NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT, made and entered as of this 30th day
of August, 1999 (the "Agreement"), by and among DELICIOUS BRANDS, INC., a
Delaware corporation (the "Company"), and the purchasers set forth on Schedule A
attached hereto (each a "Purchaser" and, collectively, the "Purchasers").
WITNESSETH:
WHEREAS, the Company desires to issue and sell, and the
Purchasers desire to purchase, all upon the terms and subject to the conditions
set forth in this Agreement, unsecured convertible promissory notes
(individually, a "Note" and, collectively, the "Notes") in the aggregate
principal amount of $5,250,000, each bearing interest at the rate of 8% per
annum.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements of the parties herein contained, the parties
hereby agree as follows:
1. Purchase and Sale of Notes.
1.1 Sale and Issuance of Notes. Subject to the terms
and conditions of this Agreement, each Purchaser severally and not jointly
agrees to purchase at the Closing (as defined below), and the Company agrees to
sell and issue to each Purchaser at the Closing, a Note of this Company in the
form attached hereto as Exhibit A. Each Purchaser shall purchase a Note in the
principal amount set forth opposite the Purchaser's name on Schedule A attached
hereto.
1.2 Closing. The purchase and sale of the Notes shall
take place at 10:00 a.m. on August 30, 1999, at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Frome ▇▇▇▇▇▇▇▇▇▇ & Wolosky LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
or at such other time and place as shall be mutually agreed upon between the
Purchasers and the Company (the "Closing"). At the Closing, the Company shall
deliver to each Purchaser a Note against receipt of a certified check or a wire
transfer of the loan amount to an account that will have been designated by the
Company not less than one (1) business day prior to the date of the Closing.
2. Representations, Warranties and Covenants of the Company.
The Company represents warrants and covenants to the Purchasers as follows:
2.1 Corporate Organization. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as and in the
places where such properties are now owned, operated and leased or such business
is now being conducted.
2.2 Authorization. The Company has the necessary
corporate power and authority to enter into this Agreement and to assume and
perform its obligations hereunder. The execution and delivery of this Agreement
and the performance by the Company of its obligations hereunder have been duly
authorized by the Board of Directors of the Company. This Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company enforceable against it in accordance with its
terms, subject to (i) applicable bankruptcy, insolvency, reorganization and
moratorium laws, (ii) other laws of general application affecting the
enforcement of creditors' rights generally and general principles of equity,
(iii) the discretion of the court before which any proceeding therefor may be
brought, and (iv) as rights to indemnity may be limited by federal or state
securities laws or by public policy.
2.3 Approvals and Consents. No action, approval,
consent or authorization, including, but not limited to, any action, approval,
consent or authorization by any governmental or quasi-governmental agency,
commission, board, bureau, or instrumentality is necessary or required as to the
Company in order to constitute this Agreement as a valid, binding and
enforceable obligation of the Company in accordance with its terms, except for
the consent of each of Network 1 Financial Securities, Inc. ("Network 1") and
U.S. Bancorp Republic Commercial Finance, Inc., both of which the Company has
obtained.
2.4 Commissions; Use of Proceeds. Network 1 will earn
a 10% fee on the gross proceeds of this transaction, and another financial
consultant to the Company may receive a 5% fee from the gross proceeds of this
transaction. The net proceeds received by the Company from this transaction will
be allocated to repay indebtedness and for general corporate purposes including
acquisitions, trade payables and working capital. The proceeds allocated to
general corporate purposes may be utilized in the discretion of the Board of
Directors of the Company.
3. Representations and Warranties of the Purchasers. Each of
the Purchasers represents and warrants to the Company as to itself as follows:
3.1 Organization and Existence. To the extent
indicated on the signature pages hereto, such Purchaser is either (i) a limited
partnership duly organized and validly existing under the laws of its respective
state of formation, (ii) a limited liability company duly organized and validly
existing under the laws of its respective state of formation, (iii) a
corporation duly organized and validly existing under the laws of its respective
state of incorporation or (iv) an individual. Each Purchaser represents that it
was not organized for the purpose of making an investment in the Company.
3.2 Authorization. The execution, delivery and
performance of this Agreement, by such Purchaser and the consummation by such
Purchaser of the transactions contemplated hereby and thereby are within the
powers of such Purchaser and have been duly authorized by all necessary
individual, corporate, partnership or limited liability company action, as
appropriate, on the part of such Purchaser. This Agreement has been duly
executed and delivered by such Purchaser and constitutes a legal, valid and
binding obligation of the Purchaser enforceable
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against such Purchaser in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization and moratorium laws, (ii) other laws of
general application affecting the enforcement of creditors' rights generally and
general principles of equity, (iii) the discretion of the court before which any
proceeding therefor may be brought, and (iv) as rights to indemnity may be
limited by federal or state securities laws or by public policy.
3.3 Approvals and Consents. No action, approval,
consent or authorization, including, but not limited to, any action, approval,
consent or authorization by any governmental or quasi-governmental agency,
commission, board, bureau, or instrumentality is necessary or required as to
such Purchaser in order to constitute this Agreement as a valid, binding and
enforceable obligation of such Purchaser in accordance with its terms.
3.4 Investment. Such Purchaser is acquiring the Note
being purchased by it for its own account as principal, not as a nominee or
agent, for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof in whole or in part and no other
person or entity has a direct or indirect beneficial interest in such Note. Such
Purchaser does not have any contract, undertaking, agreement or arrangement with
any person or entity to sell, transfer or grant participations to such person or
entity or to any third person or entity with respect to any of such Note.
3.5 Exemption From Registration. Such Purchaser
acknowledges that the offering and sale of the Notes (the "Offering") is
intended to be exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), by virtue of Section 4(2) of the Securities Act
and the provisions of Regulation D promulgated thereunder ("Regulation D"). In
furtherance thereof, such Purchaser represents and warrants to the Company as
follows:
(i) Such Purchaser realizes that the basis for the
exemption may not be present if, notwithstanding any
representations and/or warranties to the contrary
herein contained, such Purchaser has in mind merely
acquiring the Note for a fixed or determinable period
in the future;
(ii) Such Purchaser has the financial ability to bear
the economic risk of his investment, has adequate
means for providing for its current needs and
contingencies and has no need for liquidity with
respect to its investment in the Company; and
(iii) Such Purchaser has such knowledge and
experience in financial, and business matters as to
be capable of evaluating the merits and risks of an
investment in the Notes.
3.6 Accredited Investor. Such Purchaser is an
"accredited investor," as that term is defined in Rule 501 of Regulation D.
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3.7 Available Information. Such Purchaser:
(i) Has been furnished with any and all documents
that may have been made available by the Company upon
request of the Purchaser for a reasonable time prior
to the date hereof including, but not limited to,
those documents set forth on Annex A hereto;
(ii) Has been provided an opportunity for a
reasonable time prior to the date hereof to obtain
additional information concerning the Offering, the
Company and all other information to the extent the
Company possesses such information or can acquire it
without unreasonable effort or expense;
(iii) Has been given the opportunity for a reasonable
time prior to the date hereof to ask questions of,
and receive answers from, the Company or its
representatives concerning the terms and conditions
of the Offering and other matters pertaining to an
investment in the Notes, or that which was otherwise
provided in order for them to evaluate the merits and
risks of a purchase of the Notes to the extent the
Company possesses such information or can acquire it
without unreasonable effort or expense;
(iv) Has not been furnished with any oral
representation or oral information in connection with
the Offering; and
(v) Has determined that the Note is a suitable
investment for such Purchaser and that at this time
such Purchaser could bear a complete loss of such
investment.
3.8 Purchaser Representative. Such Purchaser is not
relying on any statements or representations made by the Company or its
affiliates or any purchaser representative with respect to economic
considerations involved in an investment in the Notes.
3.9 Transfer Restrictions. Such Purchaser will not
sell or otherwise transfer a Note without registration under the Securities Act
or an exemption therefrom and such Purchaser fully understands and agrees that
such Purchaser must bear the economic risk of such Purchaser's purchase because,
among other reasons, the Notes have not been registered under the Securities Act
or under the securities laws of any state and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of unless they are subsequently
registered under the Securities Act and under the applicable securities laws of
such states, or unless exemptions from such registration requirements are
available. In particular, such Purchaser is aware that the Notes are "restricted
securities," as such term is defined in Rule 144 promulgated under the
Securities Act. Such Purchaser also understands that the Company is under no
obligation to register the Notes on such Purchaser's behalf or to assist such
Purchaser in complying with any exemption from the registration requirements of
the Securities Act or applicable state securities laws. Such Purchaser further
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understands that sales or transfers of the Notes are further restricted by state
securities laws and the provisions of this Agreement.
3.10 Entire Agreement. No representations or
warranties have been made to such Purchaser by the Company, or any officer,
director, employee, agent, affiliate or subsidiary of the Company other than
those contained herein, and in subscribing for a Note such Purchaser is not
relying upon any representations other than those contained herein.
3.11 Purchaser Information. Any information that such
Purchaser has heretofore furnished or is simultaneously herewith furnishing to
the Company with respect to such Purchaser's financial position and business
experience is correct and complete as of the date of this Agreement and, if
there should be any material change in such information, such Purchaser will
immediately furnish revised or corrected information to the Company.
3.12 Legends. The Purchaser understands and
acknowledges that the Notes and the Shares (as defined in the Notes and used
hereinafter) shall bear a legend substantially follows until (i) such securities
shall have been registered under the Securities Act and effectively been
disposed of in accordance with an effective registration statement thereunder;
or (ii) in the opinion of counsel for the Company such securities may be sold
without registration under the Securities Act as well as any applicable "Blue
Sky" or state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS
CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO
A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE
WRITTEN OPINION OF COUNSEL TO DELICIOUS BRANDS, INC. (THE
"CORPORATION"), OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE
CORPORATION, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH
ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY
APPLICABLE "BLUE SKY" OR OTHER STATE SECURITIES LAW."
Furthermore, pursuant to an agreement entered into between each Purchaser and
the Company (the "Lock-up Agreement"), the Notes and the Shares shall bear the
legend set forth below, for such period as the Lock-up Agreement is in effect:
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"THE SALE OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS PURSUANT TO AN AGREEMENT
AMONG THE SECURITYHOLDER, DELICIOUS BRANDS, INC.
AND NETWORK 1 FINANCIAL SECURITIES, INC., WHICH
AGREEMENT IS ON FILE WITH DELICIOUS BRANDS, INC.
AND CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, FROM WHICH A COPY IS AVAILABLE UPON
REQUEST AND WITHOUT CHARGE."
3.13 Purchaser Address. The address set forth on the
signature pages of this Agreement is such Purchaser's true and correct business,
residence or domicile address.
3.14 Non-Marketable Investments. Such Purchaser's
overall commitment to investments that are not readily marketable is not
disproportionate to such Purchaser's net worth, and an investment in the Notes
will not cause such overall commitment to become excessive.
3.15 Finders. Such Purchaser represents and warrants
that such Purchaser has not retained any finder, broker, agent, financial
advisor or other intermediary in connection with the transactions contemplated
by this Agreement and agrees to indemnify and hold harmless the Company, its
officers, directors, affiliates, subsidiaries, employees and agents from
liability for any compensation to any such intermediary retained by such
Purchaser and the fees and expenses of defending against such liability or
alleged liability.
3.16 Survival. The foregoing representations,
warranties and agreements shall survive the execution of this Agreement.
4. General Provisions.
(a) Entire Agreement; Amendment and Waiver. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter contained herein and supersedes all prior oral or
written agreements, if any, between the parties hereto with respect to such
subject matter and, except as otherwise expressly provided herein, is not
intended to confer upon any other person any rights or remedies hereunder. Any
amendments hereto or modifications hereof must be made in writing and executed
by each of the parties hereto. Any failure by the Company or the Purchasers to
enforce any rights hereunder shall not be deemed a waiver of such rights.
(b) Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given (i) upon personal delivery to the party to be
notified, (ii) four (4) days after deposit with the United States Post Office,
by registered or certified mail, postage prepaid, or (iii) one day after deposit
with a reputable overnight courier service and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties, with a copy (which shall not constitute
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notice) for the Company to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ & Wolosky LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(c) Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware without
giving effect to conflict of laws principles.
(d) Binding Effect; Assignment. This Agreement and
the various rights and obligations arising hereunder shall inure to the benefit
of and be binding upon the Company and the Purchasers and each of their
respective successors and assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be transferred or assigned (by
operation of law or otherwise) by any of the parties hereto without the prior
written consent of the other parties hereto. Any transfer or assignment of any
of the rights, interests or obligations hereunder in violation of the terms
hereof shall be void and of no force or effect.
(e) Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
(f) Headings. The headings or captions contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(g) Pronouns. Whenever the pronouns "it" or "its" are
used herein, they shall also be deemed to mean "he" or "his" or "she" or "hers"
whenever applicable. Words in the singular shall be read and construed as though
in the plural and words in the plural shall be read and construed as though in
the singular in all cases where they would so apply.
(h) Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by virtue of
any rule of law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the maximum extent possible.
(i) Information Confidential. Each Purchaser
acknowledges that the information received by it pursuant hereto may be
confidential and is for his use only. Such Purchaser agrees that it will not use
such information in violation of the Securities Exchange Act of 1934, as
amended, or reproduce, disclose or disseminate such information to any other
person , unless the Company has made such information available to the public
generally.
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(j) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
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[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
COMPANY:
DELICIOUS BRANDS, INC.
By:
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President & Chief Executive Officer
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PURCHASERS:
---------------------------------------------
Name:
Address:
---------------------------------------------
Name:
Address:
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SCHEDULE A
SCHEDULE OF PURCHASERS
Purchaser Principal Amount of Note
M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ $2,000,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $3,250,000
Total $5,250,000
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ANNEX A
1. Quarterly Report on Form 10-Q for the period ended September 30, 1998
2. Annual Report on Form 10-K for the year ended December 31, 1998, as
amended
3. Quarterly Report on Form 10-Q for the period ended March 31, 1999
4. Current Report on Form 8-K dated April 14, 1999
5. Quarterly Report on Form 10-Q for the period ended June 30, 1999
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EXHIBIT A
FORM OF NOTE
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