preferred Stock held in the name of the Family Partnership which Mr.
Adkins has sole voting power on behalf of the partnership; (iv) 250,000 shares
of Common Stock issuable upon conversion of 25,000 shares of Series D Preferred
Stock held in the name of the Baker Family Trust which Mr. Adkins is the trustee
and has sole voting power for the trust; and (v) 400,000 shares of Common Stock
issuable upon conversion of an 8% convertible promissory note.
NAME CHANGE
This proposal describes the amendment to our Certificate of
Incorporation.
Upon the consummation of the proposed sale, we will divest ourselves of
our snack food business. Our Board of Directors believes it is advisable for us
to change our name to "Next Generation Technology, Inc." or another name as they
may determined, so that we can fulfill our obligations under the Purchase
Agreement to sell and assign the name "Delicious" to BF USB.
The holders of a majority of outstanding shares of capital stock have
executed a written consent approving the amendment to the Certificate of
Incorporation to change Delicious' name to "Next Generation Technology Holdings,
Inc." or another name as our the Board of Directors may determine. No vote of
any other stockholders is required to approve this name change. Our directors
and executive officers have informed us that, if such a vote of stockholders had
been required, they would have voted their shares of capital stock in favor of
the amendment and would have recommended that our stockholders vote in favor of
the name change.
-25-
<PAGE>
EXHIBIT A
ASSET PURCHASE AGREEMENT
By and Between
Delicious Brands, Inc.,
and
BF USB Inc.
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of April
5, 2000, is by and between BF USB Inc., a Delaware corporation ("Purchaser"),
and Delicious Brands, Inc., a Delaware corporation ("Seller"). Seller and
Purchaser may hereinafter be referred to collectively as "Parties" and
individually as a "Party".
WHEREAS, the Parties wish to provide for the terms and conditions
upon which Purchaser will acquire substantially all of the assets of Seller.
WHEREAS, the Parties wish to make certain representations,
warranties, covenants and agreements in connection with the purchase of the
assets and also to prescribe various terms and conditions to such transaction.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
Section 1
Premises, Exhibits and Schedules
The premises, Exhibits and Schedules hereto constitute an integral
and substantive part of this Agreement.
Section 2
Definitions
2.1 Certain Defined Terms. As used in this Agreement, the term:
(a) "AAA" shall have the meaning set forth in Section 11(l).
(b) "Agreement" shall have the meaning set forth in the preamble.
(c) "Allocation Certificate" shall have the meaning set forth in
Section 3(e).
(d) "Antitrust Division" shall have the meaning set forth in
Section 6(f).
(e) "Appointing Authority" shall have the meaning set forth in
Section 11(l).
(f) "Assigned Contracts" shall have the meaning set forth in
Exhibit 3(a)(ii).
(g) "Assumed Liabilities" shall have the meaning set forth in the
Liability Undertaking.
(h) "Auditor" shall have the meaning set forth in Section 3(c).
(i) "Audited Closing Balance Sheet" shall have the meaning set
forth in Section 3(c).
(j) "Authority" and "Authorities" shall have the meanings set
forth in Section 4(e).
A-1
<PAGE>
(k) "Bank" shall have the meaning set forth in Section 6(o).
(l) "Bank Extension" shall have the meaning set forth in Section
6(o).
(m) "Basket Amount" shall have the meaning set forth in Section
10(f).
(n) "Benefit Arrangement" shall have the meaning set forth in
Section 4(r)(iv).
(o) "Benefit Plans" shall have the meaning set forth in Section
4(r)(xii).
(p) "Break-up Fee" shall have the meaning set forth in Section
6(c)(ii).
(q) "Business Day" shall mean a day, other than a Saturday or a
Sunday, on which commercial banks are not closed in New York City, U.S.A. and in
the City of Parma, Italy.
(r) "Closing" shall have the meaning set forth in Section 3(d).
(s) "Closing Date" shall have the meaning set forth in Section
3(d).
(t) "Closing Working Capital Balance Adjustment" shall have the
meaning set forth in Section 3(c).
(u) "Closing Working Capital Balance/(Deficit)" shall have the
meaning set forth in Section 3(c).
(v) "COBRA" shall have the meaning set forth in Section 4(r)(xii).
(w) "Code" shall have the meaning set forth in Section 4(r)(i).
(x) "Consent" and "Consents" shall have the meaning set forth in
Section 4(f).
(y) "Disclose" shall have the meaning set forth in Section 6(e).
(z) "Disclosure Schedule" shall have the meaning set forth in
Section 4(a).
(aa) "DOL" shall have the meaning set forth in Section 4(r)(i)(B).
(bb) "Dollars" and "$" shall mean lawful money of the United States
of America.
(cc) "ERISA" shall have the meaning set forth in Section 4(r)(i).
(dd) "Escrow Account" shall have the meaning set forth in Section 3
of the Escrow Agreement.
(ee) "Escrow Agent" shall have the meaning ascribed thereto in the
preamble of the Escrow Agreement.
(ff) "Escrow Agreement" shall mean the escrow agreement
substantially in the form of Exhibit 7(g) hereto and to be delivered by the
parties at Closing pursuant to this Agreement.
(gg) "Escrow Amount" shall have the meaning set forth in Section
3(b)(A)(ii).
(hh) "Estimated Closing Working Capital Balance/(Deficit)" shall
have the meaning set forth in Section 3 (c).
(ii) "Excluded Assets" shall have the meaning set forth in Section
3(a)(iv).
(jj) "FTC" shall have the meaning set forth in Section 6(f).
(kk) "GAAP" and "general accepted accounting principles" shall have
the meaning set forth in Section 2.2.
(ll) "Hazardous Material" shall have the meaning set forth in
Section 4(z)(i).
A-2
<PAGE>
(mm) "HSR Act" shall have the meaning set forth in Section 3(d).
(nn) "Indemnified Party" shall have the meaning set forth in
Section 10(g).
(oo) "Indemnifying Party" shall have the meaning set forth in
Section 10(g).
(pp) "Independent Accountants" shall have the meaning set forth in
Section 3(c).
(qq) "Information" shall have the meaning set forth in Section
6(e).
(rr) "IP Assignments" shall have the meaning set forth in Section
3(a)(iii).
(ss) "Intellectual Property Rights" shall have the meaning set
forth in Section 4(n).
(tt) "Latest Balance Sheet" shall have the meaning set forth in
Section 4(g).
(uu) "Law" and "Laws" shall have the meaning set forth in Section
4(e).
(vv) "Liability Undertaking" shall have the meaning set forth in
Section 3(b)(B).
(ww) "Lien" shall mean any restriction on personal or real property
of any kind, including without limitation, any mortgage, pledge, lien,
hypothecation, security interest, encumbrance, claim of any kind, easement,
right-of-way, tenancy, covenant, encroachment, restriction or charge of any kind
or nature (whether or not of record).
(xx) "Loss Contingency" shall have the meaning set forth in Section
4(h).
(yy) "New Name" shall have the meaning set forth in Section 7(j).
(zz) "Party" or "Parties" shall have the meaning set forth in the
preamble.
(aaa) "Payoff Schedule" shall have the meaning set forth in Section
6(q).
(bbb) "PBGC" shall have the meaning set forth in Section 4(r)(i)(B).
(ccc) "Pension Plan" shall have the meaning set forth in Section
4(r)(i).
(ddd) "Permitted Liens" shall have the meaning set forth in Section
3(a).
(eee) "Properties" shall have the meaning set forth in Section
4(z)(i).
(fff) "Purchase Price" shall have the meaning set forth in Section
3(b)(A).
(ggg) "Purchaser" shall mean BF USB Inc. or any other entity that:
(A) (x) owns or controls BF USB Inc.; (y) BF USB Inc. owns or controls; or (z)
is owned and controlled by the same parent company or companies or the same
ultimate beneficial owner as BF USB Inc., and (B) to which BF USB Inc. may have
assigned this Agreement as of the Closing.
(hhh) "Reserve Escrow Agreement" shall have the meaning set forth in
Section 6(n).
(iii) "Seller" shall mean Delicious Brands, Inc.
(jjj) "Seller's Assets" shall have the meaning set forth in Section
3(a).
(kkk) "Seller Capital Stock" shall have the meaning set forth in
Section 4(c).
(lll) "Special Reserve Fund" shall have the meaning set forth in
Section 6(n).
(mmm) "Subsidiary" and "Subsidiaries" shall have the meaning set
forth in Section 4(b).
(nnn) "Tax Returns" shall have the meaning set forth in Section
4(p).
A-3
<PAGE>
(ooo) "Third Party" shall have the meaning set forth in Section
6(c)(i)(A).
(ppp) "Termination Date" shall have the meaning set forth in Section
3(d).
(qqq) "Treasury" shall have the meaning set forth in Section
4(r)(i)(B).
(rrr) "Transferred Employees" shall have the meaning set forth in
Section 6(l)(i).
(sss) "Welfare Plan" shall have the meaning set forth in Section
4(r)(iii).
(ttt) "Worth Agreements" shall have the meaning set forth in Section
6(p)(ii).
2.2 Accounting Terms and Determinations. All references in this
Agreement to "generally accepted accounting principles" or "GAAP" shall mean
generally accepted accounting principles in effect in the United States of
America at the time of application thereof. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all financial
statements and certificates and reports as to financial matters required to be
furnished hereunder shall be prepared, in accordance with generally accepted
accounting principles, applied on a consistent basis.
Section 3
Purchase of Assets
(a) Assets to be Purchased. Upon the terms and subject to the
conditions set forth in this Agreement (other than such conditions as shall have
been waived in accordance with the terms hereof), Seller shall sell, transfer,
convey, assign and deliver to Purchaser, and Purchaser shall purchase from
Seller, at the Closing hereunder, all of the assets, properties, goodwill and
rights of Seller, as a going concern, of every nature, kind and description,
tangible and intangible, wheresoever located and whether or not carried or
reflected on the books and records of Seller (hereinafter sometimes collectively
referred to as "Seller's Assets"), including without limitation (i) the right to
use the names and all variations thereof listed on Exhibit 3(a)(i) hereto; (ii)
the assets referred to in the form(s) of Bill (or Bills) of Sale listed on
Exhibit 3(a)(ii) hereto; (iii) the trademarks, licenses, and other Intellectual
Property Rights set forth in the assignment and transfer documents set forth in
Exhibit 3(a)(iii) (the "IP Assignments"); and (iv) the assets reflected on the
Latest Balance Sheet, with only such dispositions of such assets as shall have
occurred in the ordinary course of Seller's business between December 31, 1999
and the Closing and which are permitted by the terms hereof; and excluding only
(x) the minute books, corporate seal and stock records of Seller, and (y) the
assets specifically set forth on Exhibit 3(a)(iv) hereto (the assets referred to
in Sections 3(a)(iv)(x) and (y), hereinafter, collectively, the "Excluded
Assets"). All real property assets and fixtures included among Seller's Assets
shall be conveyed free and clear of any Lien, except for those Liens described
on Exhibit 3(a) hereto (the "Permitted Liens"). All machinery, equipment,
vehicles and other personal property, including without limitation inventories,
accounts and notes receivable, trade notes, trade accounts and Intellectual
Property Rights, shall be conveyed free and clear of any Liens except for the
Permitted Liens. Purchaser shall not assume any liabilities of Seller whether or
not associated with Seller's Assets or in any other way associated with Seller
or any of its businesses except as specifically set forth in the Liability
Undertaking set forth in Exhibit 3(b)(B).
(b) Purchase Price. Upon the terms and subject to the conditions set
forth in this Agreement, in consideration for Seller's Assets and the covenants
contained herein (including, without limitation, the restrictive covenants set
forth in the Noncompetition and Confidentiality Agreement of the Seller and the
covenant to procure the other Noncompetition and Confidentiality
A-4
<PAGE>
Agreements set forth on Exhibit 7(h)) and in full payment thereof, at Closing,
Purchaser shall:
(A) pay to Seller a total purchase price of Twenty Six
Million Six Hundred Eighty Thousand Dollars ($26,680,000) (the
"Purchase Price") as follows:
(i) By federal wire transfer of immediately
available funds to the account(s) designated
by Seller (including pursuant to Section
6(q)(i)(z)) by written notice to be
delivered to Purchaser at least five (5)
Business Days prior to Closing, the sum of
the Purchase Price, less (1) (x) the amount
of One Million Seven Hundred Thousand
Dollars ($1,700,000) representing the agreed
upon working capital adjustment, plus or
less (as the case may be), (y) the Estimated
Closing Working Capital Balance/(Deficit)
pursuant to Section 3(c); and less (2) the
Escrow Amount to be deposited pursuant to
subparagraph (ii) below.
(ii) By federal wire transfer of immediately
available funds to the Escrow Account, the
sum of Five Million Three Hundred Thirty-Six
Thousand Dollars ($5,336,000) (the "Escrow
Amount");
and
(B) execute and deliver to Seller a Liability
Undertaking in the form of Exhibit 3(b)(B) hereto ("Liability Undertaking").
(c) Closing Working Capital Balance Adjustment. The "Closing Working
Capital Balance Adjustment" shall be the amount stated in Exhibit 3(c),
Paragraph C, Item VI(c), equaling to the difference between: (x) the "Estimated
Closing Working Capital Balance/(Deficit)", as stated on Exhibit 3(c), Paragraph
C, Item V(a), and (y) the "Closing Working Capital Balance/(Deficit)", as stated
in Exhibit 3(c), Paragraph C, Item V(b). The Estimate Closing Working Capital
Balance/(Deficit) is Seller's estimate of the Closing Working Capital
Balance/(Deficit) calculated pursuant to Exhibit 3(c) using the figures notified
by Seller to Purchaser at least five (5) Business Days prior to Closing. The
Closing Working Capital Balance/(Deficit) shall be calculated using the figures
set forth in the Seller's Audited Closing Balance Sheet and the Closing Working
Capital Balance Adjustment shall be due to (xx) Purchaser, if positive, or (yy)
Seller, if negative, pursuant to Section 10(d). Within forty-five (45) days
after the Closing Date, Seller shall deliver to Purchaser a (consolidated)
balance sheet for the Seller (and its Subsidiaries) as of 11:59 p.m. of the day
immediately prior to the Closing Date (the "Audited Closing Balance Sheet"),
prepared by Seller in accordance with GAAP and consistently with the method of
preparation of the Latest Balance Sheet; provided, however, that audit fees and
expenses with respect to the audit of the Audited Closing Balance Sheet, any
entries or adjustments by reason of any Code election, any entries or
adjustments by reason of a change in the business or operations of Seller after
the Closing and any finders or brokers or similar fees and all legal fees and
expenses payable by Seller in connection with the transactions contemplated
hereby shall not be included in such Audited Closing Date Balance Sheet. The
Audited Closing Date Balance Sheet shall be audited by auditors appointed by
Seller (the "Auditor"). All Parties shall have the right to review the Auditor's
audit work papers. Auditor shall prepare a computation of the Closing Working
Capital Balance Adjustment based on the Audited Closing Balance Sheet and in
accordance with the terms of this Agreement and shall submit such computation to
Purchaser and Seller in writing at the same time that copies of the Audited
Closing Balance Sheet are delivered. The Audited Closing Balance Sheet shall
become
A-5
<PAGE>
final and binding upon the parties unless, within thirty (30) days following
submission of the Audited Closing Balance Sheet and the Closing Working Capital
Balance Adjustment calculation, a Party notifies the other Party in writing of
its objection thereto (the "First Notification"). The Parties shall negotiate in
good faith to resolve their differences. If the Parties are unable to resolve
their differences within twenty (20) days of receipt of the First Notification
by the non-objecting Party, the Parties shall submit the dispute to an
independent accounting firm mutually selected by the Parties (the "Independent
Accountants") for resolution. The Independent Accountants shall be limited to
determining whether the Audited Closing Balance Sheet was prepared in accordance
with GAAP and consistently with the method of preparation of the Latest Balance
Sheet, and the calculation of the Closing Working Capital Balance Adjustment was
calculated appropriately from the figures contained in the Audited Closing
Balance Sheet and pursuant to the method set forth in Exhibit 3(c). The Parties
shall instruct the Independent Accountants to use their reasonable efforts to
make their determination within thirty (30) days of submission. The
determination of the Independent Accountants shall be final and non-appealable,
and shall be binding upon the Parties. The fees and expenses of the Independent
Accountants shall be divided and paid equally by Seller and Purchaser.
(d) Closing. Unless this Agreement shall have been terminated and
the transactions contemplated herein shall have been abandoned pursuant to
Section 9 hereof, a closing (the "Closing") will be held as soon as practicable
but in no event later than May 31, 2000 (the "Closing Date"), provided, however,
that if any of the conditions provided for in Section 7 and Section 8 hereof
shall not have been satisfied or waived by such date, then the Party to this
Agreement that is unable to satisfy such condition or conditions, despite the
best efforts of such Party, shall be entitled to postpone the Closing by notice
to the other Parties until such condition or conditions shall have been
satisfied (which such notifying Party will seek to cause to happen at the
earliest practicable date) or waived, but in no event shall the Closing occur
later than the "Termination Date" which shall be the later to occur of: (i) ten
(10) days after the expiration of the waiting period (including any extension
thereof by reason of a request for further information) under the Hart-Scott
Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"), and (ii) five (5) Business
Days after any necessary authority and approval of Seller's shareholders of this
Agreement and the transactions contemplated herein, but in no event later than
June 15, 2000, unless the Parties shall agree in writing to extend the date of
such Closing. The Closing shall be held at the offices of BBLP-Pavia e Ansaldo
at the address set forth in Section 11(e) or at such other location as the
Parties may agree in writing, at 10:00 a.m., local time or such other time as
the Parties may agree, at which time and place the documents and instruments
necessary or appropriate to effect the transactions contemplated herein will be
exchanged by the Parties.
(e) Allocation. Seller and Purchaser agree that the consideration
paid to Seller pursuant to this Section 3 shall be allocated for purposes of
this Agreement and for federal, state and local tax purposes as set forth on the
Allocation Certificate attached hereto as Exhibit 3(e) (the "Allocation
Certificate"). The Allocation Certificate shall be completed on or before the
Closing Date. Purchaser and Seller shall file all federal, state and local tax
returns in accordance with the allocation set forth on the Allocation
Certificate.
Section 4
Representations and Warranties of Seller
Seller hereby represents and warrants to Purchaser as of the date
hereof as follows:
A-6
<PAGE>
(a) Disclosure Schedule. The disclosure schedule marked as Exhibit 4
hereto (the "Disclosure Schedule") is divided into "parts" which correspond to
the subsections of this Section 4. The Disclosure Schedule includes all
information concerning Seller and each of its subsidiaries which is responsive
to each section hereof to make such Disclosure Schedule accurate and complete in
all material respects for each such part.
(b) Corporate Organization. The Disclosure Schedule sets forth each
Subsidiary (as defined below) of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, has full corporate power and authority to carry on its business
as it is now being conducted and to own, lease and operate its properties and
assets, is duly qualified or licensed to do business as a foreign corporation in
good standing in every other jurisdiction in which the character or location of
the properties and assets owned, leased or operated by it or the conduct of its
business requires such qualification or licensing, except in such jurisdictions
in which the failure to be so qualified or licensed and in good standing would
not, individually or in the aggregate, have a material adverse effect on its
condition (financial or otherwise), results of operations, assets, properties
and going concern value; and has heretofore delivered to Purchaser complete and
correct copies of its articles or certificate of incorporation and bylaws, as
presently in effect. The Disclosure Schedule contains for Seller and its
subsidiaries a list of all jurisdictions in which each is qualified or licensed
to do business. The Disclosure Schedule sets forth the name and jurisdiction of
incorporation of each corporation as to which more than fifty percent (50%) of
the outstanding equity securities having ordinary voting rights or power at the
time of determination is being made is owned or controlled, directly or
indirectly, by Seller (individually, a "Subsidiary" and collectively, the
"Subsidiaries"). Except as set forth in the Disclosure Schedule, in the case of
each Subsidiary: (i) all outstanding capital stock and other equity securities
are owned or controlled directly or indirectly by Seller; (ii) there are no
contractual or consensual limitations on Seller's ability to vote or alienate
such securities; (iii) there are no outstanding options, warrants or other
rights to purchase or acquire securities of such corporation or securities owned
or held by Seller; (iv) there are no other contractual or consensual charges or
impediments which would materially limit or impair the ownership of such equity
interests or the ability effectively to exercise the full rights of ownership or
control of such equity interests, including without limitation any voting
trusts, voting agreements, or rights of first refusal or first option; and (v)
there are no contracts, commitments, understandings, arrangements or
restrictions by which any such corporation is bound to issue, sell, transfer or
to purchase or acquire any shares of its capital stock or other equity
securities or options, warrants or rights. Except as set forth on the Disclosure
Schedule, all shares of capital stock and other equity interests of each
Subsidiary are owned or controlled directly or indirectly by Seller free and
clear of all Liens. Except as set forth in the Disclosure Schedule, all of the
outstanding capital stock of Seller and each Subsidiary is duly authorized,
validly issued, fully paid, nonassessable and was not issued in violation of
preemptive rights.
(c) Capitalization. All authorized capital stock of Seller of all
classes ("Seller Capital Stock") is set forth on the Disclosure Schedule. The
number of shares of capital stock of Seller outstanding and the number of shares
of capital stock of Seller held in treasury as of the date of this Agreement are
set forth on the Disclosure Schedule. All issued and outstanding shares of
capital stock of Seller are duly authorized, validly issued, fully paid,
nonassessable and are without, and were not issued in violation of, preemptive
rights. Except as set forth on the Disclosure Schedule: (x) there are no shares
of capital stock or other equity securities of Seller outstanding or any
securities convertible into or exchangeable for such shares, securities or
rights; (y) there are no outstanding options, warrants, conversion privileges or
other rights to purchase or acquire any capital stock or other equity securities
of Seller granted by Seller, or any securities convertible into or exchangeable
for such shares, securities or rights; and (z) there are no contracts,
commitments, understandings, arrangements or restrictions by which Seller is
bound to issue or acquire any additional shares of its capital stock or other
equity securities or any options, warrants, conversion privileges or other
rights to
A-7
<PAGE>
purchase or acquire any capital stock or other equity securities of Seller or
any securities convertible into or exchangeable for such shares, securities or
rights.
(d) Authorization. Seller has full corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated herein.
The Board of Directors of Seller has taken all action required by law, its
articles or certificate of incorporation and bylaws and otherwise to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated herein. This Agreement has been duly and
validly executed and delivered by Seller and no other corporate action is
necessary other than approval of the Shareholders of Seller. This Agreement is
the valid and binding legal obligation of Seller, enforceable against Seller in
accordance with its terms, except that such enforceability may be subject to (i)
applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
conveyance or moratorium or other similar laws affecting or relating to the
enforcement of creditor's rights generally, (ii) general principles of equity
relating to enforceability (regardless of whether considered in a proceeding at
law or equity) and (iii) as rights to indemnity may be limited by federal and
state securities laws and public policy.
(e) Non-Contravention. Except as set forth in the Disclosure
Schedule, neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated herein will: (i) violate or be
in conflict with any provision of the articles or certificate of incorporation
or bylaws of Seller or the certificates of the designations, powers, preferences
and rights of any outstanding series of stock or other securities of Seller
(including, without limitation, the Series A, B, C, and D Convertible Preferred
Stock); or (ii) be in conflict with, or constitute a default, however defined
(or an event which, with the giving of due notice or lapse of time, or both,
would constitute such a default), under, or cause or permit the acceleration of
the maturity of, or give rise to any right of termination, cancellation,
imposition of fees or penalties under, any debt, note, bond, lease, mortgage,
indenture, license, obligation, contract, commitment, franchise, permit,
instrument or other agreement or obligation (including without limitation any
agreement with stockholders) to which Seller is a party or by which its
properties or assets are or may be bound (unless with respect to which defaults
or other rights, requisite waivers or consents shall have been obtained at or
prior to the Closing) or result in the creation or imposition of any third party
claim or cause of action against Seller or Purchaser (which in the aggregate
would result in a loss in excess of Ten Thousand Dollars ($10,000)), or Liens
(which in the aggregate would encumber assets of Seller in excess of Ten
Thousand Dollars ($10,000)), upon any property or asset of Seller under any
debt, obligation, contract, agreement or commitment to which Seller is a party
or by which Seller or any of its assets or properties is or may be bound; or
(iii) to the best of Seller's knowledge, violate any statute, treaty, law,
judgment, writ, injunction, decision, decree, order, regulation, ordinance or
other similar authoritative matters (sometimes hereinafter separately referred
to as a "Law" and sometimes collectively as "Laws") of any foreign, federal,
state or local governmental or quasi-governmental, administrative, regulatory or
judicial court, department, commission, agency, board, bureau, instrumentality
or other authority (hereinafter sometimes separately referred to as an
"Authority" and sometimes collectively as "Authorities").
(f) Consents and Approvals. Except as set forth in the Disclosure
Schedule, with
A-8
<PAGE>
respect to Seller, no consent, approval, order or authorization of or from, or
registration, notification, declaration or filing with (hereinafter sometimes
separately referred to as a "Consent" and sometimes collectively as "Consents")
any individual or entity, including without limitation any Authority, is
required in connection with the execution, delivery or performance of this
Agreement by Seller or the consummation by Seller of the transactions
contemplated herein, other than shareholder approval or consents which if not
made or obtained, will not, individually or in the aggregate, have a material
adverse effect on the business of Seller and its Subsidiaries taken as a whole.
(g) Financial Statements. Seller has furnished to Purchaser the
(consolidated) balance sheets and statements of operations (or income or loss),
changes in shareholders' equity and changes in cash flow (or financial position)
and the reports of independent public accountants described on the Disclosure
Schedule. The most recent audited (consolidated) balance sheet provided by
Seller to Purchaser shall be for the period ending December 31, 1999 and is
referred to herein as the "Latest Balance Sheet". Prior to Closing, Seller will
furnish the (consolidated) financial statements and the reports of independent
public accountants described on the Disclosure Schedule to the Purchaser. Except
as disclosed therein, the aforesaid financial statements (i) are or will be, as
the case may be, in accordance with the books and records of Seller and have
been, or will be, as the case may be, prepared in conformity with GAAP
consistently applied for all periods, and (ii) fairly present and will fairly
present, as the case may be, the (consolidated) financial position of Seller as
of the respective dates thereof, and the (consolidated) results of operations
(or income or loss), changes in shareholders' equity and changes in cash flow
(or financial position) for the periods then ended, all in accordance with
generally accepted accounting principles consistently applied for all periods.
(h) Loss Contingencies; Other Non-Accrued Liabilities; Employee
Accruals. Except for those items listed in subparagraphs (i), (ii) and (iii)
below which do not exceed individually or in the aggregate Ten Thousand Dollars
($10,000), and except as described in the Disclosure Schedule, Seller does not
have (i) any loss contingencies which are not required by GAAP to be accrued;
(ii) any loss contingencies involving an unasserted claim or assessment (known
to Seller) which are not required by GAAP to be disclosed because the potential
claimants have not manifested to Seller an awareness of a possible claim or
assessment; or (iii) any categories of liabilities or obligations which are not
required by GAAP to be accrued. For purposes of this Agreement, "Loss
Contingency" shall have the meaning accorded to it by GAAP. All accruals for
unpaid vacation pay; premiums for employment insurance; health premiums; accrued
wages, salaries and commissions; and employee benefit plan payments have been
reflected in the books and records of Seller.
(i) Absence of Certain Changes. Except as set forth in the
Disclosure Schedule, since the date of the Latest Balance Sheet, Seller has
owned and operated its assets, properties and businesses in the ordinary course
of business and consistent with past practice; without limiting the generality
of the foregoing, Seller has not, subject to the aforesaid exceptions:
(i) suffered, as of the date hereof, any adverse change in its
condition (financial or otherwise), assets or properties or experienced any
event or failed to take any action which reasonably could be expected to result
in such a change that results in a cost in excess of Five Thousand Dollars
($5,000) individually, or Ten Thousand Dollars ($10,000) in the aggregate other
than in the ordinary course of business;
(ii) other than in the ordinary course of business, suffered
any loss, damage, destruction or other casualty (whether or not covered by
insurance) or any loss of
A-9
<PAGE>
officers, employees, dealers, distributors, independent contractors, customers,
or suppliers which, individually or in the aggregate, could have a material
adverse effect on its business or operations,;
(iii) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock; or purchased or redeemed any
shares of its capital stock;
(iv) issued or sold any shares of its capital stock, or any
options, warrants, conversion, exchange or other rights to purchase or acquire
any such shares or any securities convertible into or exchangeable for such
shares;
(v) incurred any indebtedness for borrowed money;
(vi) mortgaged, pledged, or subjected to any Lien, or lease,
any of its properties or assets, tangible or intangible;
(vii) acquired or disposed of any assets or properties valued
in excess of Fifteen Thousand Dollars ($15,000) other than in the ordinary
course of business;
(viii) forgiven or canceled any debts or claims, or waived any
rights;
(ix) entered into any transaction in excess of Twenty-Five
Thousand Dollars ($25,000) other than in the ordinary course of business;
(x) granted to any officer or salaried employee or any other
employee any increase in compensation in any form or paid any severance or
termination pay other than in the ordinary course of business;
(xi) entered into any commitment for capital expenditures for
additions to plant, property or equipment in excess of twenty-five thousand
dollars ($25,000); or
(xii) agreed, whether in writing or otherwise, to take any
action described in this subsection.
(j) Real Properties. Except as set forth in the Disclosure Schedule,
Seller has good and marketable fee simple record title in and to, or a leasehold
interest in and to, all of their real property and real property assets and
fixtures reflected in the Latest Balance Sheet and all of their real property
assets and fixtures purchased or otherwise acquired since the date of the Latest
Balance Sheet (except for real property assets and fixtures sold in the ordinary
course of business since the date of the Latest Balance Sheet). Except as set
forth in the Disclosure Schedule, such leasehold interests are valid and in full
force and effect and, to the best of Seller's knowledge, enforceable in
accordance with their terms and there does not exist any violation, breach or
default thereof or thereunder. Except as set forth in the Disclosure Schedule,
none of the real property assets or fixtures owned by Seller is subject to any
Lien except for Permitted Liens. Except as set forth in the Disclosure Schedule,
to the best of Seller's knowledge, all real properties owned by and leased to
Seller used in the conduct of its business are free from structural defects, in
good operating condition and repair, with no maintenance, repair or replacement
having an estimated cost exceeding Twenty Five Thousand Dollars ($25,000) in the
aggregate having been deferred or neglected, suitable for the intended use and
free from other material defects. Except as set forth in the Disclosure
Schedule, to the best of Seller's knowledge, each such real property and its
present use conform in all respects to all occupational, safety or health,
zoning, planning, subdivision, platting and similar Laws. Except as set forth in
the Disclosure Schedule, all public utilities necessary for the use and
operation of any facilities on the aforesaid real properties are, to the best of
Seller's knowledge, available for
A-10
<PAGE>
use or access at such properties and there is no legal or physical impairment to
free ingress or egress from any of such facilities or real properties. Seller is
not a foreign person and is not controlled by a foreign person, as the term
"foreign person" is defined in Section 1445(f)(3) of the Code.
(k) Machinery, Equipment, Vehicles and Personal Property. Except as
set forth in the Disclosure Schedule, Seller has good and merchantable right,
title and interest in and to, or a leasehold interest in and to, all its
machinery, equipment, vehicles and other personal property reflected in the
Latest Balance Sheet and purchased or otherwise acquired since the date of the
Latest Balance Sheet (except for such items sold or leased in the ordinary
course of business since the date of the Latest Balance Sheet). Except as set
forth in the Disclosure Schedule, all of such leasehold interests relating to
machinery, equipment, vehicles and other personal property are valid and in full
force and effect and enforceable in accordance with their terms and there does
not exist any violation, breach or default thereof or thereunder. Except as set
forth in the Disclosure Schedule, none of such machinery, equipment, vehicles or
other personal property owned by Seller is subject to any Lien except for
Permitted Liens. Except as set forth in the Disclosure Schedule, the machinery,
equipment, vehicles and other personal property of Seller which are necessary to
the conduct of its business are in good operating condition and repair and
readily usable for the intended purposes thereof and no necessary maintenance,
replacement or repair has been deferred or neglected.
(l) Inventories. Except as set forth in the Disclosure Schedule:
(i) all inventory of Seller, whether reflected in the Latest
Balance Sheet or otherwise, consists of a quality and quantity usable and
salable on normal trading terms in the industry; and the present quantities of
all Seller's inventory are reasonable in the present circumstances of the
business as currently conducted or as proposed to be conducted.
(ii) none of Seller's inventory is being held or is otherwise
regularly held by any third party whatsoever on a consignment basis.
(iii) Seller owns free of all Liens, all packaging inventory and
related materials maintained by suppliers and other third party packers or
co-packers held for Seller as shown on the Latest Balance Sheet.
(m) Receivables and Payables. Except as set forth on the Disclosure
Schedule: (A) Seller has good right, title and interest in and to all its
accounts and notes receivable and trade notes and trade accounts reflected in
the Latest Balance Sheet and those acquired and generated since the date of the
Latest Balance Sheet (except for those paid since the date of the Latest Balance
Sheet); (B) none of such accounts and notes receivable and trade notes and trade
accounts is subject to any Lien other than Permitted Liens; (C) except to the
extent of applicable reserves shown in the Latest Balance Sheet, all of the
accounts and notes receivable, trade notes and trade accounts owing to Seller
constitute valid and enforceable claims arising from bona fide transactions in
the ordinary course of business, and, to the best of Seller's knowledge, there
are no claims, refusals to pay or other rights of set-off against any thereof;
(D) no account or note debtor whose account or note balance exceeds Twenty-Five
Thousand Dollars ($25,000) has been delinquent in payment by more than sixty
(60) days; (E) the aging schedules of (x) the accounts, trade notes and trade
accounts of Seller previously furnished to Purchaser on March 6, 2000 for the
period ended March 3, 2000 annexed to the Disclosure Schedule, and (y) the
accounts receivable of Seller furnished to Purchaser on March 6, 2000 for the
period ended February 29, 2000 annexed to the Disclosure Schedule, are complete
and accurate in all material respects; and (F) the reserves established
therefore and reflected in the Latest Balance Sheet are reasonable.
A-11
<PAGE>
(n) Intellectual Property Rights. Seller owns or has the right to
use (as specified in the Disclosure Schedule) the industrial and intellectual
property rights, including without limitation the patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, computer programs and other computer
software, inventions, know-how, trade secrets, technology, proprietary
processes, methods, systems, recipes, and formulae (collectively, "Intellectual
Property Rights") described on the Disclosure Schedule. Except as set forth on
the Disclosure Schedule, the use of all Intellectual Property Rights necessary
or required for the conduct of the businesses of Seller as presently conducted
and as proposed to be conducted does not and will not infringe or violate or
allegedly infringe or violate the intellectual property rights of any person or
entity. Except as described on the Disclosure Schedule, neither Seller nor any
Subsidiary owns or uses any Intellectual Property Rights pursuant to any license
agreement or has granted any person or entity any rights, pursuant to license
agreement or otherwise, to use the Intellectual Property Rights. Such agreements
as set forth on the Disclosure Schedule include written and oral agreements.
(o) Litigation. Except as set forth in the Disclosure Schedule,
there is no legal, administrative, arbitration, or other proceeding, suit, claim
or action of any nature or, to the best of Seller's knowledge, investigation,
review or audit of any kind, judgment, decree, decision, injunction, writ or
order pending, noticed, scheduled or, to the best of the Seller's knowledge,
threatened by or against or involving Seller, its assets, properties or
businesses or its directors, officers, agents or employees, whether at law or in
equity, before or by any person or entity or Authority, or which questions or
challenges the validity of this Agreement or any action taken or to be taken by
the Parties pursuant to this Agreement or in connection with the transactions
contemplated herein.
(p) Tax Returns. Seller has duly and timely filed all tax and
information reports, returns and related documents required to be filed by
Seller with respect to the income-type, sales/use-type and employment-related
taxes of the United States, the states, municipalities, and other foreign or
domestic jurisdictions set forth in the Disclosure Schedule (and the political
subdivisions thereof). Except as set forth in the Disclosure Schedule, Seller
has duly and timely filed all tax and information reports, returns and related
documents required to be filed by it with any Authority, including without
limitation all returns and reports of income, franchise, gross receipts, sales,
use, occupation, employment, withholding, excise, transfer, real and personal
property and other taxes, charges, assessments, and levies (collectively, the
"Tax Returns") and, except as set forth in the Disclosure Schedule, have duly
paid, or made adequate provision for the due and timely payment of all such
taxes and other charges, including without limitation interest, penalties,
assessments and deficiencies, due or claimed to be due from them by any such
Authorities, except where failure to pay would not result in a loss, cost, or
damages exceeding Ten Thousand Dollars ($10,000) in the aggregate; the reserves
for all of such taxes and other charges reflected in the Latest Balance Sheet
are adequate; and, to the best of Seller's knowledge, there are no Liens for
such taxes or other charges upon any property or assets of Seller. There is no
omission, deficiency, error, misstatement or misrepresentation, whether
innocent, intentional or fraudulent, in any Tax Return filed by Seller for any
period which could result in an actual tax liability in excess of Ten Thousand
Dollars ($10,000). The federal income tax returns (consolidated, if applicable)
of Seller have been examined by the Internal Revenue Service for all periods to
and including those expressly set forth in the Disclosure Schedule, and, except
to the extent shown therein, all deficiencies asserted as a result of such
A-12
<PAGE>
examinations have been paid or finally settled and no issue has been raised by
the Internal Revenue Service in any such examination which, by application of
similar principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined. Except as set forth in the
Disclosure Schedule, all deficiencies and assessments levied or assessed to date
resulting from examination of the Tax Returns of Seller have been paid. Except
as set forth in the Disclosure Schedule, there are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any Tax
Return for any period.
(q) Insurance. The Disclosure Schedule contains an accurate and
complete list of all policies of fire and other casualty, general liability,
theft, life, workers' compensation, health, directors and officers, business
interruption and other all other forms of insurance owned or held by Seller,
specifying the insurer, the policy number and the term of the coverage. All
present policies are in full force and effect and all premiums with respect
thereto have been paid. Seller has not been denied any form of insurance and no
policy of insurance has been revoked or rescinded during the past three (3)
years, except as described on the Disclosure Schedule.
(r) Benefit Plans. Except as set forth in the Disclosure Schedule:
(i) Seller does not sponsor, administer, maintain or contribute
to, nor has Seller at any time ever sponsored, administered, maintained,
contributed to, directly or indirectly, nor had an obligation to contribute or
been required to contribute to any "employee pension benefit plan" ("Pension
Plan", not including any union-sponsored plan) as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or under which Seller may incur any liability, including without
limitation, solely for purposes of this subsection a plan excluded from coverage
by Section 4(b)(5) of ERISA and, including without limitation any such Pension
Plan which is a "Multiemployer Plan" within the meaning of Section 4001(a)(3) of
ERISA, without regard to whether or not any of the foregoing is funded, whether
formal or informal, whether or not subject to ERISA and whether legally binding
or not. Each such Pension Plan is in compliance with the applicable provisions
of ERISA, the applicable provisions of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the "Code"), and all other
applicable Law. No Pension Plan is subject to Title IV of ERISA or to Section
412 of the Code. Seller has satisfied all payment and contribution obligations
for all union sponsored plans. Set forth on the Disclosure Schedule is a list of
all Union-sponsored pension plans to which Seller contributes or Seller's
employees are entitled to benefits, and
(A) Each Pension Plan which is intended to meet the
requirements of Section 401(a) and where applicable, Section 401(k)
of the Code, now meets and since its inception has met, the
requirements for qualification under Section 401(a) and, where
applicable, Section 401(k) of the Code, and its related trust is
now, and since its inception has been, exempt from taxation under
Section 501(a) of the Code and nothing has occurred which would
adversely affect the qualified status of such Pension Plan.
(B) Seller has performed all obligations required to be
performed by it under, and is not in default under or in violation
of, any and all of the Pension Plans, and is in compliance in all
material respects with, and each Pension Plan has been operated and
administered in all material respects in accordance with its
provisions and in compliance in all material respects with the laws
governing each such Pension Plan, including without limitation,
rules and regulations promulgated by the Department of the Treasury
("Treasury"), the Internal Revenue Service, Department of Labor
A-13
<PAGE>
("DOL"), and the Pension Benefit Guaranty Corporation ("PBGC")
pursuant to the provisions of ERISA and the Code.
(C) No event has occurred and there has been no failure
to act on the part of the Seller, as fiduciary of any Pension Plan,
or a plan official that violates Section 404 of ERISA or could
subject Seller, a Pension Plan, or a plan official to the imposition
of any tax, penalty, or other liability, further by way of indemnity
or otherwise.
(D) Seller does not owe any accrued but unpaid
contributions to any of the Pension Plans.
(E) No reportable event (as defined in Section 4043(e)
of ERISA), or requirement to provide security to a Pension Plan
(pursuant to Sections 401(a) 29 or Section 412(f) of the Code), or
plan termination (as defined in Title IV of ERISA or Section 411(d)
of the Code), has occurred with respect to any of the Pension Plans.
(F) The present value of accrued benefits (as agreed to
by Seller's actuary in writing) under any of the Pension Plans that
are covered by Title IV of ERISA does not exceed the value of the
assets of such Pension Plan. As of the last day of the last plan
year of each Pension Plan and as of the Closing Date, the amount of
"unfunded benefit liabilities" as defined in Section 4001(a)(18) of
ERISA (but excluding from the definition of "current value" of
"assets" of such Pension Plan, accrued but unpaid contributions) did
not and will not exceed zero. No "accumulated funding deficiency"
for which there is an excise tax due (or would be due in the absence
of a waiver), as defined in Section 412 of the Code or as defined in
Section 302(a)(2) of ERISA, whichever may apply, has been incurred
with respect to any Pension Plan with respect to any plan year,
whether or not waived. Seller has no liability for unpaid
contributions with respect to any Pension Plan pursuant to Section
412(m) of the Code.
(G) Seller has paid all premiums (and interest charges
and penalties for late payment, if applicable) due to the PBGC with
respect to each Pension Plan for each plan year thereof for which
such premiums are required. Seller has not engaged in, nor is a
successor to an entity that has engaged in, a transaction described
in Section 4069 of ERISA. There has been no reportable event as
defined in Section 4043(b) of ERISA and the PBGC regulations under
such section) with respect to any Pension Plan. No filing has been
made by Seller with PBGC, and no proceeding has been commenced by
the PBGC, to terminate any Pension Plan. No condition exists and no
event has occurred that could constitute grounds for termination of
any Pension Plan by the PBGC.
(ii) Seller has not ceased operations at any facility or
withdrawn from any Pension Plan or otherwise acted or omitted to act in a manner
which could subject it to liability under Section 4062, Section 4063, Section
4064, Section 4068, or Section 4069 of ERISA and there are no facts of
circumstances which might give rise to any liability of Seller to the PBGC under
Title IV of ERISA or which could reasonably be anticipated to result in any
claims being made against Purchaser, or Seller to the PBGC. Seller has not
incurred any withdrawal liability (including without limitation any contingent
or secondary withdrawal liability) within the meaning of Section 4201 and
Section 4204 of ERISA to any Multiemployer Plan. Seller has not, with respect to
any Pension Plan which is a Multiemployer Plan, suffered or otherwise caused a
"complete withdrawal" or a "partial withdrawal," as such terms are defined
respectively in Sections 4201, 4203, 4204 and 4205 of ERISA. Seller has no
liability to any such Multiemployer Plan in the event of a complete or partial
withdrawal therefrom as of the close
A-14
<PAGE>
of the most recent fiscal year of any such Multiemployer Plan ended prior to the
date hereof.
(iii) Seller does not sponsor, administer, maintain,
contribute to, or has not at any time ever sponsored, administered, maintained,
contributed to, or been required to contribute to any "employee welfare benefit
plan" ("Welfare Plan"), as such term is defined in Section 3(1) of ERISA
(including without limitation a plan excluded from coverage by Section 4(b)(5)
of ERISA), or under which Seller may incur any liability, whether insured or
otherwise, without regard to whether or not any of the foregoing is funded,
whether formal or informal, whether or not subject to ERISA and whether legally
binding or not, and any such Welfare Plan maintained by Seller is in compliance
with the provisions of ERISA and all other applicable Laws. Seller has not
established or contributed to any "voluntary employees' beneficiary association"
within the meaning of Section 501(c)(9) of the Code. Seller does not maintain
any Welfare Plan which is a "Group Health Plan" (as such the term is defined in
Section 607(1) of ERISA and Section 4980B(g)(2) of the Code) that has not been
administered and operated in all respects in compliance with the applicable
requirements of Section 601 of ERISA and Section 4980B of the Code and Seller is
not subject to any liability, including but not limited to, additional
contributions, fines or penalties, or loss of tax deductions as a result of such
administration and operation.
(iv) Seller does not maintain or contribute to any
employment, consulting, severance, or other similar contract arrangement,
procedures, or policy and each plan, arrangement (written or oral), program,
agreement or commitment providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health, disability, or accident benefits (including, without limitation,
any "voluntary employees' beneficiary association" as defined in Section
501(c)(9) of the Code providing for the same or other benefits), dependent care
spending accounts or assistance, split dollar arrangements, cafeteria plans,
supplemental retirement, termination pay, dental, salary, continuation or
deferred compensation, profit-sharing bonuses, stock options, stock appreciation
rights, stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is not a Welfare
Plan, Pension Plan, or Multiemployer Plan, (B) is entered into, maintained,
contributed to, or required to be contributed to, as the case may be, by Seller,
or under which Seller may incur any liability, without regard to whether or not
any of the foregoing is funded, whether formal or informal, whether or not
subject to ERISA, and whether legally binding or not, and (C) covers any
individual who is currently, or was previously, retained or employed by Seller
("Benefit Arrangement").
(v) As of or subsequent to the Closing Date, neither
Seller, nor any Welfare Plan or Benefit Arrangement maintained by Seller, has
any present or future obligation to maintain, sponsor, provide, or make any
payment to any present or former employee of Seller pursuant to any Welfare Plan
or Benefit Arrangement. Seller does not maintain any Welfare Plan or Benefit
Arrangement, which is funded by a trust described in Section 501(c)(9) of the
Code or subject to the provisions of Section 505 of the Code. No Welfare Plan or
Benefit Arrangement of Seller provides or is required to provide health, dental,
medical, life, death, or survivor benefits to any former or retired employee or
beneficiary thereof except to the extent required under any state insurance law
providing for a conversion option under a group insurance policy under Section
601 of ERISA or Section 4980B of the Code.
(vi) Neither any of Pension Plans or Welfare Plans or
Benefit Arrangements, nor any trust created or insurance contract issued
thereunder nor any trustee or
A-15
<PAGE>
administrator thereof nor any officer, director or employee of Seller, custodian
or any other "disqualified person" within the meaning of Section 4975(e)(2) of
the Code, or "party in interest" within the meaning of Section 3(14) of ERISA,
with respect to any such Pension Plans or Welfare Plans or Benefit Arrangements
or any such trust or insurance contract or any trustee, custodian or
administrator thereof, or any disqualified person, party in interest or person
or entity dealing with such Pension Plans or Benefit Arrangements or any such
trust, insurance contract or any trustee is subject to a tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or to a civil
penalty imposed by Section 502 of ERISA. There are no facts or circumstances
which could subject Seller to any excise tax under Section 4972 or Sections 4976
through 4980, both inclusive, of the Code.
(vii) Full payment has been made of all amounts which
Seller is required, under applicable Law, with respect to any Pension Plan or
Welfare Plan or Benefit Arrangement, or any agreement relating to any Pension
Plan or Welfare Plan or Benefit Arrangement, to have paid as a contribution
thereto. No accumulated funding deficiency (as defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived, exists with respect to any
Pension Plan. Seller does not maintain or contribute to, nor has it ever
sponsored, maintained or contributed to or been required to contribute to, any
Pension Plan subject to Part 3 of Title I of ERISA or Section 412(n) of the
Code. Seller has made adequate provisions for reserves to meet contributions
which have not been made because they are not yet due under the terms of any
Pension Plan or Welfare Plan or Benefit Arrangement or related agreements. All
Pension Plans which Seller operates as plans that are qualified under the
provisions of Section 401(a) of the Code satisfy the requirements of Section
401(a) and all other sections of the Code incorporated therein, including
without limitation Sections 401(k), 401(l) and 401(m) of the Code; and the
Internal Revenue Service has issued favorable determination letters with respect
to the current statement of all Pension Plans and, to Seller's knowledge,
nothing has occurred since the issuance of any such letters that could adversely
affect such favorable determination. There will be no change on or before
Closing in the operation of any Pension Plan, Welfare Plan or Benefit
Arrangement or any documents with respect thereto which will result in an
increase in the benefit liabilities under such plans, except as may be required
by Law.
(viii) Seller has complied with all reporting and
disclosure obligations with respect to the Pension Plans, Welfare Plans and
Benefit Arrangements imposed by Title I of ERISA or other applicable Law.
(ix) There are no pending or, to Seller's knowledge,
threatened claims, suits or other proceedings against Seller, the Pension Plan,
Welfare Plan, Benefit Arrangement, or any other party, including but not limited
to any fiduciary with respect to such plans or arrangements by present or former
employees of Seller, plan participants, beneficiaries or spouses of any of the
above, including without limitation claims against the assets of any trust,
involving any Pension Plan, Welfare Plan, or Benefit Arrangement, or any rights
or benefits thereunder, other than the ordinary and usual claims for benefits by
participants or beneficiaries.
(x) The transactions contemplated herein do not result
in the acceleration or accrual, vesting, funding or payment of any contribution
or benefit under any Pension Plan, Welfare Plan or Benefit Arrangement.
(xi) No action or omission of Seller or any director,
officer, employee, or agent thereof or any condition, circumstance, or verbal
requirement exists which in any way restricts, impairs or prohibits Purchaser or
Seller or any successor from amending, merging, or
A-16
<PAGE>
terminating any Pension Plan, Welfare Plan or Benefit Arrangement in accordance
with the express terms of any such plan and applicable Law.
(xii) (A) Each Pension Plan, Welfare Plan, Benefit
Arrangement, related trust agreement, annuity contract, or other funding
instrument complies and has been maintained, in all material respects, in
compliance with its terms and, both as to its form, operation, and procedures
with all applicable requirements, including all record keeping, reporting, and
disclosure requirements, prescribed by any and all statutes, orders, rules, and
regulations including, but not limited to, ERISA, the Consolidated Omnibus
Budget Reconciliation Act, as amended ("COBRA"), and the Code; (B) Seller has
performed, in all material respects, all obligations required to be performed
under, and is not in default under or in violation of, any and all of the
Pension Plans, Welfare Plans, and Benefit Arrangements (collectively "Benefit
Plans") is, in all material respects, in compliance with, and each Benefit Plan
has been operated and administered in accordance with its provisions and in
compliance with, the laws governing each such plan, including without
limitation, rules and regulations promulgated by the DOL, PBGC, and the
Treasury, pursuant to the provisions of ERISA, COBRA, and the Code; (C) no event
has occurred and there has been no failure to act on the part of Seller, a
fiduciary of any Benefit Plan, or a "plan official" (as defined in Section 412
of ERISA) that violates Section 404 of ERISA or could subject the Purchaser, any
Benefit Plan, a fiduciary, or plan official to the imposition of any tax,
penalty, or other liability, whether by way of indemnity or otherwise; and (D)
no filing, application, or other matter with respect to any of the Benefit Plans
or the Seller is pending with the IRS, PBGC, DOL, or other governmental body.
(xiii) The Disclosure Schedule contains a true and
complete list of all of the Benefit Plans which the Seller is now or was
previously obligated, directly or indirectly, to contribute or maintain,
regardless of whether formal or informal and without regard to whether or not it
was funded. Seller has delivered to the Purchaser (A) true and complete copies
of all documents embodying or relating to the Benefit Plans, including without
limitation, with respect to each Benefit Plan, all amendments to the Benefit
Plans, and any trust or other funding arrangement, including certified financial
statements which fairly present the assets and liabilities of each of the
Benefit Plans as of the date thereof and there have been no material changes in
the assets and liabilities since the date of such financial statements; (B) the
most recent annual and periodic actuarial evaluations, if any, prepared for any
Benefit Plan; (C) the most recent annual reports (series Form 5500 and all
schedules thereto), if any, required under ERISA, including those prepared for
the most recent three (3) years for each Benefit Plan; (D) if the Benefit Plan
is funded, the most recent annual and periodic accounting of the Benefit Plan's
assets, including the most recent three (3) years of the plan; (E) the most
recent determination letter received from the IRS, if any, and a copy of the
most recent summary plan description together with the most recent summary of
modifications required under ERISA with respect to each Benefit Plan and all
employee communications and/or written interpretations or descriptions thereof
relating to each Benefit Plan; (F) with respect to each Benefit Plan, a
description setting forth the amount of any liability of the Seller as of the
date hereof or as of the Closing Date or which arises or accrues in connection
with the Closing Date for: (1) payments which are or will be more than thirty
(30) days past due, or (2) unfunded accrued benefits, including severance
benefits, the present value of which on an aggregate estimated basis exceeds or
will exceed Twenty-Five Thousand Dollars ($25,000); and (G) any correspondence
between any Benefit Plan and any governmental agency during the last three (3)
years.
A-17
<PAGE>
(xiv) There is no contract, agreement, plan, or
arrangement covering any employee or former employee of the Seller that,
individually or collectively, provides for the payment by the Seller of any
amount (A) that is not deductible under Section 162(a)(1) or 404 of the Code or
(B) that is an "excess parachute payment" pursuant to Section 280G of the Code.
(xv) Neither the Seller nor any plan fiduciary of any
Pension Plan or Welfare Plan engaged in any transaction in violation of Sections
101 or 106 of ERISA or any "prohibited transaction," as defined in Section
4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA
or Section 4975(c)(2) or (d) of the Code.
(xvi) Seller has not announced any plan or legally
binding commitment to create any additional Pension Plans, Welfare Plans, or
Benefit Arrangements or to amend or modify any existing Benefit Plan.
(xvii) No event has occurred in connection with which
Seller or any Pension Plan, Welfare Plan, or Benefit Arrangement, directly or
indirectly, could be subject to any liability (A) under any statute, regulation,
or governmental order relating to any Benefit Plans, or (B) pursuant to any
obligation of the Seller to indemnify any person against liability incurred
under any statute, regulation or order as they relate to the Benefit Plans.
(s) Bank Accounts; Powers of Attorney. The Disclosure Schedule sets
forth: (i) the names of all financial institutions, investment banking and
brokerage houses, and other similar institutions at which the Seller maintain
accounts, deposits, safe deposit boxes of any nature, and the names of all
persons authorized to draw thereon or make withdrawals there from; (ii) the
terms and conditions thereof and any limitations or restrictions as to use,
withdrawal or otherwise; and (iii) the names of all persons or entities holding
general or special powers of attorney from Seller and a summary of the terms
thereof.
(t) Contracts and Commitments; No Default.
(i) Except as set forth in the Disclosure Schedule,
Seller:
(A) does not have any written contract, commitment,
agreement or arrangement with any person or, to Seller's knowledge,
any oral contract, commitment, agreement or arrangement which (1)
requires payments individually in excess of $5,000 annually or in
excess of $10,000 over its term (including without limitation
periods covered by any option to extend or renew by either party)
and (2) is not terminable on ninety (90) days' or less notice
without cost or other liability;
(B) does not pay any person or entity cash remuneration
at the annual rate (including without limitation guaranteed bonuses)
of more than Forty Thousand Dollars ($40,000) for services rendered;
(C) is not restricted by agreement from carrying on
their businesses or any part thereof anywhere in the world or from
competing in any line of business with any person or entity;
(D) is not subject to any obligation or requirement to
provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any person or entity;
(E) is not party to any agreement, contract, commitment
or loan to which any of its directors, officers or shareholders or
any "affiliate" or "associate" (as defined in Rule 405 as
promulgated under the Securities Act of 1933) (or former affiliate
or associate) thereof is a party;
A-18
<PAGE>
(F) is not subject to any outstanding sales or purchase
contracts, commitments or proposals which will result in any loss
upon completion or performance thereof;
(G) is not a party to any purchase or sale contract or
agreement that calls for aggregate purchases or sales in excess over
the course of such contract or agreement of Ten Thousand Dollars
($10,000) or which continues for a period of more than twelve (12)
months (including without limitation periods covered by any option
to renew or extend by either party) which is not terminable on
ninety (90) days' or less notice without cost or other liability at
or any time after the Closing;
(H) is not subject to any contract, commitment,
agreement or arrangement with any "disqualified individual" (as
defined in Section 280G(c) of the Code) which contains any severance
or termination pay liabilities which would result in a disallowance
of the deduction for any "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) under Section 280G of the Code; or
(I) has any distributorship, dealer, manufacturer's
representative, franchise or similar sales contract relating to the
payment of a commission.
(ii) True and complete copies (or summaries with all
material terms and conditions, in the case of oral contracts and
commitments) of all oral contracts and commitments in excess of Ten Thousand
Dollars ($10,000) and written contracts and commitments in excess of Twenty
Thousand Dollars ($20,000) disclosed pursuant to Section 4(t)(i) have been made
available to Purchaser for review. Except as set forth in the Disclosure
Schedule, all such contracts and commitments are valid and enforceable by and
against Seller in all material respects in accordance with their respective
terms; Seller is not in breach, violation or default, however defined, in the
performance of any of its obligations thereunder, and to the best of Seller's
knowledge, no facts and circumstances exist which, whether with the giving of
due notice, lapse of time, or both, would constitute such a breach, violation or
default thereunder or thereof; and, to the best of Seller's knowledge, no other
parties thereto are in a breach, violation or default, however defined,
thereunder or thereof, and no facts or circumstances exist which, whether with
the giving of due notice, lapse of time, or both, would constitute such a
breach, violation or default thereunder or thereof which would have a material
adverse effect on the business and operations of Seller.
(u) Orders, Commitments and Returns. Except as set forth in the
Disclosure Schedule, all accepted and unfulfilled orders for the sale of
products and the performance of services entered into by Seller and all
outstanding contracts or commitments for the purchase of supplies, materials and
services were made in bona fide transactions in the ordinary course of business.
Except as set forth in the Disclosure Schedule, to the best of Seller's
knowledge, there are no claims (in excess of $5,000 individually, or $10,000 in
the aggregate) against Seller to return products by reason of alleged
over-shipments, defective products or otherwise, or of products in the hands of
customers, retailers or distributors under an understanding that such products
would be returnable.
(v) Labor Matters.
(i) The Disclosure Schedule set forth a complete and
accurate list of all employees of Seller as of the date hereof.
A-19
<PAGE>
(ii) Except as set forth in the Disclosure Schedule: (A)
Seller has been in material compliance with all applicable Laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including without limitation any such Laws respecting
employment discrimination and occupational safety and health requirements; labor
and management relations; affirmative action plans; pension/employee benefits
laws; worker's compensation laws and has not and is not engaged in any unfair
labor practice and to Seller's knowledge no charge is being brought with regard
thereto nor has been threatened; (B) there is no unfair labor practice complaint
or investigation against the Seller for any violation of any employment law or
discrimination pending or, to the best of Seller's knowledge, threatened before
the National Labor Relations Board or any other comparable Authority; (C) there
is no labor strike, dispute, slowdown or stoppage actually pending or, to the
best of Seller's knowledge, threatened against or directly affecting Seller; (D)
to the best of Seller's knowledge, no labor representation question exists
respecting the employees of Seller and there is not pending or, to the best of
Seller's knowledge, threatened any activity intended or likely to result in a
labor representation vote respecting the employees of the Seller; (E) to the
best of Seller's knowledge, no grievance or any arbitration proceeding arising
out of or under collective bargaining agreements is pending and no claims
therefore exist or, to the best of Seller's knowledge, have been threatened; (F)
no collective bargaining agreement is binding and in force against Seller or
currently being negotiated by Seller; (G) Seller has not experienced any
significant work stoppage or other significant labor difficulties; (H) Seller is
not delinquent in payments to any persons for any wages, salaries, commissions,
bonuses or other direct or indirect compensation for any services performed by
them or amounts required to be reimbursed to such persons, including without
limitation any amounts due under any Pension Plan, Welfare Plan or Benefit
Arrangement; (I) upon termination of the employment of any person, neither
Seller, any Subsidiary, Purchaser or any subsidiary of Purchaser will, by reason
of anything done at or prior to or as of the Closing Date, be liable to any of
such persons for so-called "severance pay" or any other payments other than in
accordance with existing severance policies; (J) Seller has no policies,
practices, or procedures which require the Purchaser or the Seller to provide
severance benefits to any employees terminated by the Purchaser or the Seller;
(K) Seller has made no contract, agreement, handbook, practice, procedure,
policy or written, oral or other representation to its employees that are
inconsistent with their status as employees-at-will who may be terminated at any
time without cause; (L) Seller has made no written or oral representation to its
employees that Purchaser will retain them as employees or employ them for any
period of time subsequent to the Closing Date, and Seller has made no other
representation inconsistent with their employment by Purchaser on an at-will
basis; and (M) Seller has complied and will comply, to the extent required by
law, with all notices to employees and their unions required by the transactions
contemplated hereunder including without limitation those required by the
Federal "Warn Act" statute and all applicable similar state law statutes.
(w) Permits and Other Operating Rights. Except as set forth in the
Disclosure Schedule, Seller does not require the Consent of any Authority to
permit them to operate in the manner in which it presently is being operated,
and possess all permits and other authorizations from all Authorities presently
required to permit them to operate its businesses in the manner in which its
businesses are presently conducted except where failure to possess such permits
or other authorizations would result in a loss, liability or damage, in the
aggregate, in excess of Ten Thousand Dollars ($10,000).
A-20
<PAGE>
(x) Compliance with Law.
(i) Except as set forth in the Disclosure Schedule, and without
limiting the scope of any other representations or warranties contained in this
Agreement, the assets, properties, businesses and operations of Seller are and
have been in compliance with all Laws applicable to the ownership and conduct of
their assets, properties, Seller's businesses and operations, including without
limitation all franchising and similar licensing Laws, all applicable rules of
the Civil Rights Act of 1964, as amended, Executive Order No.11246, the
Occupational Safety and Health Act of 1970, as amended, the Clayton Act, as
amended, the Sherman Act, as amended, the Foreign Corrupt Practices Act, as
amended, the boycott and export control regulations promulgated by the U.S.
Department of Commerce, the boycott regulations promulgated by the Internal
Revenue Service, the Equal Employment Opportunity Act of 1974, as amended, the
Clean Air Act as amended, the Clean Water Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic Substances Control Act, as
amended, the Comprehensive Environmental Response, Liability and Compensation
Act of 1980, as amended, and the related employee and public right-to- know
provisions. There are no outstanding and unsatisfied deficiency reports, plans
of correction, notices of noncompliance or work orders relating to any such
Authorities, and no such discussions with any such Authorities are scheduled or
pending, to the best of Seller's knowledge.
(ii) No Franchise. Except as set forth in the Disclosure
Schedule, Seller has not been, for the past three (3) years, and is not
currently a party to any contract, agreement, or arrangement which would require
Seller to comply with, and Seller has not violated, any applicable federal or
state law, rule, or regulation governing franchises and franchisor-franchisee
relationships.
(y) Assets of Business. Except as set forth in Exhibit 3(a)(iv) and
the Disclosure Schedule, the assets owned or leased by Seller constitute all of
the assets held for use or used primarily in connection with its businesses and
are adequate to carry on such businesses as presently conducted.
(z) Hazardous Substances and Hazardous Wastes. Except as set forth
in the Disclosure Schedule, to the best of Seller's knowledge:
(i) there is not now, nor has there ever been, any disposal,
release or threatened release of Hazardous Materials (as defined below) on, from
or under properties now or ever owned or leased by or to Seller or by or to any
former subsidiary (the "Properties"). There has not been generated by or on
behalf of Seller or any former subsidiary (while owned by Seller) any Hazardous
Material. No Hazardous Material has been disposed of or allowed to be disposed
of on or off any of the Properties which may give rise to a clean-up
responsibility, personal injury liability or property damage claim against
Seller, or Seller being named a potentially responsible party for any such
clean-up costs, personal injuries or property damage or create any cause of
action by any third party against Seller. For purposes of this subsection, the
terms "disposal," "release," and "threatened release" shall have the definitions
assigned to them by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and the term "Hazardous Material" means any
hazardous or toxic substance, material or waste or pollutants, contaminants or
asbestos containing material which is or becomes regulated by any Authority in
any jurisdiction in which any of the Properties is located. The term "Hazardous
Material" includes without limitation any material or substance which is (A)
defined as a "hazardous waste" or a "hazardous substance" under applicable Law;
(B) designated as a "hazardous substance" pursuant to Section 311 of the Federal
Water
A-21
<PAGE>
Pollution Control Act; (C) defined as a "hazardous waste" pursuant to Section
1004 of the Federal Resource Conservation and Recovery Act; or (D) defined as a
"hazardous substance" pursuant to Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
(ii) None of Properties is (or, with respect to past Properties
and Properties of former subsidiaries, was at the time of disposition) in
violation of any Law (with respect to past Properties and Properties of former
subsidiaries, Laws in effect at the time of disposition) relating to industrial
hygiene or to the environmental conditions on, under or about such Properties,
including without limitation soil and ground water condition and there are (or
at the time of disposition were) no underground tanks or related piping,
conduits or related structures which would result in a loss, liability or damage
in excess of Ten Thousand Dollars ($10,000). During the period that Seller or
former subsidiaries owned or leased the Properties, neither Seller nor its
Subsidiaries nor its former subsidiaries nor, to Seller's knowledge, any third
party used, generated, manufactured or stored on, under or about such Properties
or transported to or from such Properties any Hazardous Materials and there has
been no litigation or other claim or action brought or threatened against Seller
or any settlements reached by Seller with any third party or third parties
alleging the presence, disposal, release or threatened release of any Hazardous
Materials on, from or under any of such Properties which would result in a loss,
liability or damage, in the aggregate, in excess of Ten Thousand Dollars
($10,000).
(aa) Brokers. Except as set forth in the Disclosure Schedule,
neither Seller nor its Subsidiaries, nor any of its directors, officers or
employees has employed any broker, finder or financial advisor or incurred any
liability for any brokerage fee or commission, finder's fee or financial
advisory fee, in connection with the transactions contemplated hereby, nor is
there any basis known to Seller for any such fee or commission to be claimed by
any person or entity.
(bb) SEC Reports. Seller has duly made all required filings with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 and
all similar required filings with any other Authority and all of the reports,
forms and documents so filed complied in all material respects with all
applicable requirements and Laws. Seller will promptly furnish to Purchaser an
accurate and complete copy of the reports, forms and documents filed after the
date of this Agreement or such reports, forms or documents reasonably requested
by Purchaser.
(cc) Financial Capacity. As of the Closing Date, Seller shall have
the financial capacity to pay its debts as they become due and funds sufficient
to carry on its business as conducted and as proposed to be conducted.
(dd) Ralcorp. Without limiting the generality of any of Seller's
representations and warranties herein, Seller represents and warrants that,
except as set forth in the Disclosure Schedule:
(i) Seller has no written agreement with Ralcorp;
(ii) the main provisions, terms (including pricing) and
conditions of Seller's oral agreement with Ralcorp (including without
limitation, invoicing procedures between Seller and Ralcorp, on the one hand,
and among Seller, Ralcorp and customers on the other) are set forth on the
Disclosure Schedule;
(iii) Purchaser will be able, at any time after Closing, to
terminate Seller's agreement with Ralcorp without any liability except as such
liability relates to the purchase of products, inventory, and packaging, or the
exhaustion of such through manufacture upon termination as is customary in the
existing relationship between the Parties described in the Disclosure Schedule;
and
A-22
<PAGE>
(iv) Seller has not at any time disclosed any of its
customers lists to Ralcorp.
(ee) Y2K. Sellers' computer and information technology systems are
all Y2K compliant and Seller has not experienced any damages, costs, expenses or
interruptions in its systems or of its business as a result of Y2K resulting in
costs, losses, or damages exceeding $25,000 in the aggregate.
(ff) Accuracy of Information. No representation or warranty by
Seller in this Agreement contains or will contain any untrue statement of
material fact or omits or will omit to state any material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading as of the date of the representation
or warranty.
Section 5
Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller as of the date hereof as
follows:
(a) Corporate Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the law of the State of
Delaware.
(b) Authorization. Purchaser has full corporate power and authority
to enter into this Agreement and to carry out the transactions contemplated
herein. The Board of Directors of Purchaser has taken all action required by
law, its articles or certificate of incorporation and bylaws or otherwise to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein. This Agreement is the
valid and binding legal obligation of Purchaser enforceable against it in
accordance with its terms.
(c) Non-Contravention. Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated herein will:
(i) violate any provision of the articles or certificate of
incorporation or bylaws of Purchaser, which violation will materially adversely
affect Purchaser's ability to consummate the transactions contemplated herein;
or
(ii) violate, be in conflict with, or constitute a default,
however defined (or an event which, with the giving of due notice or lapse of
time, or both, would constitute such a default), under, or cause or permit the
acceleration of the maturity of, or give rise to, any right of termination,
cancellation, imposition of fees or penalties under, any debt, note, bond,
lease, mortgage, indenture, license, obligation, contract, commitment,
franchise, permit, instrument or other agreement or obligation to which
Purchaser or any subsidiary of Purchaser is a party or by which they or any of
their properties or assets is or may be bound (unless with respect to which
defaults or other rights, requisite waivers or consents shall have been obtained
at or prior to the Closing), which violation will materially adversely affect
Purchaser's ability to consummate the transactions contemplated herein, or
(iii) result in the creation or imposition of any Lien, upon
any property or assets of Purchaser or any subsidiary of Purchaser under any
debt, obligation, contract, agreement or commitment to which Purchaser or any
subsidiary of Purchaser is a party or by which Purchaser or any subsidiary of
Purchaser or any of their assets or properties is or may be bound, which Lien
will materially adversely affect Purchaser's ability to consummate the
transactions contemplated herein; or
A-23
<PAGE>
(iv) to the knowledge of Purchaser, violate any Law which
violation will materially adversely affect Purchaser's ability to consummate the
transactions contemplated herein.
(d) Consents and Approvals. Except for the Consents identified on
Exhibit 5(d) hereto, no Consent is required by any person or entity, including
without limitation any Authority, in connection with the execution, delivery and
performance by Purchaser of this Agreement, or the consummation of the
transactions contemplated herein, other than any Consent which, if not made or
obtained, will not, individually or in the aggregate, have a material adverse
effect on the business of Purchaser and its subsidiaries taken as a whole.
(e) Brokers. Except as disclosed on Exhibit 5(e) hereto, neither
Purchaser nor any of its directors, officers or key employees have employed any
broker or finder, or incurred any liability for any brokerage fee or commission
or finder's fee, in connection with the transactions contemplated hereby, nor is
there any basis known to Purchaser for any such fee or commission to be claimed
by any person or entity.
(f) Disclosure. No representation or warranty by Purchaser in this
Agreement contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which made,
not misleading as of the date of the representation or warranty.
(g) Current Business Practices. Purchaser will use its reasonable
commercial efforts to continue the Seller's customary practice relating to the
termination of services with its third-party manufacturers and suppliers by
purchasing unsold or unused product, inventory, and packaging, or allowing such
third party to continue manufacturing throughout the exhaustion of such product,
inventory, and packaging. A description of such practices is set forth on
Exhibit 5(g).
(h) Availability of Funds. Purchaser has the assets, resources and
the financial capacity necessary to consummate the transactions (including
without limitation the payment of the Purchase Price) contemplated by this
Agreement.
Section 6
Covenants
(a) Seller's Agreements as to Specified Matters. Except as
specifically set forth on the Disclosure Schedule, except in the ordinary course
of business and consistent with past practice, and except as may be otherwise
agreed in writing by Purchaser, from the date hereof until the Closing, Seller
shall not:
(i) Amend its articles or certificate of incorporation or
bylaws;
(ii) Borrow or agree to borrow any funds;
(iii) Incur, assume, suffer or become subject to, whether
directly or by way of guarantee or otherwise, any claims, obligations,
liabilities or loss contingencies which, individually or in the aggregate, is or
are in excess of Twenty-Five Thousand Dollars ($25,000) or would have an adverse
effect on the financial condition of Seller;
(iv) Pay, discharge or satisfy any claims, liabilities or
obligations;
A-24
<PAGE>
(v) Permit or allow any of its properties or assets to
be subjected to any Lien, except the Permitted Liens;
(vi) Write down the value of any inventory or write-off
as uncollectible any notes or accounts receivable or any trade
accounts or trade notes;
(vii) Cancel or amend any debts, waive any claims or
rights or sell, transfer or otherwise dispose of any properties or
assets;
(viii) License, sell, transfer, pledge, modify,
disclose, dispose of or permit to lapse any right to the use of any
Intellectual Property Rights;
(ix) (A) Terminate, enter into, adopt, institute or
otherwise become subject to or amend in any material respect any collective
bargaining agreement or employment or similar agreement or arrangement with any
of its directors, officers or employees; (B) terminate, enter into, adopt,
institute or otherwise become subject to or amend in any material respect any
Benefit Arrangement; (C) contribute, set aside for contribution or authorize the
contribution of any amounts for any such Benefit Arrangement except as required
(and not discretionary) by the terms of such Benefit Arrangement; or (D) grant
or become obligated to grant any general increase in the compensation of any
directors, officers or employees (including without limitation any such increase
pursuant to any Benefit Arrangement);
(x) Make or enter into any commitment for capital
expenditures for additions to property, plant or equipment individually, or in
the aggregate, in excess of Twenty-Five Thousand Dollars ($25,000) unless
consented to in writing by Purchaser which consent may not be unreasonably
withheld;
(xi) (A) Declare, pay or set aside for payment any
dividend or other distribution in respect of its capital stock or other
securities (including without limitation distributions in redemption or
liquidation) or redeem, purchase or otherwise acquire any shares of its capital
stock or other securities, except with respect to securities comprising Seller
Capital Stock outstanding as of the date hereof; (B) issue, grant or sell any
shares of its capital stock or equity securities of any class, or any options,
warrants, conversion or other rights to purchase or acquire any such shares or
equity securities or any securities convertible into or exchangeable for such
shares or equity securities, except issuance of securities pursuant to the terms
of issuance of Seller Capital Stock outstanding as of the date hereof and the
issuance of additional Seller capital stock consisting of Series C and Series D
Preferred Stock to raise the working capital funds required hereunder; (C)
become a party to any merger, exchange, reorganization, recapitalization,
liquidation, dissolution or other similar corporate transaction; or (D) organize
any new subsidiary, acquire any capital stock or other equity securities or
other ownership interest in, or assets of, any person or entity or otherwise
make any investment by purchase of stock or securities, contributions to
capital, property transfer or purchase of any properties or assets of any person
or entity;
(xii) Pay, lend or advance any amounts to, or sell,
transfer or lease any properties or assets to, or enter into any agreement or
arrangement with, any director, officer, employee or shareholder;
(xiii) Terminate, enter into or amend in any material
respect any item identified in Part 4(t) of the Disclosure Schedule, or take any
action or omit to take any action which will cause a breach, violation or
default (however defined) under any such item; or
(xiv) Agree, whether in writing or otherwise, to take
any action described in this subsection.
A-25
<PAGE>
(b) Conduct of Seller Business. Except as set forth in the
Disclosure Schedule, Seller shall maintain its assets and properties and carry
on its businesses and operations in the ordinary course of business in
substantially the same manner as previously operated; and Seller shall use its
best efforts to preserve intact its business organizations, existing business
relationships (including without limitation its relationships with officers,
employees, dealers, distributors, independent contractors, customers and
suppliers), good will and going concern value.
(c) No Seller Solicitation of Alternate Transaction.
(i) Seller shall not, and will use its best efforts to ensure
that its directors, officers and employees, independent contractors,
consultants, counsel, accountants, investment advisors and other representatives
and agents shall not, directly or indirectly, solicit, initiate or encourage
discussions or negotiations with, provide any confidential or nonpublic
information to, or enter into any agreement with, any third party concerning (or
concerning the business of Seller in connection with) any tender offer
(including a self tender offer), exchange offer, merger, consolidation, sale of
substantial assets or of a significant amount of assets, sale of securities,
acquisition of beneficial ownership of or the right to vote securities
representing more than five percent (5%) of the total voting power of Seller,
liquidation, dissolution or similar transactions; provided, however, that the
foregoing shall not prohibit Seller (either directly or indirectly through its
directors, officers, employees, independent advisors, consultants, counsel, and
accountants) from:
(A) furnishing information concerning the Seller and its
businesses, properties, or assets to any person, corporation,
entity, or "group" as defined in Section 13(d) of the Exchange Act,
other than Purchaser or any of its affiliates (a "Third Party") in
response to any bona fide unsolicited inquiry, proposal or offer by
such Third Party;
(B) engaging in discussions or negotiations with such
Third Party that has made such bona fide unsolicited inquiry,
proposal, or offer;
(C) following receipt of such a bona fide unsolicited
proposal for acquisition of the Seller or its Assets, taking and
disclosing to its shareholders a position contemplated by Rule
14c-2(a) under the Exchange Act or otherwise making disclosure to
its shareholders; and
(D) taking any non-appealable, final action ordered to
be taken by the Seller by any court of competent jurisdiction but in
each case referred to in the foregoing clauses (A) through (C), only
to the extent that the Board of Directors of the Seller shall have
concluded in good faith that such action is required to prevent the
Board of Directors of the Seller from breaching its fiduciary duties
to the shareholders of the Seller under applicable law.
(ii) Break-up Fee. If for the reasons set forth in this Section
6(c), this Agreement and the transactions contemplated hereby shall be
terminated by Seller pursuant to Section 9(a)(iv) without the Closing having
occurred (whether such Third Party offer results in the consummation of a
transaction or not), then Seller agrees to pay Purchaser a "Break-up Fee". The
Break-up Fee shall consist of the sum of One Million Five Hundred Thousand
Dollars ($1,500,000), payable immediately upon termination hereof. The Parties
acknowledge that the Break-up Fee represents a negotiated figure which is not a
penalty and constitutes a reasonable estimate of the damages and costs that
would be incurred by Purchaser in the event of termination giving rise thereto.
A-26
<PAGE>
(d) Full Access to Purchaser. Seller has and shall provide Purchaser
all information in its possession requested by Purchaser after using best
efforts to procure such information and afford to Purchaser and its directors,
officers, employees, counsel, accountants, investment advisors and other
authorized representatives and agents free and full access during normal
business hours to the facilities, properties, books and records of Seller in
order that Purchaser may have full opportunity to make such investigations as it
shall desire to make of the affairs of Seller; provided, however, that any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with business operations; and Seller shall furnish such additional
financial and operating data and other information as Purchaser shall, from time
to time, reasonably request, including without limitation access to the working
papers of their independent certified public accountants (as and to the extent
permitted by such independent certified public accountants); and, provided,
further, that any such investigation shall not affect or otherwise diminish or
obviate in any respect any of the representations and warranties of Seller
herein.
(e) Confidentiality. Each of the Parties agrees that it will not
use, or permit the use of, any of the information relating to any other Party
hereto furnished to it in connection with the transactions contemplated herein
("Information") in a manner or for a purpose detrimental to such other Party or
otherwise than in connection with the transaction, and that they will not
disclose, divulge, provide or make accessible (collectively, "Disclose"), or
permit the Disclosure of, any of the Information to any person or entity, other
than their responsible directors, officers, employees, investment advisors,
accountants, counsel and other authorized representatives and agents, except as
may be required by judicial or administrative process or, in the opinion of such
Party's regular counsel, by other requirements of Law; provided, however, that
prior to any Disclosure of any Information permitted hereunder, the disclosing
Party shall first obtain the recipients' undertaking to comply with the
provisions of this subsection with respect to such information. The term
"Information" as used herein shall not include any information relating to a
Party which the Party disclosing such information can show: (i) to have been in
its possession prior to its receipt from another Party hereto; (ii) to be now or
to later became generally available to the public through no fault of the
disclosing Party; (iii) to have been available to the public at the time of its
receipt by the disclosing Party; (iv) to have been received separately by the
disclosing Party in an unrestricted manner from a person entitled to disclose
such information; or (v) to have been developed independently by the disclosing
Party without regard to any information received in connection with this
transaction. Each Party hereto also agrees to promptly return to the Party from
whom originally received all original and duplicate copies of written materials
containing Information should the transactions contemplated herein not occur. A
Party hereto shall be deemed to have satisfied its obligations to hold the
Information confidential if it exercises the same care as it takes with respect
to its own similar information. The Parties acknowledge that the transaction
described herein is of a confidential nature, and agree that the terms hereof,
including the purchase price hereunder, shall be maintained in confidence.
Sellers, with the prior approval of Purchaser, at a time and in a manner that is
acceptable to both Purchaser and Sellers, may notify employees of the fact of
the subject transaction.
(f) Filings; Consents; Removal of Objections. Subject to the terms
and conditions herein provided, the Parties shall use their best efforts to take
or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation obtaining all Consents of any person or
A-27
<PAGE>
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not in
limitation of the foregoing, it is the intent of the parties to consummate the
transactions contemplated herein at the earliest practicable time, and they
respectively agree to exert their best efforts to that end, including without
limitation, if required: (i) the filing with the Federal Trade Commission
("FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") all requisite documents and notifications in connection with the
transactions contemplated hereby pursuant to the HSR Act as soon as practicable
following the date hereof, and to respond as promptly as practicable to all
inquiries from the FTC or the Antitrust Division in connection therewith; (ii)
the removal or satisfaction, if possible, of any objections to the validity or
legality of the transactions contemplated herein; and (iii) the satisfaction of
the conditions to consummation of the transactions contemplated hereby.
(g) Further Assurances; Cooperation; Notification.
(i) Each Party hereto shall, before, at and after
Closing, execute and deliver such instruments and take such other actions as the
other Party or Parties may reasonably require in order to carry out the intent
of this Agreement.
(ii) Seller shall cooperate with Purchaser to promptly
develop plans for the management of the businesses after the Closing, including
without limitation plans relating to productivity, marketing, operations and
improvements, and Seller shall further cooperate with Purchaser to provide for
the implementation of such plans as soon as practicable after the Closing.
Subject to applicable Law, Seller shall confer on a regular and reasonable basis
with one or more representatives of Purchaser to report on material operational
matters and the general status of ongoing operations.
(iii) At all times from the date hereof until the
Closing, each Party shall promptly notify the other in writing of the occurrence
of any event which it reasonably believes will or may result in a failure by
such Party to satisfy the conditions specified in Section 7 and Section 8 hereof
within seven (7) days.
(h) Supplements to Disclosure Schedule. Within a reasonable time
(but in no event later than three (3) Business Days) prior to the Closing,
Seller shall supplement or amend the Disclosure Schedule with respect to any
event or development which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described in the
Disclosure Schedule or which is necessary to correct any information in the
Disclosure Schedule or in any representation and warranty of Seller which has
been rendered inaccurate by reason of such event or development. For purposes of
determining the accuracy as of the date hereof of the representations and
warranties of Seller contained in Section 4 hereof in order to determine the
fulfillment of the conditions set forth in Section 7, the Disclosure Schedule
shall be deemed to exclude any information contained in any supplement or
amendment hereto delivered after the delivery of the Disclosure Schedule.
(i) Public Announcements. None of the Parties shall make any public
announcement with respect to the transactions contemplated herein or the
purchase price hereunder without the prior written consent of the other Party;
provided, however, that any of the Parties may at any time make any
announcements which are required by applicable Law so long as the Party so
required to make an announcement, promptly upon learning of such requirement,
notifies the other Party of such requirement and discusses with it in good faith
the exact proposed wording of any such announcement for such other Party's
reasonable approval which shall not be unreasonably withheld. Without limiting
the generality of the foregoing,
A-28
<PAGE>
Seller hereby agrees to deliver to Purchaser final draft(s) of any information
statements (any such information statement, an "Information Statement") to be
distributed to its shareholders pursuant to applicable Law in connection with
this Agreement and the terms and conditions contemplated hereby and the issuance
of the securities disclosed in Part 6(a)(xi)(B) of the Disclosure Schedule, it
being understood and agreed that any such Information Statement shall be (x) in
form and substance reasonably acceptable to Purchaser and (y) provided to
Purchaser at least two (2) Business Days prior to its distribution to Seller's
securities holders or filing with any applicable Authority.
(j) Transactional Tax Undertakings.
(i) The Parties shall cooperate to make any necessary
filings with state and local taxing authorities and to furnish any required
supplemental information to any federal, state, local, and foreign tax
liabilities resulting from the consummation of the transactions contemplated
herein.
(ii) In the event that any sales or use tax, or any tax
in the nature of a sales or use tax, or any transactional tax is payable or
assessed relative to the transactions contemplated herein, Seller shall pay all
such taxes and shall not collect any part thereof from Purchaser, provided,
however, that Purchaser shall pay any excise tax required with respect to the
relicensing of any motor vehicles which are part of Seller's Assets.
(k) Bulk Transfers. Seller has requested that Purchaser waive, and
Purchaser hereby agrees to waive, the requirements of the Uniform Commercial
Code concerning bulk transfers, as in effect in the various states in which
Seller has assets, including without limitation the requirement of notice to
creditors. It is expressly agreed by the Parties that the obligation to
indemnify Purchaser under Section 10(e) includes any and all liability
(including claims, suits or demands against Purchaser), loss, cost (including
reasonable attorney's fees), expense or damage of any kind which Purchaser may
suffer in connection with such request and waiver.
(l) Employee Benefits.
(i) Employees. On the Closing Date, Purchaser: (A) will
assume the employees covered by the collective bargaining agreements listed in
Part 4(v)(ii)(F), and in Part 4(v)(i) under "union" employees, of the Disclosure
Schedule and (B) shall have the right (but not the obligation) to offer to all
or any number of the other employees then employed with respect to the
businesses relating to Seller's Assets the opportunity to maintain such
employee's current employment and shall provide within thirty (30) days after
the execution of this Agreement, but not later than ten (10) Business Days prior
to Closing, a list of those employees of Seller to whom it will offer employment
(collectively, the "Transferred Employees"); provided, that Purchaser, in its
sole discretion and considering its best interests, may terminate the employment
of any employees who accept such offer at any time after such Closing Date.
During the first twelve (12) months after the Closing Date, the compensation and
benefits provided by Purchaser shall be reasonably comparable on an overall
basis (including without limitation all compensation and benefits accrued by
such employees as of the Closing Date under all Pension Plans, Welfare Plans and
Benefit Arrangements irrespective of whether such accrued benefits are actually
received by such employees) to those provided to such employees prior to the
Closing Date with credit given for the length of actual service with Seller (or
both) prior to the Closing Date. Purchaser has not agreed to assume any
obligation or liability under any Pension Plans, Welfare Plans, Benefit
Arrangements, severance obligation or other employment benefit related
obligation but may do so in its sole discretion.
A-29
<PAGE>
(ii) Severance. If the employment of any employee who
accepts the offer referred to in Section 6(1)(i) above is terminated by
Purchaser other than for cause within the twelve (12) months after the Closing
Date, Purchaser shall be responsible for making payment of severance
compensation to such employee in accordance with the practice of Seller or any
of its Subsidiaries (as applicable) at the Closing Date, as described on Exhibit
6(1) hereto, with credit being given for the length of actual service with
Seller (or both) prior to the Closing Date.
(iii) 401(k) Plan. Purchaser shall take appropriate
measures with Seller's assistance as reasonably requested so that Seller's
401(k) plans shall be, upon Closing: (x) assumed by Purchaser (and amended, if
required by Purchaser), (y) merged into an existing 401(k) plan maintained by
Purchaser, and/or (z) frozen or terminated and replaced with new plans (within
Purchaser's sole discretion).
(iv) Retention of Employees. Neither Seller nor any
Subsidiary shall, for a period of three (3) years after the Closing Date, take
any action, other than with the written consent of Purchaser, to induce any
employee who accepts an offer pursuant to Section 6(1)(i) above, while still
employed by Purchaser or any subsidiary of Purchaser, to enter into the employ
of Seller or other affiliate of Seller.
(m) Use of Trade Names and Corporate Name. As of and after the
Closing, Seller shall not use any of the names listed on Exhibit 3(a)(i) or
title similar to such name or any other trade names or trademarks being
transferred hereunder.
(n) Special Reserve Fund. Seller has raised from among its current
shareholders through the issuance of new Series D Preferred Convertible Stock
the aggregate amount of One Million Five-Hundred Thousand Dollars ($1,500,000),
of which Five-Hundred Thousand Dollars ($500,000) have been set aside as a
separate cash reserve (the "Special Reserve Fund"), for the purpose of assuring
that Seller meets its payment obligations and working capital requirements from
the date hereof through the Closing Date; the amount of the Special Reserve Fund
has been set on the basis of Seller's Monthly Cash Flow Forecasts prepared by
Seller for the period from February 1 through May 31, 2000, attached hereto as
Schedule 6(n). The balance of One-Million Dollars ($1,000,000) shall be injected
into Seller for normal business and operational purposes. The Special Reserve
Fund, which is free of any Liens, may be drawn upon only on the terms and for
the purposes set forth in the "Reserve Escrow Agreement" delivered to Purchaser
on the date hereof substantially in the form of Exhibit 6(n).
(o) Bank Extension. Annexed hereto as Exhibit 6(o) is an executed
copy of the Fourth Amendment to Financing Agreement, dated as of March 31, 2000
(the "Bank Extension"), entered into by Seller and U.S. Bancorp Republic
Commercial Finance, Inc. (the "Bank"). Seller represents and warrants that: (x)
the Bank Extension is effective as of the date of execution of this Agreement,
and (y) Seller has complied with all of the conditions set forth therein..
(p) Noncompetition and Confidentiality Agreements. At the Closing,
Seller shall:
(i) provide Purchaser with copies of the Noncompetition and
Confidentiality Agreements dated as of the Closing Date, executed by Thomas J.
Guinan, Jeffrey Weiner and Adnan Durrani substantially in the forms respectively
set forth in Exhibit 7(h), and
(ii) assign to Purchaser all of Seller's rights, benefits, and
interests under each of the Worth Agreements with respect to Protection of
Confidential Information and Noncompetition so that the provisions of Sections
4, 5 and 6 of each of the Worth Agreements
A-30
<PAGE>
shall inure in full to the sole benefit of the Purchaser; it being understood
and agreed that (x) Purchaser shall not assume any obligations whatsoever under
the Worth Agreements and, except as expressly set forth above, Seller shall
retain all rights and obligations under the Worth Agreements, and (y) in the
event of any breach of the provisions of those rights under the Worth Agreements
assigned to Purchaser, Seller shall, at Purchaser's cost, take any and all
reasonable action requested by Purchaser to enforce those provisions. As used
herein, the "Worth Agreements" shall mean: (A) that certain Consulting, Loan
Repayment and Noncompetition Agreement dated as of August 13, 1997 between
Richard S. Worth and Seller, and (B) that certain Consulting, Loan Repayment and
Noncompetition Agreement dated as of August 13, 1997 between Randye Worth and
Seller.
(q) Payoff Schedule; Termination of Financing Agreement. (i) At
least five (5) Business Days prior to Closing, Seller shall deliver to Purchaser
a "Payoff Schedule" to be attached hereto as Exhibit 6(q), setting forth (x) a
list of every creditor of Seller (including but not limited to: stock, note,
warrant, option, and securities holders of Seller; banks and financial
institutions; trade creditors other than those assumed by Purchaser; suppliers
other than those assumed by Purchaser; and other third parties) to which Seller
owes amounts which are due or to become due within ninety (90) days after
Closing in excess of Ten Thousand Dollars ($10,000), (y) each such amount with
respect to each creditor as of a date which shall not be more than five (5)
Business Days prior to the Closing, and (z) for each creditors to be paid off at
or immediately after the Closing, the payment instructions to Purchaser with
information on the relevant bank account into which payment of the respective
payoff amounts shall be made at or immediately after the Closing.
(ii) On or before the Closing, Seller shall provide Purchaser
with fully executed originals, in form and substance acceptable to Purchaser,
of: (A) an agreement in writing between Bank and Seller providing for (x)
Seller's payment in full of all amounts due or outstanding under the Financing
Agreement (as defined in, and amended by, the Bank Extension), and (y) the
termination of such Financing Agreement and of any and all Liens granted to the
Bank on any of Seller's Assets, and (B) an instrument in writing of the Bank
releasing any and all of its Liens in any of Seller's Intellectual Property
Rights, and whereby the Bank covenants and agrees to execute and deliver to
Purchaser any further documents and instruments as may be necessary or
reasonably requested by Purchaser in order to fully release such Intellectual
Property Rights and other Seller's Assets from any Liens held in Bank's favor.
(r) Further Covenants of Seller. Without limiting the generality of
any other provision of this Agreement,
(i) On or prior to Closing, Seller shall: (A) be qualified to do
business and be in good standing in the state of Illinois or indemnify Purchaser
pursuant to Section 10(c) from and against any and all loss, liability, or
damage suffered or incurred by Purchaser in connection with Seller's failure to
so qualify or be in good standing; (B) obtain acknowledgement and consent of
Condor Ventures, Inc.; Laner, Muchin, Dombrow, Becker, Levin and Tominberg, Ltd.
(LMDBLT), and the Bank that the execution of this Agreement and consummation of
the transactions contemplated hereby do not contravene the agreements set forth
in Part 4(e)(ii) of the Disclosure Schedule or indemnify Purchaser pursuant to
Section 10(c) from and against any and all loss, liability, or damage suffered
or incurred by Purchaser in connection with Seller's failure to obtain
acknowledgement and consent; (C) in relation to the Pate's litigation disclosed
in Part 4(o) of the Disclosure Schedule, indemnify and hold Purchaser harmless
to the fullest extent set forth in Section 10 below, against all claims or
causes of action commenced, directly or indirectly, by Pate's Bakery, LLC
against Purchaser; and (D) make all
A-31
<PAGE>
necessary filings, cure any outstanding deficiencies and pay all fees and
penalties necessary to bring the 401(k) plans set forth in Part 4(r) of the
Disclosure Schedule in full compliance with law or, if Purchaser so chooses, at
Purchaser's sole discretion, indemnify Purchaser pursuant to Section 10(c) from
and against any and all loss, liability, or damage suffered or incurred by
Purchaser in connection with Seller's failure to make such filings, cure such
deficiencies or pay such fees and penalties;
(ii) Except as provided in Section 6(l)(i), Seller represents,
warrants and covenants that Purchaser has not, and will not, assume any
obligation whatsoever for any employment agreement(s) of Seller with any of its
employees including, but not limited to those with Mark Robson, Thomas Guinan
and Jeffrey Weiner.
Section 7
Conditions to Obligations of Purchaser
Notwithstanding any other provision of this Agreement to the
contrary, the obligation of Purchaser to effect the transactions contemplated
herein shall be subject to the satisfaction at or prior to the Closing of each
of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of Seller contained in this Agreement, including without limitation
in the Disclosure Schedule initially delivered to Purchaser as Exhibit 4 (and
not including any changes or additions delivered to Purchaser pursuant to
Section 6(h)), shall be in all material respects true, complete and accurate as
of the date when made and at and as of the Closing as though such
representations and warranties were made at and as of such time, except for
changes specifically permitted or contemplated by this Agreement.
(b) Performance. Seller shall have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by Seller on or
prior to the Closing.
(c) Required Approvals and Consents.
(i) All action required by law and otherwise to be taken by the
Board of Directors of Seller and the shareholders of Seller to authorize the
execution, delivery and performance of this Agreement by the Seller and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken.
(ii) All Consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein including, without
limitation, those required by the HSR Act, and all Consents of from all persons
and entities other than Authorities that are identified in the Disclosure
Schedule shall have been delivered, made or obtained, and Purchaser shall have
received copies thereof.
(d) No Proceeding or Litigation. To the best of Seller's knowledge,
no suit, action, investigation, inquiry or other proceeding by any Authority or
other person or entity shall have been instituted or threatened which questions
the validity or legality of the transactions contemplated hereby or which, if
successfully asserted, would individually or in the aggregate, otherwise have an
adverse effect on the conduct of the businesses relating to Seller's Assets.
(e) Opinion of Seller Counsel. Purchaser shall have received an
opinion from Olshan, Grundman, Frome, Rosenzweig & Wolosky, LLP, counsel to
Seller, dated the Closing Date, substantially in the form and substance set
forth as Exhibit 7(e) hereto.
A-32
<PAGE>
(f) Certificates. Purchaser shall have received such certificates of
Seller's officers (including but not limited to an officer certificate
certifying that the Estimated Closing Working Capital Balance/(Deficit) and the
other unaudited financial statements and balance sheets provided by Seller
hereunder are in compliance with Section 4(g)) in a form and substance
reasonably satisfactory to Purchaser, dated the Closing Date, to evidence
compliance with the conditions set forth in this Section 7 and such other
matters as may be reasonably requested by Purchaser.
(g) Escrow Agreements. The parties thereto shall have executed and
delivered an Escrow Agreement in the form of Exhibit 7(g) hereto and the Reserve
Escrow Agreement in the form of Exhibit 6(n).
(h) Noncompetition and Confidentiality Agreements. On or before the
Closing Date, Seller shall have delivered to Purchaser Noncompetition and
Confidentiality Agreements dated as of the Closing Date and executed by Thomas
J. Guinan, Jeffrey Weiner and Adnan Durrani respectively, substantially in the
forms respectively set forth in Exhibit 7(h).
(i) Documentation for Conveyance of Seller's Assets. Purchaser shall
have received, in form and substance reasonably satisfactory to Purchaser, dated
the Closing Date, all of the Bill(s) of Sale, deeds, assignments including,
without limitation, assignments of trademarks and other intellectual property
rights, certificates of title, and any and all other conveyance and transfer
documentation listed on Exhibit 7(i) hereto as may be supplemented after the
date hereof but before Closing.
(j) Certificates of Amendment. On the Closing Date, Seller's shall
deliver: (i) Certificate of Amendment of its certificate of incorporation to be
filed in the State of Delaware amending its corporate name from "Delicious
Brands, Inc." to any other name which is in compliance with Section 6(m) (the
"New Name"), (ii) Certificates of Amendment (or equivalent) amending its
certificates of authority to be filed in Illinois, New York and Michigan,
respectively, amending its corporate name from "Delicious Brands, Inc." to the
New Name, (iii) any other documents for any other jurisdiction in which it is
qualified to do business or uses the "Delicious Brands, Inc." name, and (iv) any
other documents otherwise necessary or convenient to consummate the transactions
contemplated in this Agreement, including but not limited to, certificates of
good standing from the States of Delaware, Illinois, New York and Michigan dated
no earlier than two (2) Business Days prior to Closing. All such certificates
shall be in form and substance reasonably satisfactory to Purchaser.
(k) Environmental Phase I. The "Phase I" environmental report on
Seller's premises (which Purchaser in its discretion may procure prior to
Closing) does not require, in Purchaser's reasonable discretion, any material
repairs to any of Seller's premises or will not cause or require the
interruption of the use of Seller's premises, interfere with the carrying out of
the business in the regular course, or otherwise present material liabilities or
other legal risks.
(l) Employees. Purchaser shall provide a list of the Transferred
Employees pursuant to Section 6(l). Seller shall be solely responsible for any
severance and all other employment benefits to and rights of the Transferred
Employees through the Closing Date and for the remainder of Seller's employees
that are not assumed or employed by Purchaser through and after Closing.
(m) Payoff Schedule. At Closing, Purchaser shall have received the
Payoff Schedule pursuant to Section 6(q), with any amendments as necessary to
make it current as of the Closing Date; it being understood and agreed that
Seller shall provide Purchaser with a draft
A-33
<PAGE>
of the updated Payoff Schedule at least five (5) Business Days prior to Closing.
Section 8
Conditions to Seller's Obligations
Notwithstanding anything in this Agreement to the contrary, the
obligation of Seller to effect the transactions contemplated herein shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions:
(a) Representations and Warranties True. The representations and
warranties of Purchaser contained in this Agreement shall be in all material
respects true, complete and accurate as of the date when made and at and as of
the Closing, as though such representations and warranties were made at and as
of such time, except for changes permitted or contemplated in this Agreement.
(b) Performance. Purchaser shall have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by Purchaser at or
prior to the Closing.
(c) Corporate Approvals. The shareholders of Seller shall have
approved the transactions contemplated hereby. All Consents listed on Exhibit
5(d) hereto shall have been delivered, made or obtained. All action required to
be taken by Purchaser to authorize the execution, delivery and performance of
this Agreement by Purchaser and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
(d) No Proceeding or Litigation. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity shall
have been instituted or threatened which questions the validity or legality of
the transactions contemplated hereby.
(e) Certificates. Purchaser shall have furnished Seller with such
certificates of Seller officers, in a form and substance reasonably acceptable
to Seller, dated the Closing Date, to evidence compliance with the conditions
set forth in this Section 6 and such other matters as may be reasonably
requested by Seller.
(f) Opinion of Purchaser Counsel. Purchaser shall have delivered to
Seller an opinion from BBLP - Pavia e Ansaldo Beiten Burkhardt Mittl & Wegener
Moquet Borde & Associes Meyer Lustenberger, Professional Corporation, counsel to
Purchaser, dated the Closing Date, in the form and substance set forth as
Exhibit 8(f) hereto.
(g) Payment of Consideration. Seller shall have received
satisfactory evidence that the wire transfers required by Sections 3(b)(A)(i)
and 3(b)(A)(ii) hereof have been completed and the Liability Undertaking
required by Section 3(b)(B) hereof has been executed and delivered.
(h) Escrow Agreements. The parties thereto shall have executed and
delivered an Escrow Agreement in the form of Exhibit 7(g) hereto and the Reserve
Escrow Agreement in the form of Exhibit 6 (n) hereto.
Section 9
Termination and Abandonment
(a) Methods of Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time notwithstanding
approval
A-34
<PAGE>
thereof by the shareholders of Seller, but not later than the Closing:
(i) By mutual written consent of Purchaser and Seller; or
(ii) By Purchaser on or after the Termination Date or such
later date as may be established pursuant to Section 3 hereof, if any of the
conditions provided for in Section 7 of this Agreement shall not have been
satisfied or waived in writing by Purchaser prior to such date; or
(iii) By Seller on or after the Termination Date or such later
date as may be established pursuant to Section 3 hereof, if any of the
conditions provided for in Section 8 of this Agreement shall not have been
satisfied or waived in writing by Seller prior to such date; or
(iv) By Seller if, prior to Closing, in good faith, based upon
written advice from outside counsel, and in order to prevent the Board of
Directors from breaching its fiduciary duty, the Board of Directors of Seller
shall have withdrawn or modified, in a manner adverse to Purchaser, its approval
or recommendation of this Agreement or its recommendation that shareholders of
the Seller adopt and approve this Agreement in order to permit Seller to execute
a definitive agreement providing for the acquisition of the assets of the Seller
or in order to approve a tender or exchange offer for any or all of the Seller's
Common Stock, in either case, that is determined, by the Board of Directors of
the Company to be a superior proposal. In the foregoing event, Seller shall pay
Purchaser the Break-up Fee as set forth above in Section 6(c)(ii).
(v) By any Party if the Closing shall not have occurred on or
before June 15, 2000.
(b) Procedure Upon Termination. In the event of termination and
abandonment pursuant to subsection (a), written notice thereof shall forthwith
be given to the other Party or Parties, and the provisions of this Agreement
(except to the extent provided in Section 11(a)) shall terminate, and the
transactions contemplated herein shall be abandoned, without further action by
any Party hereto. If this Agreement is terminated as provided herein: (i) each
Party will, upon request, redeliver all documents, work papers and other
material of any other Party (and all copies thereof) relating to the
transactions contemplated herein, whether so obtained before or after the
execution hereof, to the Party furnishing the same; (ii) the confidentiality
obligations of Section 6 (e) shall continue to be applicable; and (iii) except
as provided in this subsection, no Party shall have any liability for a breach
of any representation, warranty, agreement, covenant or other provision of this
Agreement, unless such breach was due to a willful or bad faith action or
omission of such Party or any representative, agent, employee or independent
contractor thereof.
Section 10
Survival and Indemnification
(a) Survival. The representations and warranties of each of the
Parties shall survive the Closing for a period of two (2) years from the Closing
Date.
(b) Indemnification by Purchaser. Purchaser agrees to indemnify
Seller from and against any and all loss, liability or damage suffered or
incurred by it by reason of (i) any untrue representation of, or breach of
warranty or covenant by, Purchaser in any part of this Agreement, provided,
however, that no claim for indemnity may be made pursuant to this subsection
after the second anniversary of the Closing Date; (ii) any nonfulfillment of any
covenant, agreement or undertaking of Purchaser in any part of this Agreement
which by its
A-35
<PAGE>
terms is to remain in effect after the Closing and has not been specifically
waived in writing at the Closing by the Party or Parties hereof entitled to the
benefits thereof; and (iii) any obligations of Seller assumed by Purchaser in
the Liability Undertaking.
(c) Indemnification by Seller; Untrue Representation or Breach of
Warranty or Covenant. Seller agrees to indemnify Purchaser from and against any
and all loss, liability or damage suffered or incurred by it by reason of any
untrue representation of, or breach of warranty or covenant by Seller in this
Agreement, provided, however, that Purchaser shall make any claim(s) pursuant to
this subsection (c): (A) exclusively against the Escrow Fund (and then to the
Seller only in the event that the Escrow Fund is no longer available or lacks
sufficient funds) until the aggregate amount of all such claims exceeds
Five-Hundred Thousand Dollars ($500,000), and (B) either against the Escrow Fund
or directly against Seller, in Purchaser's sole discretion, once the amount of
all such claims exceeds Five-Hundred Thousand Dollars ($500,000), and provided,
further, that no claims for indemnity may be made pursuant to this subsection
after the second anniversary of the Closing Date.
(d) Indemnification by Parties; Closing Working Capital Balance
Adjustment. Seller and Purchaser agree to indemnify each other for the amount of
the Closing Working Capital Balance Adjustment determined pursuant to Section
3(c) and resulting in any shortfall or excess, as the case may be. Any shortfall
shall result in a dollar-for-dollar reduction in the Purchase Price in the full
amount of such shortfall. Purchaser shall, in its sole discretion, either make a
claim for such amount under the Escrow Agreement or directly in writing against
Seller, which shall be payable within ten (10) Business Days of receipt by
Seller. Any excess shall result in a dollar-for-dollar increase in the Purchase
Price in the full amount of such excess. Seller shall make a written demand to
Purchaser and such excess amount shall be payable within ten (10) Business Days
of receipt thereof by Purchaser.
(e) Indemnification by Seller; Other. Seller agrees to indemnify
Purchaser from and against: (i) any and all loss, liability or damage suffered
or incurred by it by reason of any nonfulfillment of any covenant, agreement or
undertaking of Seller in this Agreement which by its terms is to remain in
effect after the Closing and has not been specifically waived in writing at the
Closing by the Party or Parties entitled to the benefits thereof; (ii) any
obligations of Seller not specifically assumed by Purchaser in the Liability
Undertaking; and (iii) any and all costs and expenses, including, without
limitation, legal fees and expenses, in connection with enforcing the
indemnification rights of Purchaser pursuant to Sections 10(c), 10(d) and 10(e).
(f) Basket Amount. Notwithstanding anything in Sections 10(b), (c)
and 10(e) to the contrary, neither Party shall be entitled to any
indemnification under such subsections against the other Party if the aggregate
amount of all claims of the Indemnified Party (as defined below) thereunder is
less than One-Hundred Twenty-Five Thousand Dollars ($125,000) (the "Basket
Amount"), but if the aggregate amount of all such Indemnified Party's claims
exceeds the Basket Amount, then the Indemnified Party shall be entitled to full
indemnification of all claims and there shall be no Basket Amount.
Notwithstanding anything in this Agreement to the contrary, for the purposes of
calculating the Basket Amount, Purchaser and Seller agree that each dollar from
the very first dollar on the very first claim incurred by the Indemnified Party
shall be included in calculating the Basket Amount regardless of any threshold
set forth in any provision of this Agreement. The Parties do not intend that the
Basket Amount be deemed to be a definition of what is "material" for any purpose
in this Agreement. Neither Party shall be entitled to any indemnification under
the subsection hereof in excess of the Purchase Price. The foregoing
notwithstanding, there shall be no Basket Amount applicable to claims under
Section 10(d).
A-36
<PAGE>
(g) Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the Party seeking indemnification (the "Indemnified
Party") shall promptly notify the Party from whom indemnification is sought (the
"Indemnifying Party") of the claim and, when known, the facts constituting the
basis for such claim. In the case of any such claim for indemnification,
hereunder resulting from or in connection with any claim or legal proceedings of
a third party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising there from. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld. If
the Indemnifying Party is of the opinion that the Indemnified Party is not
entitled to indemnification, or is not entitled to indemnification in the amount
claimed in such notice, it shall deliver, within thirty (30) days after the
receipt of such notice, a written objection to such claim and written
specifications in reasonable detail of the aspects or details objected to, and
the grounds for such objection. If the Indemnifying Party shall file timely
written notice of objection to any claim for indemnification, the validity and
amount of such claim shall be determined by arbitration pursuant to Section
11(l) hereof. If timely notice of objection is not delivered or if a claim by an
Indemnified Party is admitted in writing by an Indemnifying Party or if an
arbitration award is made in favor of an Indemnified Party pursuant to Section
11(1), the Indemnified Party, as a non-exclusive remedy, shall have the right to
(i) receive from the Escrow Agent, upon five (5) days prior written notice to
the other party by the Escrow Agent of such release of funds, the amount of such
claim or award on a dollar-for-dollar basis in order to satisfy such claim or
award; (ii) set off the amount of such claim or award against any amount yet
owed, whether due or to become due, by the Indemnified Party or any subsidiary
thereof to any Indemnifying Party by reason of this Agreement or any agreement
or arrangement or contract to be entered into at the Closing; or (iii) recover
the amount of such claim or award by using a combination of subparagraphs (i)
and (ii).
(h) The Parties here agree and acknowledge that certain
representations, warranties, covenants and indemnification rights may survive
the term of the Escrow Agreement and, therefore, the availability of any Escrow
Funds (as defined therein). In the event that after termination of the Escrow
Agreement, a Party intends to make a claim to an Indemnifying Party pursuant to
a right hereunder, the Indemnified Party shall do so directly setting forth in a
written notice the basis for the claim and the amount sought. If the Parties
cannot mutually agree to resolve such claim within thirty (30) days after
receipt by the Indemnifying Party of such notice, the Indemnified Party may
pursue its remedies, under Section 11(l) of this Agreement.
Section 11
Miscellaneous Provisions
(a) Expense. Each of the Parties shall bear its own costs, fees and
expenses in connection with the negotiation, preparation, execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, including without limitation fees, commissions and expenses
payable to brokers, finders, investment bankers, consultants, exchange or
transfer agents, attorneys, accountants and other professionals, whether or not
the transactions contemplated herein are consummated; provided, however, that
each Party shall bear fifty percent (50%) of the fees and expenses of the
Independent Accountant and each Party shall bear fifty percent (50%) of the fees
of the Escrow Agent.
(b) Amendment and Modification. Subject to applicable Law, this
Agreement may be amended or modified by the Parties at any time prior to the
Closing with respect to any of the
A-37
<PAGE>
terms contained herein; provided, however, that all such amendments and
modifications must be in writing duly executed by all of the Parties.
(c) Waiver of Compliance; Consents. Any failure of a Party to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by the Party entitled hereby to such compliance, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No single or partial exercise
of a right or remedy shall preclude any other or further exercise thereof or of
any other right or remedy hereunder. Whenever this Agreement requires or permits
the consent by or on behalf of a Party, such consent shall be given in writing
in the same manner as for waivers of compliance.
(d) No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any person or entity (other than an assignee of Purchaser or a Party
hereto and his, her or its respective successors and assigns permitted hereby)
to any claim, cause of action, remedy or right of any kind.
(e) Notices. All notices, requests, demands and other communications
to either party hereunder shall be in writing delivered by certified or
registered mail, return receipt requested; reputable overnight courier, by hand
and a copy by facsimile transmission and shall be given to:
if to Purchaser, to:
Parmalat Bakery Division
135 Otonabee Drive
Kitchener, Ontario
N2C 1L7 Canada
Attn.: Mr. Ray Kingdon, President
Facsimile No.: 519-893-9223
Telephone No.: 519-893-6400 x 227
and
Parmalat Canada
405 The West Mall
Suite 1000, 10th Floor
Etobicoke, Ontario
M9C 5J1 Canada
Attn.: Mr. Peter Quintiliani, Chief Financial Officer
Mr. Peter Ferraro, VP and General Counsel
Facsimile No.: 416-620-3626
Telephone No.: 416-620-3623
with a copy to:
Parmalat S.p.A.
Via O. Grassi 22/26
43044 Collecchio
Parma, Italy
Attn.: Mr. Fausto Tonna, Chief Financial Officer
Facsimile No.: (+39) 0521 808 327
Telephone No.: (+39) 0521 8081
A-38
<PAGE>
BBLP - Pavia e Ansaldo
Beiten Burkhardt Mittl & Wegener
Moquet Borde & Associes
Meyer Lustenberger, Professional Corporation
460 Park Avenue, 21st Floor
New York, NY 10022
Attn.: Gian Paolo Zini
Richard P. Altieri
Facsimile No.: (212) 980 1453
Telephone No.: (212) 980 1633
or to such other person or address as Purchaser shall furnish to the
other Parties in writing in accordance with this subsection.
if to Seller, to:
Delicious Brands, Inc.
2070 Maple Street
Des Plaines, Illinois 60018
Attn.: Mr. Thomas J. Guinan, Chief Executive Officer
with a copy to:
Olshan, Grundman, Frome,
Rosenzweig & Wolosky, LLP
505 Park Avenue
New York, New York 10022
Attn.: Steven Wolosky, Esq.
Facsimile No.: (212) 980-7177
Telephone No.: (212) 753-7200
or to such other person or address as Seller shall furnish to the
other Parties in writing in accordance with this subsection.
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to 5
p.m. in the place of receipt and such day is a Business Day in the place of
receipt. Otherwise, any such notice, request or communication shall be deemed
not to have been received until the next succeeding Business Day in the place of
receipt. For notice to be effective against the respective Parties, all copies
must be delivered as set forth above.
(f) Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned (whether
voluntarily, involuntarily, by operation of law or otherwise) by any of the
Parties without the prior written consent of the other parties; provided,
however, that Purchaser may assign this Agreement, in whole or in any part, and
from time to time as set forth in this Agreement.
(g) Governing Law. The validity, interpretation, enforceability, and
performance of this Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the principles of
conflicts of law thereof.
(h) Counterparts. This Agreement may be executed simultaneously in
one or more
A-39
<PAGE>
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(i) Headings. The table of contents and the headings of the sections
and subsections of this Agreement are inserted for convenience only and shall
not constitute a part hereof.
(j) Entire Agreement. The Disclosure Schedule and the exhibits and
other writings referred to in this Agreement or in the Disclosure Schedule or
any such exhibit or other writing are part of this Agreement: together they
embody the entire agreement and understanding of the Parties in respect of the
transactions contemplated by this Agreement and together they are referred to as
"this Agreement" or the "Agreement". There are no restrictions, promises,
warranties, agreements, covenants or undertakings, other than those expressly
set forth or referred to in this Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the
transaction or transactions contemplated by this Agreement and the subject
matter hereof (including without limitation (i) the letter of intent dated
October 7, 1999, from [Parmalat] to Seller, (ii) the memorandum dated October
27, 1999, from Seller to [Parmalat], (iii) the letter dated November 4, 1999,
from Pricewaterhouse Coopers to Seller, (iv) the Exclusivity Letter dated
October 27, 1999, between [Parmalat] and Seller and (v) the Confidentiality and
Non-Disclosure Agreement dated June 24, 1999, between [Parmalat] and Seller, and
all amendments and extensions thereof).
(k) Injunctive Relief. It is expressly agreed among the Parties that
monetary damages would be inadequate to compensate a party hereto for any breach
by any other Party of its covenants and agreements in Sections 6(c) and 6(e)
hereof. Accordingly, the Parties agree and acknowledge that any such violation
or threatened violation will cause irreparable injury to the non-breaching Party
and that, in addition to any other remedies which may be available, the
non-breaching Party shall be entitled to injunctive relief against the
threatened breach of Sections 6(c) and 6(e) hereof or the continuation of any
such breach without the necessity or proving actual damages and may seek to
specifically enforce the terms thereof.
(1) Arbitration. With the sole exception of the injunctive relief
contemplated by Section 11(k), any dispute, controversy or claim arising out of,
or relating to, this Agreement including, without limitation, the interpretation
or the breach, termination or invalidity thereof, shall be exclusively and
finally resolved by arbitration in accordance with the Commercial Rules of the
American Arbitration Association ("AAA") then obtaining. The arbitration panel
shall consist of three (3) arbitrators. The claimant shall propose one
arbitrator; the respondent shall propose the second arbitrator; and the third
arbitrator, who shall serve as chairman, shall be appointed by the AAA. If any
of the Parties shall fail to propose an arbitrator, such arbitrator shall be
appointed by the AAA (the "Appointing Authority"). The place of arbitration
shall be New York City, USA and the English language shall be used throughout
the arbitral proceedings. By agreeing to arbitrate, the Parties waive their
right to any form of appeal or recourse to a court of law or other judicial
authority, to the fullest extent permitted by law. Notwithstanding the
foregoing, this agreement to arbitrate shall not bar either party from seeking
temporary or provisional remedies in any Court of competent jurisdiction.
Judgment upon any arbitration award may be entered in any court having
jurisdiction thereon. The Parties hereby consent to the exclusive jurisdiction
of the state and federal courts located in New York county, New York State.
(m) Severability. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be
A-40
<PAGE>
invalid, unenforceable, or void, the remainder of this Agreement and such
provisions as applied to other persons, places, and circumstances shall remain
in full force and effect.
[Signatures on following page]
A-41
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
this 5th, day of April, 2000.
PURCHASER:
BF USB Inc.
By: /s/ Brian M. Paluch By: /s/ Peter Quintilian
------------------- --------------------
Name: Brian M. Paluch Name: Peter Quintilian
Title: President Title: Treasurer
ATTEST:
By: ____________________
Name:
Title:
STATE OF Missouri )
) ss.:
COUNTY OF St. Louis )
On this 5th day of April, 2000, before me personally came Brian
Paluch, _______________ of BF USB Inc., a Delaware corporation, to me known, and
known to me to be the person who executed the foregoing instrument, who, being
by me duly sworn, did depose and say that he is the President of BF USB Inc., a
Delaware corporation; and that he executed the foregoing instrument on behalf of
such corporation and affixed the corporate seal to the foregoing instrument by
order of the Board of Directors of said corporation and signed his name thereto
by like order.
/s/ Barbara Ann Brown
--------------------
Notary Public 3/10/2002
[seal]
A-42
<PAGE>
SELLER:
DELICIOUS BRANDS, INC.
By: /s/ Tom Guinan
--------------------
Name: Tom Guinan
Title: President
ATTEST:
By: /s/ Jeffry Weiner
----------------------
Name: Jeffry Weiner
Title: CFO
STATE OF IL )
) ss.:
COUNTY OF DuPage )
On this 5th day of April, 2000, before me personally came Tom
Guinan, President of DELICIOUS BRANDS, INC., a Delaware corporation, to me
known, and known to me to be the person who executed the foregoing instrument,
who, being by me duly sworn, did depose and say that he is the President of
DELICIOUS BRANDS, INC., a Delaware corporation; and that he executed the
foregoing instrument on behalf of such corporation and affixed the corporate
seal to the foregoing instrument by order of the Board of Directors of said
corporation and signed his name thereto by like order.
/s/ Doreen Lindsey
--------------------
Notary Public
[seal]
A-43
<PAGE>
EXHIBIT B
OPINION
VALUEMETRICS, INC.
150 EAST 52ND STREET, 16TH FLOOR
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 980-5800
April 4, 2000
Board of Directors
Delicious Brands, Inc.
2070 Maple Street
Des Plaines, IL 60018
Dear Sirs:
We understand that Delicious Brands, Inc. (the "Company"), and BF
USB, Inc. ("BF") have entered into an Asset Purchase Agreement, (the
"Agreement"), whereby, among other things, the Company will sell, transfer,
convey, assign and deliver to BF all the assets, properties, goodwill and rights
of the Company, as a going concern, of every nature, kind and description,
tangible and intangible (the "Assets"), subject to certain provisions and
limitations set forth in the Agreement. BF shall not assume any liabilities of
the Company whether or not associated with the Company's assets or in any other
way associated with the Company or any of its businesses except as specifically
set forth in Exhibit 3(b)(ii) of the Agreement (the "Liabilities").
Upon the terms and subject to the conditions set forth in the
Agreement, in consideration for the Company's Assets, and the covenants and
various provisions contained in the Agreement, BF shall: (A) pay the Company a
total purchase price of Twenty Six Million Six Hundred Eighty Thousand Dollars
($26,680,000) (the "Consideration") as follows: i.) By federal wire transfer of
immediately available funds, the sum of the $26,680,000, less the amount of One
Million Seven Hundred Thousand Dollars ($1,700,000) representing the agreed upon
working capital adjustment, plus or less (as the case may be), the estimated
closing working capital balance/(deficit) pursuant to Section 3(c) of the
Agreement, and less the Escrow Fund to be deposited pursuant to Section
3(b)(A)(ii) of the Agreement, ii.) By federal wire transfer of immediately
available funds to the Escrow Account designated by the Company by written
notice to be delivered to BF at least ten (10) business days prior to closing,
the sum of Five Million Three Hundred Thirty-Six Thousand Dollars ($5,336,000)
(the "Escrow Fund"); and (B) execute and deliver to the Company a Liability
Undertaking pursuant to the terms of the Agreement. The purchase of Assets and
the assumption of certain Liabilities consistent with the terms and conditions
of the Agreement is hereinafter defined as the Transaction.
B-1
<PAGE>
Delicious Brands, Inc.
April 4, 2000
Page 2
You have requested our opinion, as financial advisors, as to the
fairness, from a financial point of view, to the Company of the Consideration to
be paid in the Transaction.
In conducting our analysis of the Company and arriving at our
opinion as expressed herein, we have reviewed and analyzed certain financial and
other information of the Company that was publicly available; including filings
made with the Securities and Exchange Commission (the "SEC"). The documents
reviewed by Valuemetrics include, but are not limited to:
(i) Form S-1/A Amendment Number 4 to Registration Statement dated
October 23, 1998;
(ii) Form 10-K for the fiscal year ended December 31, 1998;
(iii) Form 10-K/A for the fiscal year ended December 31, 1998;
(iv) Forms 10-Q for the quarters ended September 30, 1998, March 31,
1999, June 30, 1999 and September 30, 1999;
(v) Form 8-K filed April 12, 1999 in connection with the issuance and
sale of Series B Convertible Preferred Stock and warrant to purchase
common stock;
(vi) Form 8-K filed August 30, 1999 in the connection with the sale of
non-negotiable unsecured convertible promissory notes;
(vii) Form 8-K filed February 1, 2000 in connection with the NASDAQ Stock
Market determination to delist the Company's security from the
NASDAQ Stock Market;
(viii) Company prepared list of stock option and warrants outstanding as of
December 31, 1999; (ix) Unaudited management prepared financial
statements for the fiscal year ending December 31, 1999;
(x) Unaudited management prepared financial statements for the month
ending January 31, 2000;
(xi) Unaudited management prepared financial statements for the month
ending February 29, 2000;
(xii) The stock price trading history of the Company's shares as traded on
the NASDAQ Stock Market and OTC Bulletin Board Market;
(xiii) Public new releases by the Company for the eighteen month period
ending March 31, 2000;
(xiv) Company supplied Note Purchase Agreement dated August 30, 1999 in
connection with the sale of non-negotiable unsecured convertible
promissory notes;
(xv) Certificate of Adjustment dated February 2000 in connection with the
Series B Preferred Stock and warrant to purchase shares of common
stock of the Company;
(xvi) Financing and Security Agreements between the Company and Republic
Acceptance Corporation dated November 27, 1996;
(xvii) First Amendment to Financing Agreement dated April 3, 1998;
(xviii) Third Amendment to Financing Agreement dated February 10, 2000;
(xix) Listing of U.S. and foreign trademarks registered by the Company as
of February 18, 2000;
B-2
<PAGE>
Delicious Brands, Inc.
April 4, 2000
Page 3
(xx) Certificate of Designation, Powers, Preferences and Rights of the
Series A Convertible Preferred Stock;
(xxi) Certificate of Designation, Powers, Preferences and Rights of the
Series C Convertible Preferred Stock;
(xxii) Certificate of Designation, Powers, Preferences and Rights of the
Series D Convertible Preferred Stock;
(xxiii) Stock Purchase Agreement dated December 10, 1999 in connection with
the sale of Series C Convertible Preferred Stock of the Company;
(xxiv) Draft Stock Purchase Agreement dated March, 2000 in connection with
the sale of Series D Convertible Preferred Stock of the Company;
(xxv) The Company's 1989 Stock Option Plan;
(xxvi) The Company's 1994 Formula Stock Option Plan;
(xxvii) The Company's 1995 Stock Option Plan;
(xxviii) Draft Asset Purchase Agreement between the Company and BFUSB, Inc.
dated March 21, 2000;
(xxix) Descriptive Memorandum dated August 25, 1999 prepared by Condor
Ventures, Inc.
In addition, Valuemetrics has reviewed available industry and market
research and publicly available financial and stock performance data of
companies that we deemed comparable to the Company.
In rendering our opinion, we have conducted on site due diligence
and held discussions with certain officers, employees and representatives
(including counsel) of the Company concerning the business and its operations,
assets, present condition and future prospects and undertook such other studies,
analyses and investigations as we have deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the
accuracy and completeness of the financial and other information supplied to or
otherwise used by us in arriving at our opinion and have not attempted
independently to verify such information. We have not assumed any responsibility
for the independent verification of any such information or projections provided
to us and we have further relied upon the assurance of the management of the
Company that they are unaware of any facts that would make the information or
projections provided to us incomplete or misleading. In arriving at our opinion,
we have not performed or obtained any independent appraisal of the assets or
liabilities of the Company, the purchased Assets or assumed Liabilities. We have
also assumed that the Transaction would be consummated on the terms set forth
therein, without waiver of any such terms.
We have assumed, with the consent of the Company that the
Transaction will comply with applicable federal and state laws, including,
without limitation laws relating to bankruptcy, insolvency, reorganization,
fraudulent conveyance, fraudulent transfer or other similar laws now or
hereafter in effect affecting creditors' rights generally.
B-3
<PAGE>
Delicious Brands, Inc.
April 4, 2000
Page 4
As part of our professional services, we are regularly engaged in
the valuation of businesses and securities in connection with mergers,
acquisitions, leveraged buyouts, sales of unlisted securities, and valuations
for estate, corporate and other purposes. We have also taken into account our
assessment of general economic, market and financial conditions and our
experience in similar transactions, as well as our experience in securities
valuation in general. Our opinion necessarily is based upon conditions as they
exist and can be evaluated on the date hereof. Subsequent developments may
affect this opinion, and we disclaim any obligation to update, revise or
reaffirm this opinion.
This letter and our opinion as expressed herein are for the benefit
and use of the Board of Directors of the Company in its consideration of the
Transaction. The Board of Directors of the Company may rely upon this opinion
with respect to the Transaction. This letter does not constitute a
recommendation of the Transaction over any other alternative transactions which
may be available to the Company and does not address the underlying business
decision of the Board of Directors of the Company to proceed with or effect the
Transaction. In addition, in rendering this opinion, we do not express any view
as to the prices at which the Company's securities may trade prior to or
following the Transaction. This letter does not constitute a recommendation by
our firm to any particular member of the Board of Directors or to any
stockholder as to how such member or stockholder should vote in connection with
the Transaction. We understand that this Opinion will be filed with the SEC and
distributed to the Company's stockholders as part of a Proxy Statement relating
to the Transaction. We hereby consent to the foregoing use of this letter.
Otherwise, this letter and the contents hereof may not be published,
disseminated, referred to, summarized, described or otherwise used, nor shall
any public reference to Valuemetrics, Inc. be made, without our prior written
consent (except in documents or communications filed with the SEC and NASDAQ,
including any proxy statements). As you are aware, we will receive a fee for our
services to the Board of Directors in connection with rendering this opinion,
and the Company has indemnified Valuemetrics for certain liabilities arising out
of this engagement including the rendering of this opinion.
Based upon and subject to the foregoing, it is our opinion that, as
of the date hereof, the Consideration to be paid under the terms of the
Agreement and in connection with the Transaction is fair, from a financial point
of view, to the Company.
Very truly yours,
/s/ VALUEMETRICS, INC.
VALUEMETRICS, INC.
B-4
