LITTLE MEADOW CORP.
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
September 7, 1999
Delicious Brands, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Re: Terms of Transaction
Gentlemen:
The purpose of this letter is to outline the basic terms pursuant to
which Little Meadow Corp. ("Little Meadow") would amend certain of the terms of
the Securities Purchase Agreement (the "Agreement") dated April 12, 1999 by and
between Delicious Brands, Inc. (the "Company") and Little Meadow and the related
documents entered into in connection with the Agreement. The terms, which shall
be effective as of the date hereof, are as follows:
1. Little Meadow agrees to cause ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to resign from the board
of directors of the Company.
2. The number of directors that shall comprise the Board of Directors
shall be increased from seven (7) to nine (9), and the two (2)
vacancies created thereby and the vacancy created by the resignation of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ pursuant to paragraph 1 above, shall be filled by a
vote of the holders of voting stock of the Company, voting together as
a single class at the Company's next annual meeting of stockholders
which shall be held by no later than November 30, 1999. If the annual
meeting of stockholders is not held by such date, the Company will have
a special meeting of stockholders on such date, to elect the three (3)
directors who will fill the vacancies created pursuant to the terms of
paragraphs 1 and 2, and the Board of Directors shall recommend for
election two (2) director- nominees approved by the nominating
committee of the Board of Directors (see Paragraph 4 below) and who
shall have been approved by the director (who shall be a member of the
nominating committee) elected by the holders of the Series B
Convertible Preferred Stock, $.01 par value per share ("Series B
Preferred Stock").
3. The Certificate of Designations, Powers, Preferences and Rights
("Certificate of Designation") of the Series B Convertible Preferred
Stock will be amended so that the holders of a majority of the shares
of the Series B Preferred Stock will have the exclusive right, voting
separately as a class, (i) to elect one (1) rather than two (2)
directors (the "Series B Director"), and (ii) if the Series B Director
resigns or otherwise must be replaced, to elect the replacement for the
Series B Director. Notwithstanding the foregoing, the holders of Series
B Preferred Stock would only retain their right to elect one director,
voting separately as a class, so long as Little Meadow and its
affiliates maintained beneficial ownership (pursuant to rule 13D-3 of
the Securities Exchange Act)
Delicious Brands, Inc.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Page 2
of at least 11% of the Company's common stock, which percentage is the
same percentage of board representation that the Series B Preferred
Stock has the right to elect.
4. The Certificate of Designation and By-laws, as appropriate, shall be
and hereby are amended mutatis mutandis so as to (i) create a
nominating committee of the board of directors, consisting of three
directors, who shall select the eight persons (i.e. the eight of nine
positions on the board of directors other than that held by the Series
B Director whose selection shall be made in accordance with the
following clause (ii)) as nominees to stand for election as directors
of the Company, at least one member of which nominating committee must
be the Series B Director; (ii) provide that the nominee to be selected
to stand for election as the Series B Director shall be nominated by
the current Series B Director; and (iii) provide that under all
circumstances, at least two (the "Approved Directors") of the eight
persons nominated by the nominating committee to stand for election to
the board of directors, shall be approved by the Series B Director or
if there is no Series B Director by one of the other directors approved
by the Series B Director or by an Approved Director. Moreover, if
either or both of the two persons approved by the Series B Director or
an Approved Director, as the case may be, as provided in clause (iii)
above resigns or must otherwise be replaced on the board of directors,
the person or persons selected to replace such person or persons must
be approved by the Series B Director or by an Approved Director.
Approval to fill all vacancies created on the Board of Directors shall
be made by the nominating committee in a manner consistent with the
manner nominees are selected above.
5. Little Meadow agrees that at any time prior to November 30, 1999,
the Company may, at its election, upon not less than five business days
prior written notice to Little Meadow, require Little Meadow to
exercise all or such portion as is identified in such notice, of its
warrant ("Warrant") to purchase 700,000 shares of the Company's common
stock dated April 12, 1999 (the "Mandatory Exercise" and the number of
shares of the Company's common stock received by Little Meadow upon the
Mandatory Exercise being referred to herein as the "Exercise Shares").
The Certificate of Designation shall be and hereby is amended mutatis
mutandis to provide that in the event that the Company requires Little
Meadow to exercise its Warrant, then, for a period of ten years from
the date of such Mandatory Exercise, the holder(s) of the Series B
Preferred Stock, in addition to the equitable adjustment and other
anti-dilution protection currently contained in the Certificate of
Designation, shall receive equitable adjustment and other anti-dilution
protection with respect to the Exercise Shares in accordance with the
terms of the Certificate of Designation as if, as of the date hereof
and hereafter, the Exercise Shares are and continue to be additional
shares of the Company's common stock into which the Series B Preferred
Stock is convertible. The Company agrees to accept services Little
Meadow has already performed on behalf of the Company in lieu of
consideration required to exercise the Warrant.
Delicious Brands, Inc.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Page 3
6. All provisions of the documents entered into in connection with this
Agreement will be amended, in form which is reasonably acceptable to
Little Meadow, to reflect the above changes including, without
limitation, amending Section 4(d) of the Certificate of Designation to
provide that the Company may not, without the vote or consent of the
Series B Director or if there is no Series B Director, an Approved
Director, file a voluntary petition or consent to filing of a petition
under any federal or state bankruptcy laws. All such documentation,
including, without limitation, any amendment to the Certificate of
Designation or By-laws, shall be in form and substance reasonably
satisfactory to Little Meadow.
7. The Company agrees to pay up to $20,000 in fees and disbursements of
counsel, upon presentation by counsel of hourly billing records
documenting such expenses, to Little Meadow or its affiliates incurred
in connection with the negotiation, drafting and completion of this
Agreement and all related matters.
Please acknowledge your agreement with the terms set forth above by
executing the space provided for your signature below.
Very truly yours,
LITTLE MEADOW CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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ACKNOWLEDGED AND AGREED TO:
DELICIOUS BRANDS, INC.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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