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EXHIBIT 10.28
MANUFACTURING AGREEMENT
This MANUFACTURING AGREEMENT (the "Agreement") is made as of March ___,
1998 (the "Effective Date"), between The Delicious Frookie Company, Inc., a
Delaware corporation, with its principal place of business at 0000 Xxxxx Xxxx,
Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxx 00000 ("DFC"), and Xxxx'x Bakery LLC, a
Delaware limited liability company, with its principal place of business at 0000
Xxxx Xxxxx Xxxx, Xxxxx Xxxxxx, Xxxxxxxx 00000 ("Xxxx'x").
W I T N E S S E T H
WHEREAS, DFC, contemporaneous with the execution and Effective Date of
this Agreement, has purchased all of the outstanding capital interests in
Salerno Foods, L.L.C. ("Xxxxxxx");
WHEREAS, in connection with such purchase, DFC has become the successor in
interest to Xxxxxxx'x interests and obligations;
WHEREAS, Xxxxxxx and Xxxx'x entered into a Manufacturing Agreement
effective as of January 22, 1996 (the "Old Manufacturing Agreement");
WHEREAS, Xxxx'x and DFC are willing to terminate the Old Manufacturing
Agreement and to enter into this Agreement in place thereof; and
NOW, THEREFORE, in consideration of these recitals and the agreements
hereinafter set forth, and other valuable consideration, the parties hereto
agree as follows:
1. Termination of Old Manufacturing Agreement
DFC (as successor in interest to Xxxxxxx) and Xxxx'x hereby agree to
terminate the Old Manufacturing Agreement, effective upon the Effective Date,
and they further agree that following the Effective Date the Old Manufacturing
Agreement shall be void and shall be of no continued force or effect.
2. Definitions
2.1. "FDCA" means the Federal Food, Drug, and Cosmetic Act, as amended
from time to time, together with all regulations issued by the Food and Drug
Administration and any other governmental agency pursuant thereto.
2.2. "DFC Product" means any products of DFC which are manufactured by
Xxxx'x for DFC pursuant to the terms of this Agreement.
2.3. "FTCA" means the Federal Trade Commission Act, as amended from time
to time, together with all regulations issued by the Federal Trade Commission
and any other governmental agency pursuant thereto.
2.4. "Plant" means Xxxx'x production facilities, wherever located.
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2.5. "Product" means, collectively, the Xxxxxxx Product and the DFC
Product.
2.6. "Xxxxxxx Product" means all product(s) manufactured for or on behalf
of DFC and marketed by DFC under the Xxxxxxx'x or Mama's name brand, at all
times now or in the future, including, but not limited to, those products
described on Exhibit A attached hereto and incorporated herein.
2.7. "Specifications" means the specifications and quality control
requirements for the Product and for any ingredients and packaging materials
that DFC provides to Xxxx'x from time to time.
2.8. "Technical Information" means all customer and business information
and all formulas, quality control data, test data, and all other scientific and
technical data and information relating to the Products which are now owned or
controlled by DFC or which may hereafter be developed by either party in
connection with the Product.
2.9. "Unit Cost" means the per unit price charged by Xxxx'x to DFC for the
Xxxxxxx Products or the DFC Products, as the case may be, F.O.B. Xxxx'x Plant
and exclusive of freight charges, as set forth on Exhibit A.
3. Raw Materials and Packaging Materials
3.1. Approved Suppliers. Raw materials and packaging materials for the
Products shall only be purchased by Xxxx'x from suppliers that have been
approved by DFC, which approval shall not be unreasonably withheld. As of the
date hereof, the suppliers described on Exhibit B, attached hereto and
incorporated herein, have been approved by DFC. Notwithstanding the foregoing,
all raw materials and packaging materials purchased by Xxxx'x shall comply with
the applicable Specifications. DFC, in its reasonable determination, may
withdraw approval of any suppliers that cannot comply with the applicable
Specifications.
3.2. Inventory. Xxxx'x shall order and maintain an inventory of raw
materials and packaging materials sufficient to meet DFC's production needs, as
determined by the orders provided by DFC under Section 4. Xxxx'x shall not be
required to maintain such inventory in excess of a rolling ninety (90) day
supply.
3.3. Promotion Materials. DFC may, from time to time, provide promotional
materials or coupons to Xxxx'x for insertion into the Product packaging. Such
promotional materials or coupons shall meet Xxxx'x reasonable weight and size
requirements for Xxxx'x equipment as communicated by Xxxx'x to DFC. DFC shall
notify Xxxx'x of such insertions at the time the applicable order is made by
DFC, and the parties shall mutually agree upon the manner in which such
insertions will be made by Xxxx'x for such order. There shall be no charge to
DFC in connection with such insertions unless Xxxx'x incurs a cost increase
directly or indirectly resulting from such insertions, which increase Xxxx'x can
substantiate. Any such substantiated cost increase may be charged by Xxxx'x to
DFC if Xxxx'x has notified DFC of such cost increase prior to the performance of
any insertion work by Xxxx'x.
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4. Production, Production Forecasts, Shipping Orders, and Reports
4.1. Production. Xxxx'x shall manufacture and package Products at the
Plant, in quantities ordered by DFC, in accordance with the terms and conditions
set forth in this Agreement. Xxxx'x acknowledges it has reviewed and understands
fully the Specifications that DFC has provided Xxxx'x with respect to the
Product. DFC may hereafter publish and provide to Xxxx'x, with reasonable
advance notice, a quality assurance manual ("Quality Assurance Manual"), and
Xxxx'x will comply with all Specifications contained therein. Xxxx'x agrees that
DFC may supplement or otherwise modify such Specifications upon reasonable
notice to Xxxx'x.
4.2. Production Forecasts. Beginning on the Effective Date, and at each
one (1) month interval thereafter, DFC shall provide Xxxx'x with a first month
production/purchase order for the following month, together with forecasts of
DFC's anticipated needs for quantities of Product per month during the two (2)
month period following such first month. Such first month production/purchase
orders shall be firm and shall be filled by Xxxx'x in accordance with this
Agreement. Such forecasts provided by DFC are for the convenience of Xxxx'x
only, and shall not constitute purchase orders.
4.3. Forecast Updates. Approximately quarterly, DFC shall provide Xxxx'x
with production forecast updates for the remainder of the calendar year. Such
forecasts provided by DFC are for the convenience of Xxxx'x only, and shall not
constitute purchase orders.
4.4. Storage and Shipment. Xxxx'x shall provide suitable storage and
warehouse space for all Product for the time and to the extent required for
Xxxx'x to perform its obligations under this Agreement, which time shall not
exceed fourteen (14) days from the originally-scheduled shipping date set forth
in the applicable purchase order for Product. Product is to be stored in clean
space, suitable for storage of food and protection of its contents with respect
to integrity and quality, in compliance with good commercial practice and all
applicable laws, rules, and regulations, including, without limitation, FDCA
regulations. Such storage and warehousing of Product shall be solely at Xxxx'x
expense. Xxxx'x shall load Product onto such carriers as DFC designates. All
Product is delivered F.O.B. Xxxx'x dock and all risk of loss of the Products
shall remain with Xxxx'x until loaded onto such carriers designated by DFC,
unless DFC and Xxxx'x shall otherwise mutually agree. If DFC and Xxxx'x shall
mutually agree that certain Product shall be delivered other than F.O.B. Xxxx'x
dock, then Product shall be shipped F.O.B. DFC's dock, and all risk of loss of
Product shall remain with Xxxx'x until loaded onto DFC's dock; the carrier
selection, shipment, and payment procedures and xxxx of lading requirements
shall be subject to DFC's approval, which approval shall not be unreasonably
withheld and shall be in accordance with any reasonable instructions issued by
DFC. Product is to be shipped via clean trucks and trailers suitable for
transportation of food and protection of its contents, with respect to integrity
and quality, in compliance with good commercial practice and all applicable
laws, rules, and regulations, including, without limitation, Department of
Transportation regulations. Xxxx'x is responsible for shipping all Product in
accordance with this Agreement.
4.5. Shipping Instructions. Xxxx'x shall prepare the Product for shipment
to DFC in quantities and on dates designated by DFC. DFC shall send shipping
instructions via facsimile to Xxxx'x at least three (3) weeks before the
shipment date designated by DFC. Adjustments to
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shipping instructions made less than three (3) weeks prior to the requested
shipping date may be made upon mutual agreement of DFC and Xxxx'x.
4.6. Substitution of Products. Subject to Xxxx'x consent, which consent
may not be unreasonably withheld, DFC may request Xxxx'x to substitute another
product for any Product, in each case, such substitute product being a product
that Xxxx'x is reasonably capable of producing. Except for Product which is the
subject of a written purchase order submitted by DFC, at any time and from time
to time, DFC may cancel any order previously projected or estimated. Any
substitute products shall be deemed "Products" under and as defined in this
Agreement.
4.7. Production and Shipping Reports. Xxxx'x shall provide DFC with daily
production reports and daily shipment of finished goods reports, in such form as
DFC reasonably requests. Reports from Xxxx'x facilities shall be sent to DFC by
facsimile in the manner set forth in Section 20.1
4.8. Inventory Reports. Xxxx'x shall provide DFC with a daily report of
Xxxx'x inventories of finished Product and materials. The report shall be
delivered by facsimile in the manner set forth in Section 20.1.
5. Xxxx'x Right of First Refusal.
5.1. DFC agrees to first order and purchase from Xxxx'x all requirements
it may have, from time to time, for all Xxxxxxx Products which DFC chooses to
manufacture or market now or in the future, and to do so in accordance with the
provisions of this Agreement ("Xxxx'x Right of First Refusal"). Xxxx'x Right of
First Refusal shall be as further described in this Section 5.
5.2. DFC shall provide Xxxx'x with at least six (6) months' prior written
notice of the termination date of any existing manufacturing, supply, or similar
agreement by and between DFC and a party other than Xxxx'x, relating to Xxxxxxx
Products. DFC shall also provide Xxxx'x with six (6) months' advance written
notice of DFC's intent to produce a new Xxxxxxx Product, or to materially modify
the Specifications, requirements, or pricing of an existing Salerno Product.
Xxxx'x shall have the right of first refusal to produce pursuant to this
Agreement all Xxxxxxx Products being supplied by another manufacturer or
following the termination date under any existing manufacturing, supply, or
similar agreements, and all new or modified Xxxxxxx Product requirements.
5.3. In the event any supplier to DFC fails to deliver Xxxxxxx Products to
DFC, or materially breaches a supply or similar agreement with DFC relating to
Xxxxxxx Product, such that DFC intends to or contemplates seeking such Xxxxxxx
Products from another supplier, DFC shall provide Xxxx'x with written notice of
DFC's requirements relating to such Xxxxxxx Products, as far in advance as
reasonably practical. Xxxx'x shall have the right of first refusal to produce
such Xxxxxxx Products pursuant to this Agreement.
5.4. DFC's obligations pursuant to this Agreement to first order any
Xxxxxxx Product requirements from Xxxx'x are subject to the following
conditions:
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(a) Xxxx'x has demonstrated to DFC's satisfaction and
approval, which approval DFC shall not unreasonably withhold, that
Xxxx'x is capable of providing the manufacturing facilities,
available equipment, and storage capacity reasonably necessary for
such requirements;
(b) Xxxx'x has demonstrated to DFC's satisfaction and
approval, which approval DFC shall not unreasonably withhold, that
Xxxx'x is capable of delivering requirements for Xxxxxxx Product in
accordance with DFC's reasonable scheduling needs;
(c) any sample quality and test-run quality requirements of
DFC for the Xxxxxxx Product(s) comprising such requirements meet
DFC's published specifications, and the other conditions set forth
in this Agreement; and
(d) this Agreement has not been terminated pursuant to Section
17 herein, due to Xxxx'x material breach of any terms hereof.
5.4.1 In connection with all Xxxxxxx Products referenced in Section
5.2, if following diligent investigation, inquiry, and conference with
Xxxx'x, DFC in good faith does not believe Xxxx'x satisfies anyone or more
of the conditions listed in Section 5.4(a), (b), or (c), DFC shall give
Xxxx'x written notice of such determination no later than two (2) months
following the date the written notice referenced in Section 5.2 is
delivered to Xxxx'x. Such notice shall state in detail the conditions(s)
Xxxx'x does not satisfy and the reasons DFC believes Xxxx'x does not
satisfy the stated condition(s).
5.4.2 Xxxx'x shall have sixty (60) days following receipt of the
written notice referenced in Section 5.4.1 to cure any inability to
satisfy any condition(s) listed in a notice from DFC pursuant to Section
5.4.1. In the event such failure cannot be reasonably cured within sixty
(60) days, provided Supplier commences such cure within thirty (30) days
of receipt of a notice from DFC pursuant to Section 5.4.1, and thereafter
diligently pursues the cure to completion.
(a) In connection with all products referenced in Section 5.3,
if following diligent investigation, inquiry, and conference with
Xxxx'x, DFC in good faith believes Xxxx'x does not satisfy one or
more of the condition(s) listed in Section 5.4(a), (b), or (c), DFC
shall give Xxxx'x written notice of such determination within ten
(10) days following the date the written notice referenced in
Section 5.3 is delivered to Xxxx'x. Such notice shall state in
detail the condition(s) Xxxx'x does not satisfy, the reasons DFC
believes Xxxx'x does not satisfy the stated condition(s), and the
detailed state of facts that would have to exist for Xxxx'x to
satisfy the stated condition(s).
(b) Xxxx'x shall have twenty (20) days following receipt of
the written notice referenced to in Section 5.4.2(a), to cure any
inability to satisfy any conditions listed therein.
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(c) As soon as reasonably practical, but in no event more than
forty five (45) days following receipt of any notice referenced in
Section 5.2 and not longer than ten (10) days following receipt of
any notice referenced in Section 5.3, Xxxx'x shall notify DFC of the
unit price it will agree to deliver Xxxxxxx Products requested in
the notice from DFC.
5.5. Within thirty (30) days of DFC's receipt of such suggested pricing
regarding Xxxxxxx Products contained in a notice from DFC pursuant to Section
5.2, and within five (5) days of DFC's receipt of suggested pricing regarding
Xxxxxxx Products contained in a notice from DFC pursuant to Section 5.3, the
parties shall meet and agree upon a price. If the parties so agree, such Xxxxxxx
Products and pricing shall be added to Exhibit A and shall thereafter be
produced for DFC by Xxxx'x pursuant to this Agreement.
If the parties cannot so agree, DFC may seek bona fide independent
third party manufacturers or contract packers to provide to DFC written
commitments to supply such Products pursuant to substantially identical terms as
this Agreement, other than price. Upon receipt of such commitments, DFC shall
supply Xxxx'x with a written summary of all of the material terms and prices
contained in each commitment received, and the identity of the commitment DFC
intends to accept subject to Xxxx'x rights herein. The summary delivered to
Xxxx'x shall be certified as complete and accurate by the President or Chief
Financial Officer of DFC. Xxxx'x shall have ten (10) days from receipt of a
certified summary of such bona-fide written commitments from independent
suppliers to agree to produce Products therein referenced, at the price set
forth in the summary of the commitment DFC has designated it will accept.
In the event Xxxx'x agrees to produce Xxxxxxx Products for the same
or lesser price as that set forth in the certified summary of the commitment DFC
has designated it will accept, then such Xxxxxxx Products and pricing shall be
added to Exhibit A and such Xxxxxxx Products shall thereafter be produced for
DFC by Xxxx'x pursuant to this Agreement.
5.6. In the event Xxxx'x does not cure its inability to satisfy the
conditions contained in a notice received from DFC pursuant to Section 5.2 or
5.3 within the time periods set forth in Sections 5.4.2 and 5.4.2(b), or if
Xxxx'x does not agree to produce Xxxxxxx Products for the price included in a
written commitment designated for acceptance by DFC within the time periods set
forth in Sections 5.4.2(c), then DFC may (for a period of thirty (30) days after
the earlier to occur of (i) expiration of such time periods; or (ii) receipt of
Xxxx'x written notice it will not cure such conditions or meet the designated
commitment prices) enter into a manufacturing supply or similar agreement with
an independent third party on terms not more favorable to the independent
supplier than those in this Agreement and the notices given pursuant to this
Section 5, provided the term of any such supply or similar agreement shall not
exceed one year.
In the event DFC does not enter into a supply or similar agreement
with such independent supplier within such thirty (30) day period, and upon the
expiration of the term of any such agreement or other termination thereof, the
production of such Xxxxxxx Products shall again be subject to all the provisions
of this Agreement, including, but not limited to, Section 5 and Xxxx'x Right of
First Refusal.
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5.7. Release. DFC may request in writing that Xxxx'x release DFC from
Xxxx'x Right of First Refusal in connection with a given Xxxxxxx Product and a
given order if, in DFC's President's reasonable business judgment, Xxxx'x Right
of First Refusal is causing a material and adverse financial detriment to DFC.
Xxxx'x may xxxxx or deny such requests in its sole discretion. Any such request
which is granted by Xxxx'x must be evidenced by a written waiver from DFC of any
implication of additional concession, waiver, or modification of Xxxx'x Right of
First Refusal and such waiver shall only apply to the specific Products and
orders contained in the written request of DFC.
6. Aggregate Minimum Production of Products
6.1. The parties hereby agree that during each calendar year commencing on
January 1, 1999, the minimum aggregate production of Products shall be one
million, three hundred thousand (1,300,000) cases (the "Minimum Aggregate
Production").
6.2. Within sixty (60) days following the end of each calendar year,
Xxxx'x shall certify the aggregate number of cases of Products manufactured by
Xxxx'x for DFC. To the extent that such aggregate does not meet, or exceed, the
Minimum Aggregate Production, DFC shall pay to Xxxx'x an amount equal to the
Minimum Aggregate Production, less the number of cases so certified, times Zero
Dollars and Fifty Cents ($.50).
6.3. With respect to DFC Products manufactured hereunder, such DFC
Products shall be subject to the provisions of Sections 1, 2, 3, 4, 6, 7, 8, 9,
10, 11, 12, 13, 14, 15, 16, 17, 18, 20, and 21 of this Agreement.
7. Equipment and Capacity
7.1. Xxxx'x shall furnish and maintain, at its own cost and expense, all
equipment necessary to manufacture and package any Product in accordance with
the Specifications and in compliance with Federal, state, and local laws, rules,
and regulations.
7.2. If DFC shall supply any equipment to Xxxx'x, such equipment shall at
all times remain the property of DFC and shall be clearly designated as such.
Xxxx'x shall not cause or permit any liens or encumbrances upon such equipment.
Xxxx'x shall not use any such equipment for the production of products for any
company other than DFC, without DFC's prior written consent, which may be
withheld. Xxxx'x shall be responsible for maintenance of such equipment, and
shall return it to DFC promptly upon termination of this Agreement in as good
condition as received, ordinary wear and tear excepted. DFC IS NOT THE
MANUFACTURER OF ANY SUCH EQUIPMENT AND THEREFORE MAKES NO EXPRESS WARRANTIES AND
DFC DISCLAIMS ANY AND ALL IMPLIED WARRANTIES INCLUDING, BUT NOT LIMITED TO,
THOSE OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO
SUCH EQUIPMENT AND SHALL HAVE NO RESPONSIBILITY FOR ANY LOSSES, INJURIES, OR
DAMAGE THAT MAY OCCUR IN CONNECTION WITH, OR RELATED TO, SUCH EQUIPMENT.
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8. Compensation, Payment, Materials, and Title
8.1. As full and complete compensation for all services performed and
Product purchased and sold hereunder, Xxxx'x shall be entitled to receive
compensation on a per Product, per case, basis at the price indicated on the
Product list set forth on Exhibit A, as such may be amended from time to time.
Pricing shall be reviewed annually for all components (except for raw materials
and packaging, which shall be reviewed semi-annually) and may be adjusted only
upon the mutual agreement of Xxxx'x and DFC, to reflect a change in costs to
Xxxx'x and compliance with the procedures of this Section 8.
8.2. Except for raw materials and packaging as provided in Section 8.3
below, Xxxx'x will submit its annual request (if any) for an increase in pricing
to DFC at least sixty (60) days prior to the effective date of the requested
increase in pricing, and any requested increase shall be effective only upon the
mutual agreement of Xxxx'x and DFC.
8.3. With respect to pricing for raw materials and packaging, Xxxx'x will
submit its semi-annual request (if any) for an increase in pricing to DFC at
least sixty (60) days prior to the effective date of the requested increase in
pricing; any such requested increase shall be effective only if the aggregate
cost to Xxxx'x of raw and packaging materials has increased Xxxx'x total direct
cost by five percent (5%) or more.
8.4. Notwithstanding the provisions of Sections 8.2 and 8.3, if the
Specifications change and thereby directly cause Xxxx'x cost to produce a
Product to increase, Xxxx'x may, within thirty (30) days after the date of such
change, request a cost increase equal to such additional cost in accordance with
Section 8.2.
8.5. Xxxx'x agrees to use its best efforts to contain costs by obtaining
competitive prices on raw and packaging materials and by operating efficiently.
DFC shall be entitled to audit any underlying documents relating to ingredient
and packaging materials relied on by Xxxx'x to support any price adjustment
requested hereunder. Notwithstanding the foregoing, if Xxxx'x agrees to
participate in any research and development product trials requested by DFC,
Xxxx'x shall be entitled only to its substantiated direct costs for labor and
materials for Product manufactured during any such trials or as otherwise agreed
upon between the parties. Xxxx'x shall not be reimbursed for start-up production
costs for any Product or for Product trials or trial runs made by Xxxx'x, unless
DFC requests the same.
8.6. Invoices for Product shall be sent to DFC at the time of shipment. A
cash discount of one percent (1%) will be taken if the invoice is paid within
fifteen (15) days. Payment in full shall be due within thirty (30) days after
receipt by DFC of invoice and Product. A late charge of one and one half percent
(1 1/2%) shall be paid by DFC for every thirty (30) day period any invoice
remains unpaid after such thirty (30) days. All invoices shall have the DFC
purchase order number and xxxx of lading number written on them and be
accompanied by a signed copy of the outbound xxxx of lading setting forth the
relevant DFC purchase order number, consignee, production codes, and quantities
of each Product shipped. Invoices shall be sent to DFC's Vice President and
Chief Financial Officer, or as otherwise designated by DFC in writing.
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8.7. DFC and its agents shall have access to Xxxx'x plants once each
calendar quarter for the purpose of performing system and inventory audits
pertaining to DFC or this Agreement. Xxxx'x shall be notified in advance of the
names of all such visiting DFC personnel or agents and their intended dates of
arrival. DFC shall also be entitled to audit any underlying documents relied on
by Xxxx'x to support any price increase requested hereunder.
8.8. Title to all Product shall be and remain in DFC. Such Product shall
be segregated on Xxxx'x premises and either (i) clearly designated as the
property of "The Delicious DFC Company, Inc." or (ii) placed in DFC, Xxxxxxx, or
Mama's packaging clearly displaying a DFC, Xxxxxxx or Mama's brand name.
Immediately upon termination of this Agreement for any reason whatsoever, Xxxx'x
shall return to DFC all inventory of materials purchased by DFC and all Product.
9. Quality Control and Testing
9.1. Xxxx'x shall manufacture Product strictly in accordance with all
applicable laws, rules, and regulations, and any Specifications issued by DFC to
Xxxx'x. DFC reserves the right at any time to delete, alter, or add to the
Specifications. If any such change contains requirements beyond the scope of any
quality standards contemplated by this Agreement and a cost increase results
from such change, Xxxx'x may, within thirty (30) days after the date of such
notice, request a cost increase equal to such additional cost. Such increase
shall become effective on the effective date of the Specification change.
9.2. Xxxx'x shall store all raw materials, packaging materials, and
finished Product in a clean, dry area, free from insects and rodents, in a
manner to prevent entry of foreign materials. Storage and handling shall be
performed strictly in accordance with the provisions of all applicable laws, the
Specifications, and any written instructions issued by DFC to Xxxx'x. Raw
materials may not be used beyond such shelf life as may reasonably be designated
by DFC, and shall be used on a first-in, first-out basis. Xxxx'x shall conform
to any shelf-life requirements reasonably designated by DFC.
9.3. Xxxx'x shall have each shipment of raw materials and packaging
materials, whether supplied or purchased by DFC or purchased by Xxxx'x, analyzed
for such matters as DFC may reasonably require, before any said materials can be
used in making and packaging the Product. Such analysis may be conducted
in-house or by an outside laboratory approved by DFC. Outside lab tests are an
exception and expenses will be negotiated on an as-needed basis. All test
results are to be documented and available for inspection or statistical
summary, at DFC's request.
9.4. Xxxx'x shall not use any raw materials or packaging materials that do
not strictly comply with DFC's instructions or applicable laws, rules, or
regulations. If there is any question as to the acceptability of any raw
material or packaging material, Xxxx'x shall contact DFC's Vice President and
Chief Financial Officer, or his or their designate(s). If Xxxx'x uses any
nonconforming material without prior written approval by DFC, Xxxx'x shall be
responsible for all losses, costs, and expenses suffered or incurred by DFC as a
result of such use. The foregoing shall apply regardless of any involvement DFC
may have had in connection with such material, including, but not limited to,
supplying or purchasing material or designating approved suppliers.
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9.5. Xxxx'x shall perform all in-process and finished Product checks
necessary to assure Product quality and any other checks reasonably required by
DFC. These tests are to be considered routine and are to be performed at Xxxx'x
expense. All test results are to be documented and summarized as directed in the
Specifications or the Quality Assurance Manual.
9.6. No Product shall be released for shipment, unless it strictly
complies with the Specifications and all applicable laws, rules, and
regulations. Xxxx'x shall place any noncomplying Product on hold. Product that
does not strictly comply shall be put on hold and may be released only with the
prior written approval of DFC.
9.7. DFC may, at any time, in its absolute discretion, institute a
positive release program for Xxxx'x. If such positive release program is
instituted, no Product shall be shipped and all Product shall remain on hold at
Xxxx'x premises until released by DFC in writing.
9.8. Product put on hold pursuant to Sections 9.6 and 9.7 shall be
properly tagged and isolated and shall not be released without the prior written
approval of DFC. DFC shall not be required to pay for any Product rejected or
placed on hold, if the Product hold is attributable to Xxxx'x production method
or any material used by Xxxx'x. Xxxx'x shall reimburse DFC for expenses relating
to the hold actually incurred including, but not limited to, any raw materials
or packaging materials purchased by DFC.
9.9. All rejected Product will be disposed of in a manner consistent with
all applicable laws, rules, and regulations and as approved by DFC, which
approval shall not be unreasonably withheld. No Product or Product in process
can be sold as salvage without the prior written approval of DFC.
9.10. Production codes for Product must be in accordance with DFC's
instructions. Xxxx'x shall maintain detailed records on raw and packaging
materials usage, finished Product production by code date, and shipping of
Product, so that Product can be traced in case of a recall. Such records shall
also comply with the reasonable instructions issued by DFC. Xxxx'x shall be
capable of giving a complete response to DFC within two (2) hours of
notification during the operating hours of the Plant, including the code date
and location of each case of Product. Unless necessary to prevent serious injury
or death, Xxxx'x cannot initiate a recall or withdrawal of the Product. If a
recall or withdrawal must be initiated before notice to DFC in order to prevent
serious injury or death, notice must be provided as soon as is reasonably
feasible.
9.11. Xxxx'x shall reimburse and indemnify DFC for all losses, costs, and
expenses of any recall of Product or withdrawal from store shelves attributable
to Xxxx'x or any materials used by Xxxx'x. DFC shall reimburse and indemnify
Xxxx'x for all losses, costs, and expenses of any recall of Product or
withdrawal from store shelves attributable to DFC or any materials used by DFC.
9.12. Xxxx'x Plant and all Products so designated by DFC shall be
authorized as manufactured under the supervision of the Kashruth Division of
Orthodox Jewish Congregations of America and all Products shall be certified
thereunder as either kosher and pareve, bearing the O.U.D. symbol of
certification.
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10. Inspection Access
10.1. Xxxx'x plant shall meet all requirements established by Federal,
state, or local regulations or any requirements reasonably established by DFC,
including, but not limited to, Good Manufacturing Practices and Hazard Analysis
Critical Control Points programs. DFC and its agents shall have access to Xxxx'x
plant at any time and at all times Product is in process, for the purpose of
conducting inspections and performing quality control audits; Xxxx'x shall have
access to the results of any test performed by Xxxx'x or at Xxxx'x directions.
DFC's presence does not relieve Xxxx'x of any obligations it may have under this
Agreement.
10.2. If the Food and Drug Administration or any other Federal, state, or
local governing agency gives notice of or makes an inspection at Xxxx'x
premises, seizes any Product, or requests a recall, DFC shall be notified
immediately. Duplicates of any samples of Product taken by such agency shall be
sent to DFC promptly.
11. Quality Control Samples and Reports
11.1. At its own cost and expense, Xxxx'x shall collect and keep retention
samples in accordance with DFC's reasonable directions. In addition, routine
samples limited to the amount reasonably necessary for DFC's quality-control
purposes shall be sent to DFC at Xxxx'x cost and expense, including costs for
freight.
11.2. Xxxx'x shall not change any formula or ingredients with respect to
any Product without the prior written consent of DFC.
12. Time of the Essence
12.1. The parties acknowledge time is of the essence in this Agreement.
13. Warranties; Conformity
13.1. The Product furnished to DFC under this Agreement shall be of the
best quality and pure and free from adulteration, and Xxxx'x does hereby warrant
and guarantee to DFC that at the time of delivery the Product shall (i) comply
with all applicable Federal, state, and local laws and regulations, including,
without limitation, the FDCA and the FTCA, (ii) not be adulterated or misbranded
within the meaning of the FDCA, (iii) not be an article which, under the
provisions of Section 404 and 505 of the FDCA, may not be introduced into
interstate commerce, (iv) not be in violation of the provisions of the Food
Additives Amendment of 1958, (v) be in full compliance with California's Safe
Drinking Water and Toxic Enforcement Act of 1986, as amended from time to time,
and all regulations promulgated thereunder, and are products which do not
require any form of warning under such Act, and (vi) conform with any samples
approved by DFC and with the Specifications.
13.2. Neither payment by DFC nor quality assurance release by DFC shall be
considered acceptance of any Product, and DFC may reject any Product which does
not conform to the warranties of Xxxx'x hereunder.
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13.3. Xxxx'x warrants and represents that Xxxx'x will comply with all
applicable labor and employment laws, including, without limitation, all laws
and regulations under the Federal Occupational Safety Hazards Act (OSHA), as
amended. Xxxx'x agrees to furnish DFC the expiration date of any union contract.
Such information shall be provided no later than ninety (90) days after the
execution of this Agreement, and shall be updated promptly after the parties
agree upon any new expiration date. In addition, Xxxx'x shall notify DFC of any
potential strike or labor action, of which Xxxx'x is aware, in Xxxx'x facility
or that could affect the production or shipment of the Product.
13.4. The foregoing provisions are in addition to, and are not intended to
limit or replace, any of DFC's rights or Xxxx'x duties and obligations arising
out of any other provision of this Agreement or any other applicable law.
14. Trademark; Proprietary Information
14.1. During the course of its performance of this Agreement, Xxxx'x may,
employing artwork, mechanical, and packaging cylinders furnished by DFC, and in
compliance with all applicable laws, cause to be printed on the packaging
materials and shipping containers of the Product those trademarks and/or trade
names that DFC may designate in writing from time to time. Xxxx'x will not use
in any way, and will not remove, alter, or change in any way, any trademark,
trade name, logo, or other commercial symbol of DFC, without the prior written
permission of DFC.
14.2. Nothing set forth in this Agreement shall be construed to grant to
Xxxx'x any right to or interest in any trademark, trade name, copyright, patent,
or know-how owned or asserted to be owned by DFC or any of its affiliates.
Xxxx'x use of such trademarks, trade names, copyrights, patents, or know-how
shall constitute an infringement thereof and/or a violation of DFC's rights.
Xxxx'x will exercise due care to protect the trade name, trademarks, and general
goodwill of DFC and refrain from any activities detrimental thereto. All use of,
and all good will pertaining to, DFC's trade names, trademarks, and logos shall
accrue to DFC's sole benefit.
14.3. The parties acknowledge and agree the Specifications, the Quality
Assurance Manual, and Technical Information are confidential and are proprietary
to DFC, regardless of whether they were developed by DFC or by Xxxx'x. Xxxx'x
agrees that any Specifications and Technical Information it may develop shall be
a "work for hire" in favor of DFC and subject to DFC's obligations to reimburse
Xxxx'x for direct costs pursuant to Section 8.5, hereinabove. Xxxx'x hereby
assigns to DFC all of Xxxx'x interest in any such Specifications, the Quality
Assurance Manual, and Technical Information exclusively to its production of the
Product, and limit its production of the Product to DFC's orders. Following a
valid termination of this Agreement pursuant to its terms, Xxxx'x shall turn
over all copies of the Specifications, the Quality Assurance Manual, and
Technical Information to DFC and shall not make any use whatsoever of any
Specifications, the Quality Assurance Manual, or Technical Information without
DFC's prior consent. During the terms of this Agreement and indefinitely
thereafter, Xxxx'x shall maintain the Specifications, the Quality Assurance
Manual, and Technical Information in strict confidence, not disclose the
Specifications, the Quality Assurance Manual, or Technical Information to any
other person. Xxxx'x shall, to the extent reasonably practical, neither
acknowledge nor disclose directly
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13
or indirectly to any third party, without DFC's written consent, that it has
entered into this Agreement, unless such third party has entered into a written
confidentiality agreement with Xxxx'x prohibiting further disclosure and Xxxx'x
has notified DFC of such disclosure. To help preserve confidentiality, Xxxx'x
shall, to the extent reasonably practical, not permit any third party to view
the production of any Product.
14.4. Xxxx'x shall require every one of its employees who views or is
advised orally of any material part of the Specifications, the Quality Assurance
Manuals, and Technical Information to sign a Confidentiality Agreement
substantially similar to that attached as Exhibit C.
15. Insurance; Indemnification
15.1. Xxxx'x shall provide all proper safeguards and shall assume all
risks in its performance of this Agreement and shall indemnify and hold harmless
DFC from and against any and all loss, liability, damages, claims for damages,
suits, recoveries, judgments, or executions, including costs, expenses, and
reasonable attorneys' fees, that may be claimed, asserted, or recovered against
DFC by any person, firm, or corporation whatsoever or whomsoever arising out of
any obligation of Xxxx'x under this Agreement, out of possession, use of
consumption by any person of the Product supplied by Xxxx'x to DFC under this
Agreement, or out of any actual or alleged injury to person or property or death
occurring to any of Xxxx'x employees, agents, or any individual on Xxxx'x
premises. Xxxx'x shall indemnify and hold harmless DFC in the event of any
injury in connection with materials or equipment supplied by DFC, provided such
injury is a result of the use by Xxxx'x or its agents of the materials or
equipment.
15.2. Xxxx'x shall carry with companies satisfactory to DFC: (i) Workers'
Compensation and Employee's Liability Insurance; (ii) Standard Form Fire and
Extended Coverage Insurance inuring to DFC's benefit for the full replacement
value of any of the Product or any premiums or packaging materials in the care,
custody, or control of Xxxx'x; and (iii) Public Liability Insurance including
Contractual Liability and Products Liability Coverage (with Broad Form Vendor's
Endorsement naming DFC and its authorized distributors and customers as insured)
with a combined single limit of not less than Ten Million Dollars ($10,000,000).
Xxxx'x shall submit policies and/or certificates of insurance evidencing the
above coverage (which shall include an agreement by the insurer not to cancel or
materially alter its coverage except upon thirty (30) days' prior written notice
to DFC) to DFC upon DFC's written request therefor. Product Liability Insurance
shall continue in effect for DFC's benefit for a period of one (1) year from the
date of the last delivery of Product to DFC. In case of Xxxx'x failure to carry
said policies and/or furnish certificates of insurance or upon cancellation of
any required insurance, DFC may, at its option, immediately terminate this
Agreement unless (in the case of cancellation) Xxxx'x obtains substitute
insurance coverage before such insurance becomes canceled and provides DFC with
satisfactory evidence thereof.
16. Relationship of the Parties
16.1. Xxxx'x shall be deemed an independent contractor with respect to the
terms and provisions of this Agreement and it shall not in any respect act as an
agent or employee of DFC. All persons employed in connection with the
manufacture and/or supply of the Product shall be
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employees or agents of Xxxx'x and under no circumstances shall Xxxx'x or any of
its employees or agents be deemed the employees or agents of DFC.
17. Term; Termination
17.1. This Agreement shall remain in effect indefinitely unless
terminated in accordance with this Section below:
17.1.1 Xxxx'x may terminate this Agreement at any time upon giving
DFC ninety (90) days' notice.
17.1.2 Notwithstanding any other provision of this Agreement, either
party may terminate this Agreement immediately only if:
(a) the other party suspends or discontinues its business
operations; makes any assignment for the benefit of its creditors;
commences voluntary proceedings for liquidation in bankruptcy;
admits in writing its inability to pay its debts generally as they
become due or consents to the appointment of a receiver; trustee, or
liquidator of the other party or of all or any material part of its
property; or if there is an execution of a material portion of its
assets;
(b) the other party shall commence any case, proceeding, or
other action under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, or relief of debtors seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition, or
other relief with respect to its debts;
(c) there shall be commenced against the other party any case,
proceeding, or other action of a nature referred to in clause (b)
above which results in the entry of an order for relief or any such
adjudication or appointment or remains undismissed, undischarged,
unstayed, or unbonded for a period of ninety (90) days; or (ii)
there shall be commenced against the other party any case,
proceeding, or other action seeking issuance of a warrant of
attachment, execution, distraint, or similar process against all or
any substantial part of its assets, which results in the entry of an
order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within ninety (90)
days from the entry thereof; or (iii) the other party shall take any
action in furtherance of, or indicating its consent to, approval of,
or acquiescence in, any of the acts set forth in clause (i) or (ii)
above; or
(d) Xxxx'x assigns its rights to a party who is at the time of
transfer involved as an adverse party in material and adverse
litigation against DFC.
17.1.3 Either party may terminate this Agreement after notice to the
other party only if the other party materially fails to comply with any
covenant of such other party in
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15
this Agreement and such failure continues for more than thirty (30) days
after written notice thereof from such party.
17.1.4 DFC may terminate this Agreement three (3) years after any
transfer by Xxxx'x of this Agreement, or the rights established herein,
whether by asset sale, merger, or business combination with any entity, or
by a stock sale to any entity wherein after the transfer the existing
owners of Xxxx'x on the date of this Agreement own less than fifty percent
(50%) of the transferee.
17.2. Within ninety (90) days after the termination of this Agreement, for
any reason other than Xxxx'x breach, DFC shall transfer out and pay for any raw
materials covered under the purchase portion of this Agreement; which are not
then being used by Xxxx'x in a reasonable volume for another customer. DFC shall
transfer and pay out for such material in an amount up to but not to exceed a
ninety (90) day supply under this Agreement. At its option, DFC may place
additional orders with Xxxx'x to consume existing stocks of such items.
Upon termination of this Agreement for any reason whatsoever, Xxxx'x
shall deliver to DFC all Specifications, the Quality Assurance Manual, and
Technical Information, other confidential information, artwork, all premiums and
packaging materials purchased by DFC and all other materials, supplies, or
equipment provided by DFC. Xxxx'x shall also deliver to DFC all Product
manufactured hereunder, and shall invoice DFC in accordance with the terms
hereof. Any Product on hold at the time of termination shall be disposed of in
accordance with the instructions of DFC.
17.3. Upon termination of this Agreement, copies of all DFC-related
records shall be disposed of in accordance with DFC's instructions. All such
records will be kept by Xxxx'x for a minimum of three (3) years following
production, or such other time period as DFC may specify in writing.
18. Agency Fee and Warrant
18.1. In consideration for the services rendered in connection with the
termination of the Old Manufacture Agreement and the execution of this
Agreement, DFC hereby agrees to pay to American Pacific Financial Corp. an agent
fee in the aggregate amount of One Hundred Thousand Dollars ($100,000), payable
in full on the earlier of one hundred twenty (120) days following the date
hereof or ten (10) business days following the effective date of DFC's initial
public offering.
18.2. In consideration for the services rendered in connection with the
termination of the Old Manufacturing Agreement and the execution of this
Agreement, DFC hereby agrees to grant to Capital Foods L.L.C. on the Effective
Date a Warrant (the "Warrant") to purchase 100,000 shares of DFC's common stock
at an exercise price of $5.50 per share. The Warrant shall be granted on the
Effective Date, shall expire on the tenth (10th) anniversary of the Effective
Date, and shall be substantially in the form of Exhibit D attached hereto and by
this reference incorporated herein.
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19. Applicable Law
19.1. This Agreement shall be construed in accordance with the laws of the
State of Illinois, without regard to its rules on conflicts of law. The parties
agree to sole jurisdiction and venue in any Federal or state court in Xxxx
County, Illinois, and each party hereby consents to the jurisdiction of such
courts over itself in any action relating to this Agreement. The parties further
agree that the prevailing party shall be entitled to recover from the
non-prevailing party reasonable expenses, including without limitation attorneys
fees and costs.
20. Notice; Designation
20.1. Unless otherwise indicated herein, all notices, requests, demands, or
other communications to the respective parties hereto shall be deemed to have
been given or made (a) when deposited in the mails, registered or certified
mail, return receipt requested, postage prepaid; or (b) if sent by means of
overnight delivery service, when delivered to such service, addressed to the
respective party at the following address:
The Delicious Frookie Company, Inc.
0000 Xxxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
President and Chief Executive Officer
Telephone: 000-000-0000, Ext. 205
Facsimile: 000-000-0000
with a copy to:
Xxxxxx & Xxxxxxxx P.C.
000 Xxxxx Xxxxxxxx Xxx.
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxx XxXxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Xxxx'x Bakery LLC
0000 Xxxx Xxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
Attention: General Manager
Telephone: 000-000-0000
Facsimile: 000-000-0000
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17
with a copy to:
Xxxxxx Xxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
XxXxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
20.2. If a specific contact person is designated in a provision, notice
concerning the subject matter of such provision shall be directed to such
person. The address or the name of any party or contact person may be changed by
sending notice in the manner set forth above. Unless otherwise indicated, if no
contact person is designated for a specific function as set forth in this
Agreement, the contact person for such function shall be the President and Chief
Executive Officer for DFC and the General Manager for Xxxx'x.
21. Successors; Assignment
21.1. This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the parties.
22. Modification; Nonwaiver; Severability
22.1. Neither this Agreement nor any part hereof may be changed, altered,
or amended orally. Any modification must be by written instrument signed by the
party against whom enforcement of the change, alteration, or amendment is
sought.
22.2. Failure by either party to exercise promptly any right granted
herein or to require strict performance of any obligation imposed hereunder
shall not be deemed a waiver of such rights.
22.3. If any provision of the Agreement is held ineffective for any
reason, the other provisions shall remain effective.
IN WITNESS WHEREOF, the parties hereto have caused this Manufacturing
Agreement to be duly executed by their duly authorized officers as of the day
and year first above written.
XXXX'X BAKERY LLC THE DELICIOUS FROOKIE COMPANY, INC.
By: /s/ Xxxxxx X. Xxxx By: /s/ Xxxxxxx Xxxxx
--------------------------------- ------------------------------------
Manager President
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LIST OF EXHIBITS
EXHIBIT A PRODUCT PRICE LIST
EXHIBIT B APPROVED SUPPLIERS
EXHIBIT C FORM OF CONFIDENTIALITY AGREEMENT
EXHIBIT D FORM OF WARRANT
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NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE LAWS
OF ANY STATE, AND THUS MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER SUCH LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
Warrant to purchase
100,000
Warrant Shares (subject
to adjustment)
THE DELICIOUS FROOKIE COMPANY, INC.
a Delaware corporation
The Delicious Frookie Company, Inc., a Delaware Corporation (the
"Company"), for value received, hereby grants to Capital Foods LLC, a Nevada
limited liability company, or any "Person" (as hereinafter defined) to whom this
Warrant may be transferred (the "Holder"), the right, subject to the terms and
conditions set forth herein, to purchase from the Company, at any time and from
time to time, up to one hundred thousand (100,000) duly authorized, validly
issued, fully paid and non-assessable shares of the Common Stock, $______ par
value, of the Company (the "Common Stock"), at an initial purchase price on a
per share basis (the "Exercise Price"), subject to adjustment as provided in
Section 3 hereof, equal to Five Dollars and Fifty Cents ($5.50); provided,
however, that this Warrant must be exercised, if at all, in whole or in part, on
or before the tenth (10th) anniversary of the date of issuance of this Warrant.
The number and character of the securities purchasable upon exercise of such
rights of purchase, and the Exercise Price, are subject to adjustment as
provided herein. The term "Warrant" as used herein shall include this Warrant,
any Warrant issued in substitution for or replacement of this Warrant, or any
Warrant into which this Warrant may be divided or exchanged. The term "Warrant
Shares" shall mean the Common Stock issuable upon exercise of this Warrant. For
purposes hereof, the term "Person" shall include any natural person,
corporation, limited liability company, joint venture, partnership, trust or
other entity.
1. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE
(a) Subject to the other terms and conditions of this Warrant, the purchase
rights evidenced by this Warrant may be exercised in whole or, from time to
time, in part, at the times and subject to the conditions set forth above, by
the Holder's presentation of this Warrant to the Company at its principal
offices, accompanied by a duly executed Notice of Exercise, in the form attached
hereto as Exhibit A and by this reference incorporated herein, and by payment of
the aggregate Exercise Price in the manner specified in Section 1(b) hereof, for
the number of Warrant Shares specified in the Notice of Exercise.
20
(b) The aggregate Exercise Price for the number of Warrant Shares specified in
any Notice of Exercise may be paid at the Holder's election either: (i) in cash
by certified check or wire transfer of immediately available funds; or (ii) by
surrender of the Warrant as provided in this subsection (b) (a "Net Issuance").
If the Holder elects the Net Issuance method, the Company will issue Warrant
Shares in accordance with the following formula:
X = Y(A-B)/A
Where: X = the number of Warrant Shares to be issued to the Holder
Y = the number of Warrant Shares for which this Warrant is requested
to be exercised
A = the "Current Fair Market Value" of one share of Common Stock
B =the Exercise Price
As used herein, the "Current Fair Market Value" of one share of Common Stock,
shall mean:
(i) if the exercise of the Warrant is in connection with the first primary
offering of Common Stock by means of a registration statement filed by the
Company in accordance with the Securities Act of 1933, as amended (or any
successor Federal statute) which offering does not exclusively relate to
securities under an employee stock option, bonus or other compensation plan (the
"Initial Public Offering"), and if the Company registration statement relating
to the Initial Public Offering has been declared effective by the Securities and
Exchange Commission, then the initial "price to public" specified in the final
prospectus with respect to the Initial Public Offering; or
(ii) if the exercise of the Warrant is not in connection with, or is
after, the Initial Public Offering, then:
(1) If traded on a securities exchange or the Nasdaq National Market
System, the value shall be deemed to be the average of the closing prices
of the securities on such exchange over the 30-day period ending three
business days prior to the date of exercise;
(2) If actively traded over-the-counter, the value shall be deemed
to be the average of the closing bid or sale prices (whichever are
applicable) over the 30-day period ending three business days prior to the
date of exercise; and
(3) If there is no active public market, the value shall be the fair
market value thereof, as determined in good faith by the Company's Board
of Directors.
(c) In the event of any exercise of the rights represented by this
Warrant, certificates for the Warrant Shares so purchased shall be dated the
date of such exercise and delivered to the Holder hereof within a reasonable
time, not exceeding fifteen (15) days after such exercise. If this Warrant is
exercised in part only, as soon as is practicable after the presentation and
surrender of this Warrant to the Company for exercise, the Company shall execute
and deliver to the Holder a new Warrant, containing the same terms and
conditions as this Warrant, evidencing the right of the Holder to purchase the
number of Warrant Shares as to which this Warrant has not been exercised. Upon
receipt of this Warrant by the Company at its principal offices accompanied by
the items required for
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exercise specified in subsection (a) above, the Holder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such exercise and a
stockholder of the Company, notwithstanding that the stock transfer books of the
Company may then be closed or that certificates representing such Warrant Shares
may not then be actually delivered to the Holder.
2. EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT
(a) Any sale, transfer, assignment or hypothecation of this Warrant,
whether in whole or in part, must be in compliance with Section 5 hereof. Any
assignment, transfer or hypothecation of this Warrant, whether in whole or in
part, shall be made by the presentation and surrender of this Warrant to the
Company at its principal offices, accompanied by a duly executed Assignment
Form, in the form attached hereto as Exhibit B and by this reference
incorporated herein. Upon the presentation and surrender of these items to the
Company, in the event the Warrant is being transferred in its entirety, the
Company, at its sole expense, shall execute and deliver to the new Holder or
Holders a new Warrant or Warrants, containing the same terms and conditions as
this Warrant, in the name of the new Holder or Holders as named in the
Assignment Form, and this Warrant shall at that time be canceled, and, in the
event the Warrant is being transferred in part, the Company, at its sole
expense, shall execute and deliver to the new Holder or Holders a new Warrant or
Warrants, containing the same terms and conditions as this Warrant, in the name
of the new Holder or Holders as named in the Assignment Form, and to the Holder
of this Warrant, a new Warrant, containing the same terms and conditions as this
Warrant, evidencing the right of the Holder to purchase the number of Warrant
Shares as to which this Warrant was not transferred.
(b) This Warrant, alone or with any other Warrant owned by the same Holder
containing substantially the same terms and conditions, is exchangeable at the
option of the Holder but at the Company's sole expense, at any time prior to its
expiration either by its terms or by its exercise in full, upon presentation and
surrender to the Company at its principal offices, for another Warrant or other
Warrants, of different denominations but containing the same terms and
conditions as this Warrant, entitling the Holder to purchase the same aggregate
number of Warrant Shares that were purchasable pursuant to the Warrant or
Warrants presented and surrendered. At the time of presentation and surrender by
the Holder to the Company, the Holder shall also deliver to the Company a
written notice, signed by the Holder, specifying the denominations in which new
Warrants are to be issued to the Holder.
(c) The Company shall execute and deliver to the Holder a new Warrant
containing the same terms and conditions as this Warrant upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, provided that: (i) in the case of
loss, theft or destruction, the Company receives from the Holder a reasonably
satisfactory indemnification; and (ii) in the case of mutilation, the Company
receives from the Holder a reasonably satisfactory form of indemnity and the
Holder presents and surrenders this Warrant to the Company for cancellation. Any
new Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company regardless of whether the Warrant that was
lost, stolen, destroyed, or mutilated is enforceable by anyone at any time.
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(d) The Company will, at the time of or at any time after each exercise of
this Warrant, upon the request of the Holder hereof or of any Warrant Shares
issued upon such exercise, acknowledge in writing its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided, that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Company to afford such
rights to such Holder.
3. ADJUSTMENTS OF EXERCISE PRICE
(a) Except as provided herein, upon the occurrence of any of the events
specified in this Section 3, the Exercise Price in effect at the time of such
event and the number of Warrant Shares then purchasable pursuant to this Warrant
at that time shall be proportionately adjusted as provided herein.
(b) If the Company shall issue any Common Stock or securities exercisable
for or convertible into Common Stock other than Excluded Stock, for a
consideration per share less than the applicable Exercise Price in effect
immediately prior to the issuance of such Common Stock (excluding stock
dividends, subdivisions, split-ups, combinations, dividends or recapitalizations
which are covered by Section 3(c), (d), and (e)), the Exercise Price in effect
immediately after each such issuance shall forthwith (except as provided in this
Section 3) be reduced by the full amount by which the Exercise Price for each
such Warrant Share then in effect exceeds the issue price per share of such
additional issued Common Stock. For purposes of this Section 3 the term Excluded
Stock shall include all securities issued or issuable under the Company's
existing and future stock option plans and any warrants to purchase the
Company's securities outstanding on the date hereof.
(c) If the number of shares of Common Stock outstanding at any time after
the date hereof is increased by a stock dividend payable in shares of Common
Stock or by a subdivision or split-up of shares of Common Stock, then, on the
date such payment is made or such change is effective, the Exercise Price shall
be appropriately decreased so that the number of Warrant Shares issuable on
exercise of this Warrant shall be increased in proportion to such increase of
outstanding shares.
(d) If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination of the outstanding shares of
Common Stock, then, on the effective date of such combination, the Exercise
Price shall be appropriately increased so that the number of Warrant Shares
issuable on exercise of this Warrant shall be decreased in proportion to such
decrease in outstanding shares.
(e) In case of any capital reorganization, or any reclassification of the
stock of the Company (other than as a result of a stock dividend or subdivision,
split-up or combination of shares), the Warrant shall, after such capital
reorganization or reclassification, be exercisable into the kind and number of
shares of stock or other securities or property of the Company or otherwise to
which such Holder would have been entitled if immediately prior to such capital
reorganization or reclassification such Holder had exercised this Warrant. The
provisions of this clause (e) shall similarly apply to successive
reorganizations and reclassifications.
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(f) All calculations under this Section 3 shall be made to the nearest one
hundredth (1/100) cent or to the nearest one hundredth (1/100) of a share, as
the case may be. In no event shall the Exercise Price be reduced to less than
$.01.
(g) No adjustment in the Exercise Price need be made if such adjustment
would result in a change in the Exercise Price of less than $0.01. Any
adjustment of less than $0.01 which is not made shall be carried forward and
shall be made at the time of and together with any subsequent adjustment which,
on a cumulative basis, amounts to an adjustment of $0.01 or more in the Exercise
Price.
(h) The Company will not, by amendment of its Articles of Incorporation or
otherwise, through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder hereof against
impairment.
(i) Upon the occurrence of each adjustment or readjustment of the Exercise
Price pursuant to this Section 3, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to the Holder hereof a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon written request at
any time of any Holder hereof, furnish or cause to be furnished to such Holder a
like certificate setting forth (i) such adjustments and readjustments, (ii) the
Exercise Price at the time in effect, and (iii) the number of Warrant Shares and
the amount, if any, of other property which at the time would be received upon
the exercise of this Warrant.
(j) In the event of any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property or to receive
any right, the Company shall mail to the Holder hereof at least ten (10) days
prior to such record date, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend or distribution or right, and
the amount and character of such dividend, distribution or right.
(k) For purposes of this Section 3, equity securities owned or held at any
relevant time by or for the account of the Company in its treasury shall not be
deemed to be outstanding for purposes of the calculations and adjustments
described.
4. STOCK FULLY PAID; RESERVATION OF WARRANT STOCK
The Company covenants and agrees that all Warrant Shares that may be
issued upon the exercise of this Warrant will, upon issuance, be fully paid and
non-assessable and free from all taxes, liens and charges with respect to
issuance (excluding taxes based on the income of Holder).
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The Company further covenants and agrees that during the period within which
this Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of the issue upon exercise of the rights evidenced by
this Warrant a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.
5. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933
(a) This Warrant, the Warrant Shares, and all other equity securities
issued or issuable upon exercise of this Warrant, may not be offered, sold or
transferred, in whole or in part, in the absence of an effective registration
statement under the Securities Act of 1933, as amended (the "Act"), and all
applicable state securities statutes, or an opinion of counsel acceptable to the
Company to the effect that such registration is not required.
(b) The Company shall cause the following legend to be set forth on each
certificate representing this Warrant, the Warrant Shares, or any other equity
security issued or issuable upon exercise of this Warrant, not theretofore
distributed to the public or sold to underwriters, as defined in the Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR UNDER THE LAWS OF ANY STATE, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER SUCH LAWS OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS
NOT REQUIRED."
6. FRACTIONAL SHARES
No fractional shares of Warrant Stock or scrip representing fractional
shares of Warrant Stock shall be issued upon the exercise of all or any part of
this Warrant. With respect to any fraction of a unit or any security called for
upon any exercise of this Warrant, the Company shall pay to the Holder an amount
in money equal to that fraction multiplied by the "current fair market value" of
that share, reasonably determined in accordance with Section 1 hereof.
7. RIGHTS OF THE HOLDER
The Holder shall not be entitled to vote on any and all matters for which
a holder of Common Stock is entitled to vote. Except as specifically provided in
this Warrant, the Holder shall not be entitled to any other rights as a
stockholder of the Company by reason of this Warrant, either at law or equity.
8. NOTICES
Except as may be otherwise expressly provided herein, any notice, consent,
or other communication required or permitted to be given hereunder shall be in
writing and shall be deemed to have been given: (i) three days after the date
sent by United States certified mail, return receipt requested, with proper
postage thereon; (ii) one day after sent if sent by overnight courier of
national cognition; or (iii) when transmitted or delivered, if sent by facsimile
or personally delivered (as the case may be), and shall be addressed as follows:
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(a) if to the Company, at 0000 Xxxxx Xxxx, Xxxxx 000, Xxx Xxxxxxx, XX
00000, Attention: Chief Executive Officer; and
(b) if to the Holder, at _______________________________________________.
Attention: ______________________,
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
9. APPLICABLE LAW
Illinois law shall govern the interpretation, construction, and
enforcement of this Warrant and all transactions and agreements contemplated
hereby, notwithstanding any state's choice of law rules to the contrary. Any
litigation related to this Warrant may be maintained only in the Federal
district court for the Northern District of Illinois (or any successor
jurisdiction) or in an Illinois state court in Xxxx County, and each party
hereby irrevocably consents and submits to the jurisdiction of that Federal or
state court and irrevocably waives any objection the party may have based upon
improper venue, forum non conveniens, or other similar doctrines or rules.
10. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this Warrant
shall be binding on the Company and its successors and shall inure to the
benefit of the original Holder, its successors and assigns and all holders of
Warrant Shares.
(b) This Warrant may not be modified or terminated, nor may any
performance or condition hereof be waived in whole or in part except by an
agreement in writing signed by the party against whom enforcement of such
modification, termination, or waiver is sought.
(c) If any provision of this Warrant is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such provision shall be
severed, enforced to the extent possible, or modified in such a way as to make
it enforceable, and the invalidity, illegality or unenforceability thereof shall
not affect the remainder of this Warrant.
(d) Paragraph headings used in this Warrant are for convenience only and
shall not be taken or construed to define or limit any of the terms or of this
Warrant. Unless otherwise provided herein, or unless the context otherwise
requires, the use of the singular shall include the plural and the use of any
gender shall include all genders.
ISSUED and executed this _____ day of March, 1998.
THE DELICIOUS FROOKIE COMPANY, INC.
By: ____________________________________________
Its: ___________________________________________
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EXHIBIT A
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Warrant
Shares pursuant to the Warrant.)
The undersigned Holder of the Warrant hereby:
(i) irrevocably elects to exercise the Warrant to the extent of
purchasing ______________ Warrant Shares;
(ii) (a) |_| makes payment in full of the aggregate Exercise Price for
those Warrant Shares in the amount of $__________ by certified check
or wire transfer of immediately available funds; or (b) |_| elects
to exercise a Net Issuance for those Warrant Shares;
(iii) requests that a certificate for such Warrant Shares be issued in the
name of the undersigned or, if the name and address of some other
person is specified below, in the name of such other person:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(Name and address of person other than the undersigned in whose name
Warrant Shares are to be registered.)
(iv) requests, if the number of Warrant Shares transferred are not all
the Warrant Shares purchasable pursuant to the unexercised portion
of the Warrant, that a new Warrant of like tenor for the remaining
Warrant Shares purchasable pursuant to the Warrant be issued and
delivered to the undersigned at the address indicated below.
Dated: ________________ Holder:_______________________________
By:__________________________________
Its:__________________________________
Address:______________________________
______________________________________
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EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, _________________________, hereby sells,
assigns and transfers unto:
Name:__________________________________________________________________________
(Please type or print)
Address:_______________________________________________________________________
the right to purchase _____ Warrant Shares pursuant to terms and conditions of
the Warrant held by the undersigned. The undersigned hereby authorizes and
directs the Company (i) to issue and deliver to the above-named assignee at the
above address a new Warrant pursuant to which the rights to purchase being
assigned may be exercised, and (ii) if there are rights to purchase Warrant
Shares remaining pursuant to the undersigned's Warrant after the assignment
contemplated herein, to issue and deliver to the undersigned at the address
stated below a new Warrant covering such remaining rights. Except for the number
of Warrant Shares purchasable, the new Warrants to be issued and delivered by
the Company are to contain the same terms and conditions as the undersigned's
Warrant. To complete the assignment contemplated by this Agreement Form, the
undersigned hereby irrevocably constitutes and appoints the Company as the
undersigned's attorney-in-fact to transfer the Warrants and the rights
thereunder on the books of the Company, with full power of substitution for
these purposes.
Dated: ________________ Holder:_______________________________
By:__________________________________
Its:__________________________________
Address:______________________________
______________________________________
