Exhibit 10.1
CONTRACT PACKAGING AGREEMENT
This CONTRACT PACKAGING AGREEMENT (the "Agreement") is entered into as of
September 19, 2006 (the "Effective Date"), between BRAVO! FOODS INTERNATIONAL
CORP., a Delaware corporation with its principal place of business at ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter
referred to as "Bravo"), and HP HOOD LLC, a Delaware limited liability company
with its principal place of business at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(hereinafter referred to as "Hood".)
WHEREAS, Bravo is engaged in the business of marketing and selling
various flavored milk products;
WHEREAS, Hood is a dairy processing company and has developed processing
capability to produce aseptic milk and dairy beverage products at its
processing facility in Winchester, Virginia;
WHEREAS, Bravo desires to engage Hood to manufacture aseptically-produced
flavored milk products for Bravo, and Hood is willing to undertake such
activity for Bravo on the terms stated herein; and
WHEREAS, as a further inducement to Hood to enter into this Agreement
Bravo is willing to ▇▇▇▇▇ ▇▇▇▇ warrants for the purchase of Bravo common stock
as set forth herein;
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
SECTION 1--Definitions
"Act"--means the Federal Food, Drug and Cosmetic Act of 1938, as amended
from time to time.
"QC Hold Period"--means the twelve (12) day period following production
for which Products are held in storage for quality control purposes.
"Forecast Accuracy"--shall be a percentage calculated for a particular
calendar period as follows: one hundred percent (100%) minus a percent equal to
the absolute value of ((the number of cases of Products actually ordered during
the period minus the number of cases of Products forecasted to be ordered for
the period) divided by the number of cases of Products actually ordered during
the period). As an illustration of the above, if 100 cases were forecasted to
be ordered during the period and only 80 were actually ordered during the
period the Forecast Accuracy is:
100% - (80 - 100)/80 = 75%
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"Four Week Finished Goods Forecast"--means a rolling four week forecast
of projected shipments of finished goods of Products, by Product Type, to Bravo
customers in a format reasonably acceptable to Hood, to be provided by Bravo to
Hood by 8:00am Eastern Standard Time ("EST") or Eastern Daylight Time ("EDT"),
as the case may be, on Friday morning of each week during the Term of this
Agreement covering the following four week production period.
"Late Order Percent"--shall be calculated for a particular calendar
period as follows: 100 times (orders placed for Products with lead times of
less than seven (7) days divided by total orders). As an illustration of the
above, if 10 orders during the period were placed with lead times of less than
seven days and 70 orders were placed in total, the Late Order Percent is:
100 X 10/70 = 14.3%
"Manufacturing Fee"--means the tolling fee in excess of all of Hood's
actual costs for milk, ingredients and packaging of Products pursuant to this
Agreement. The initial Manufacturing Fee is Eighteen and One Half Cents
($0.185) per fourteen ounce (14 oz.) container. The Manufacturing Fee shall be
adjusted annually in January of each year of the Term (as defined herein),
beginning in January after the first anniversary of the Effective Date, in
proportion to the change in the average of the twelve most recent monthly
indices that are final (i.e. not preliminary) as of the immediately preceding
December in the Producer Price Index for Total Manufacturing Industries, Series
ID PCUOMFG--OMFG--, Base Date 8412, published by the U.S. Department of Labor,
Bureau of Labor Statistics ("PPI Index"), using the change in the average value
of the PPI Index for the most recent twelve months when compared to the average
of the index values for the twelve months immediately preceding the most recent
twelve months. For example, in January of 2008, the Manufacturing Fee will be
adjusted based on the change in the value of the average for the PPI Index for
the twelve months of September 2006 through August 2007 compared with the value
in the average for the PPI Index for the twelve months of September 2005
through August 2006.
The Manufacturing Fee has been established based on the current mix of
Product Types and warehouse full pallet shipment profile. Any changes in the
mix of Product Types or full pallet shipment profile that results in an
increase in Hood's costs of production will be reimbursed to Hood in the annual
cost adjustment process.
"Order Fill Percent"--shall be calculated for a particular calendar
period as follows: 100 times (number of cases of Product delivered divided by
number of cases of Product ordered). As an illustration of the above, if 100
cases were ordered during the period and only 80 were actually delivered during
the period the Order Fill Percent is:
100 X 80/100 = 80%
"Plant"--means Hood's manufacturing and dairy processing facility
located in Winchester, Virginia. Hood may add additional manufacturing and
processing facilities owned by Hood or Hood affiliates or third parties to the
definition of Plant hereunder with Bravo's prior consent, which consent shall
not be unreasonably conditioned, delayed or withheld.
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"Products" or "Product"--means flavored milk or dairy beverage products
produced under aseptic conditions allowing for storage in non-refrigerated
facilities at temperatures up to eighty-five degrees (85(degree)) Fahrenheit.
Products shall be packaged in fourteen ounce (14 oz.) plastic containers and
sold under various trademarks owned or licensed by Bravo.
"Product Type"--means individual brands, flavors and package sizes of
Products, including without limitation Milky Way, Snickers, Three Musketeers,
Starburst (strawberry and orange), Slim Slammers (vanilla and chocolate) and
Pro Slammers (vanilla, chocolate and strawberry). The parties may mutually
agree to add additional Product Types to this Agreement.
"Shipment Schedule"--means the schedule for the shipment of Products to
customers of Bravo provided by Bravo to Hood at least seven (7) days in advance
of scheduled shipment.
"Specifications"--means the Product specifications attached hereto as
Exhibit A and incorporated herein by reference.
"Twelve Month Finished Goods Forecast"--means a rolling twelve month
forecast of projected shipments of finished goods of Products, by Product Type,
to Bravo customers in a format reasonably acceptable to Hood, to be provided by
Bravo to Hood by 8:00am EST or EDT, as the case may be, on the first Friday of
each month covering the following twelve month period.
SECTION 2--Term
This Agreement shall be deemed to have taken effect on the Effective Date
and shall continue in effect until the sixth (6th) anniversary of the Effective
Date subject to the right of Hood to cancel the Agreement early as set forth
herein. Thereafter, this Agreement shall renew automatically for an unlimited
number of successive one year terms unless one party has provided at least
three hundred sixty five (365) days advance written notice to the other party
of its intent to cancel the Agreement at the end of either the initial term or
any renewal term. The initial six year term and each one year renewal term
shall be collectively referred to herein as the "Term." Notwithstanding the
Term, Hood may cancel this Agreement at any time after commencement of
production of the Products by provision of written notice to Bravo at least
three hundred sixty five (365) days prior to the effective date of termination.
A cancellation under this paragraph may be without cause and shall be without
further obligation to either party hereto except as provided by the terms and
conditions of this Agreement.
SECTION 3--Hood Services
▇. ▇▇▇▇ Services. Hood shall:
o Purchase all ingredients, packaging and labels for Products;
o Manufacture and package the Products;
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o Label and code date the containers or cartons containing Products, as
appropriate, pack each case with the appropriate number of cartons or
containers, and label and code date the case; and
o Palletize and stretch wrap the cases of Products for shipment;
o Store the Products in a non-refrigerated warehouse for the QC Hold
Period;
o Store the Products in a non-refrigerated warehouse until shipment to
Bravo customers as set forth in Section 6; and
o Deliver or arrange for the delivery of pallets of Products to Bravo's
customers in accordance with the Shipment Schedule.
B. Operation of the Plant. Hood shall, at its own expense, provide, keep,
maintain and operate the Plant with the necessary machinery and equipment for
manufacturing, processing, labeling and packaging Products, as well as any
other equipment, materials and supplies which are necessary to supply
requirements for Products.
C. Non-Standard Labor. In the event that Bravo requests Hood to perform
non-standard services in connection with this Agreement, Hood shall be entitled
to charge Bravo, in addition to the other charges and fees hereunder,
non-standard labor charges of thirty dollars and thirty-eight cents ($30.38)
per person per hour for skilled labor and sixteen dollars ($16.00) per person
per hour for non-skilled labor. Non-standard labor shall include, without
limitation, labor costs of (1) hand packing Product, and (2) reprocessing
Product.
SECTION 4--Product Specifications, Ingredients and Packaging
A. Specifications. The Products shall conform in all material respects to
the Specifications and shall be packed only in accordance with the
Specifications. Any modification, deletion or addition of or to the
Specifications requires the consent of Hood. If any such modification(s),
deletion(s) or addition(s) result in additional costs to Hood, Hood shall be
entitled to a cost increase equal to such additional costs as a condition of
its consent to any such change.
B. Ingredients. Hood will purchase all ingredients for the Products, in
amounts sufficient to manufacture in accordance with the production schedules
established pursuant to Section 7. Hood will purchase flavoring and vitamins
for Products only from suppliers approved by Bravo. Upon termination of this
Agreement or a change in ingredients required by Bravo, Hood will surrender to
Bravo all unused ingredients purchased by Hood for the account of Bravo which
are not useable by Hood for the production of other products, and Bravo will
reimburse Hood at its cost for all such unused ingredients up to a maximum of
sixteen (16) weeks supply, except for unused ingredients that are damaged or
unusable due to any fault of Hood.
C. Packaging. Hood will purchase an inventory of packaging materials in
accordance with the Specifications. Prior to any changes to any existing
packaging materials, Bravo will approve the material, design, printing and
minimum production run of all packaging, and the net cost thereof. Bravo will
be responsible for providing all artwork for any packaging changes
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(subject to the reasonable approval of Hood with respect to regulatory
requirements) and will pay directly all plate and mold charges. Hood will
continue to purchase such packaging materials as needed for production unless
and until packaging changes are required by Bravo and newly designed packaging
can be obtained. Upon termination of this Agreement or a change in packaging
required by Bravo, Hood will surrender to Bravo all unused packaging purchased
by Hood for the account of Bravo, and Bravo will reimburse Hood at its cost for
all such unused packaging up to a maximum of sixteen (16) weeks supply, except
for unused packaging that is damaged or unusable due to any fault of Hood. Hood
will also maintain an inventory of corrugated cardboard cases for packaging the
finished Products for storage and shipping.
SECTION 5--Sampling and Testing; Rejection of Nonconforming Product
A. Sampling and Testing. Hood shall implement a program of random
environmental sampling of the Plant for control of Listeria monocytogenes. The
samples shall be taken on a quarterly basis. Samples shall be tested by a
qualified laboratory and test results shall be available for inspection by
Bravo technical personnel. Bravo shall reimburse Hood for the reasonable costs
of the tests required by this paragraph. Hood shall also provide such
quantities of packaged Product as Bravo may from time to time request for
Bravo's own testing.
B. Availability to Test. Bravo shall have the right to inspect the
Products prior to warehouse storage, to test samples thereof, and to reject
shipment or delivery of any Product not meeting the standards and
specifications set forth in the Specifications.
C. Records. Hood shall maintain true, accurate and complete records in
respect of the production, storage and shipment of Products hereunder for a
period as required by inspecting government agencies. Bravo may inspect the
records at mutually convenient times and locations.
D. Notice of Governmental Inspections. Hood shall maintain for inspection
by Bravo copies of reports of any federal, state or local inspections of the
Plant and any sanitation audits of the Plant. Hood shall notify Bravo promptly
by telephone of any inspections or audits which indicate the presence of
salmonella or any other bacteriological agent or substance which is considered
by health authorities as being indicative of either unsanitary practices or
public health concern.
▇. ▇▇▇▇▇ Inspections. Hood shall allow duly authorized representatives of
Bravo entry into the Plant at any time during regular business hours and upon
reasonable advance notice to inspect and test facilities, equipment and
materials used in manufacturing, processing, labeling, packaging and storing
Products. Hood shall cooperate fully with such representatives and shall render
any requested assistance or information.
F. Nonconforming Product. Bravo may at any time reject delivery of any
Product which has not been manufactured, processed, labeled, packaged or stored
in compliance with the terms and conditions of this Agreement and the
Specifications. Any Product rejected by Bravo that is not re-conditionable or
salvageable shall be disposed of by Hood at Hood's sole cost and
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expense in a manner which shall absolutely preclude its use for human
consumption. If Hood determines that any such Product is re-conditionable or
salvageable, Hood shall remove all Bravo trademark identity from it and dispose
of it as it does for its own products in a similar state. Bravo shall have no
obligation to pay Hood for nonconforming Product.
SECTION 6--Storage, Inventories, Orders, Shipment and Delivery
A. Storage; Risk of Loss. Hood shall provide suitable approved storage
for all Product ingredients, Product packaging and finished goods of Products.
Risk of loss of stored ingredients, packaging and finished goods shall be on
Hood. Title to the Products and risk of loss with respect to the Products shall
pass upon delivery of the Products to Bravo or its customers as set forth
herein. Any Products stored in Hood's warehouse for longer than forty (40) days
from date of production shall be subject to a weekly storage fee of Four
Dollars Fifty Cents ($4.50) per pallet of Product. If Hood determines in its
sole discretion that it is necessary to rent additional outside storage space
to store any Products, Bravo agrees to pay any additional charges for such
storage that Hood may incur.
B. Inventories. Hood shall promptly confirm to Bravo the inventory of
finished goods Products in Hood storage upon Bravo's request therefore. Bravo
will be responsible for product losses and/or rework due to short code dates
prior to Shipment Date if production is within the Four Week Finished Goods
Forecast and Hood has shipped Products in order of production, e.g., first
produced, first shipped. Hood will be responsible for product losses and/or
rework if Hood production of Products exceeds the Four Week Finished Goods
Forecast or if Products are not shipped by Hood in order of production. Hood
will use reasonable efforts to notify Bravo about Products that are in danger
of running into short code problems.
C. Orders. Bravo orders for shipment of Products to Bravo's customers
("Customer Orders") shall be delivered by Bravo to Hood electronically at least
once per day, at least seven (7) days in advance of the Shipment Date, as
defined below. Bravo will electronically provide Hood with a firm purchase
order ("PO") for the purchase of Products at least twenty-four (24) hours in
advance of the shipping date specified in the Customer Order (the "Bravo Order
Date"). Bravo will not allow changes to Customer Orders one day prior to the
Bravo Order Date. The PO shall designate the type and number of units of
Products and the Bravo or customer location to which the Products shall be
delivered.
D. Shipments. On the shipping date specified in the Customer Orders,
which (as provided in Section 6C above) shall be one day after the Bravo Order
Date (the "Shipment Date"), Hood shall deliver the Products that are the
subject of the PO for shipment to Bravo's customers. Shelf life for Products
delivered shall be one hundred five (105) days from date of delivery as long as
Bravo's Four Week Finished Goods Forecast has a Forecast Accuracy of at least
ninety five percent (95%). Any exceptions to the standard shelf life will be
separately negotiated and agreed by the parties. Hood shall arrange for
transportation of products from Hood's Plant dock to the designated Bravo or
customer location. All freight costs shall be the responsibility of Bravo.
Carriers may invoice Bravo or Bravo's designee directly for such shipments. If
Hood is invoiced for freight costs, Hood will invoice Bravo for such costs
either as
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part of the invoice for the Products or by separate invoice if the Products
have been invoiced before shipment. Hood will provide electronic confirmation
to Bravo of actual deliveries by PO made on a Shipment Date by at least 8:00 am
EST or EDT, as the case may be, on the date following a Shipment Date.
E. Delivery. Product shall be delivered by Hood F.O.B. the Plant
warehouse in accordance with the Firm Finished Goods Forecast. Risk of loss
shall transfer to Bravo on the delivery of Products as set forth herein.
SECTION 7--Product Minimums and Capacity; Scheduling; Capital
A. Product Minimums; Batch Size. For the months of November and December
2006, Bravo shall purchase the amounts set forth on Exhibit B attached hereto
and incorporated herein by this reference. Beginning on January 1, 2007, Bravo
shall purchase at least seventy million (70,000,000) individual units of
Products annually (the "Product Minimums") ratable monthly at plus or minus
five percent (5%), provided however that the monthly allocation of Product
Minimums for 2007 shall be as set forth on Exhibit B. In no event will Hood be
obligated to produce more Products than the Product Minimums as set forth
herein. Except as set forth below, in the event that the total aggregate
Manufacturing Fee for all Products Bravo pays or becomes obligated to pay to
Hood for the months of November and December 2006 and for each semiannual
period thereafter is less than the total aggregate Manufacturing Fee Bravo
would have paid Hood had it achieved the Product Minimums for such periods,
then Bravo shall, within thirty (30) days of the end of 2006 or of each such
semiannual period, as the case may be, pay Hood the difference between those
two amounts of money (the "Penalty Payment"). Notwithstanding the above, for
each calendar year beginning on January 1, 2008, Bravo may provide Hood at
least three (3) months advance written notice that Bravo will not be able to
purchase a portion of the Product Minimums up to a total of but not more than
fifty percent (50%) of its obligation for that year only (the "Shortfall
Amount"). In such case, the amount of Products Bravo is entitled to purchase
and that Hood is obligated to provide to Bravo for that calendar year shall be
reduced ratably by the Shortfall Amount, and Bravo's obligation to pay the
Penalty Payment to Hood for the Shortfall Amount only shall be reduced to fifty
percent (50%) of the amount that would otherwise have been owed. Any shortfall
on Product Minimums not within the Shortfall Amount shall be subject to the
full Penalty Payment. Each notice of a Shortfall Amount provided by Bravo to
Hood is good only for the calendar year subsequent to such notice, and the
Product Minimums shall revert to the number set forth herein after the
conclusion of such calendar year unless Bravo has provided Hood with a
subsequent notice of a Shortfall Amount for the next calendar year.
On or before October 30, 2006, Bravo agrees to provide and maintain for
the Term of this Agreement security instruments reasonably satisfactory to Hood
in the amount of One Million Dollars ($1,000,000) to secure Bravo's obligations
to purchase or pay for Products hereunder and/or make any Penalty Payment
required herein. In addition, in the event that Bravo fails to comply with the
payment terms set forth herein or, in Hood's reasonable judgment, there is a
significant deterioration in Bravo's financial condition, Hood may at any time
thereafter require Bravo to post additional security reasonably satisfactory to
Hood of up to Two Million Five
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Hundred Thousand Dollars ($2,500,000) such that the total dollar amount of
security provided in favor of Hood by Bravo hereunder may be as high as Three
Million Five Hundred Thousand Dollars ($3,500,000). Hood acknowledges and
agrees that either cash or a standby letter of credit issued by a bank
reasonably acceptable to Hood are acceptable forms of security for Bravo to
provide to meet this obligation.
The minimum batch size per Product Type shall be 10,000 gallons. For each
Product Type that falls below this threshold, the Manufacturing Fee shall be
increased by twenty percent (20%).
B. Scheduling. Bravo shall furnish to Hood the Twelve Month Finished
Goods Forecast by 8:00am EST or EDT, as the case may be, on the first Friday of
each month. Bravo shall furnish to Hood the Four Week Finished Goods Forecast
by 8:00am EST or EDT, as the case my be, on each Friday of each week. Each Four
Week Finished Goods Forecast shall specify the date(s) for delivery of
Products, which date shall also be the last day of the QC Hold Period for such
Products.
C. Quarterly Production Conferences. During the term of this Agreement,
Bravo and Hood shall confer four times per year regarding the operating rules
for the production of Products and mutually agree on those rules for the period
covered by each conference. The issues that will be addressed during such
conferences include the following matters:
1. Review Forecast Accuracy for the current period versus goals
2. Determine ways to improve Forecast Accuracy
3. Develop next period's Forecast Accuracy goals
4. Review Order Fill Percent for current period versus goals
5. Develop next period's Order Fill Percent goals
6. Review Late Order Percent versus goals
7. Develop next period's Late Order Percent goals
8. Review Product dumped and/or reworked due to short codes in warehouse
SECTION 8--Cost of Products to Bravo; Payment Terms; Audit by Bravo
A. Invoices. Hood shall invoice Bravo and Bravo shall pay Hood for each
Product Type the actual cost (revised monthly) of all milk, ingredients and
packaging used for the production of the Product, plus the Manufacturing Fee
applicable to that Product Type as defined herein. The costs of milk,
ingredients and packaging for each Product Type, including shrink percentage,
shall be separately specified in accordance with the pricing format for the
Bravo Milky Way Chocolate Dairy Beverage Product set forth in Exhibit C
attached hereto and incorporated herein by reference. Hood shall be entitled to
vary the format for presenting the information to Bravo as long as it includes
all of the information set forth on Exhibit C.
B. Payment Terms. Hood shall invoice Bravo for all Products produced by
Hood on the last date of the QC Hold Period. All such invoices shall be due and
payable within fifteen (15)
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days from the date of invoice. All payments shall be made by electronic funds
transfer. The failure of Bravo to make any payment when due hereunder shall
constitute a material breach of this Agreement. Amounts due on invoices not
paid within the above terms shall bear interest at a rate of one percent (1%)
per month until paid. In any event, all amounts owing to Hood shall be
immediately due and payable in the event of termination of this Agreement.
C. Audit. Bravo, through its duly authorized representatives, shall have
the right once a year during the Term to conduct a reasonable examination of
Hood's books and records concerning the costs charged to Bravo hereunder during
normal business hours and upon reasonable notice, and Hood shall render all
reasonably requested assistance in connection therewith.
SECTION 9--Warranties
A. Warranties of Hood. Hood represents and warrants to Bravo that the
Products when sold and delivered to Bravo shall (a) be manufactured under
sanitary conditions; (b) be fit for human consumption; (c) conform to the
Specifications; and (d) be in full compliance with the Act, and with all other
federal, state and local laws, rules, regulations and guidelines applicable to
the manufacture and sale of beverage products (including but not limited to
Good Manufacturing Practices prevailing in the industry and Federal Food and
Drug Administration, Department of Agriculture and Food Safety and Quality
Services guidelines and regulations) now in effect or which may hereinafter
come into effect. Hood specifically warrants and guarantees that no Product
will be adulterated or misbranded within the meaning of the Act, and that no
Product will be produced or delivered in violation of the Act. In the event a
material used in the Products as a food ingredient or additive is prohibited
for such use by federal, state or local regulatory action, or a supply thereof
is no longer available, such prohibition or unavailability will constitute
automatic cancellation with respect to such material in the formulation of the
Product, and Hood shall have the right, subject to the prior approval of Bravo,
to substitute other suitable material.
B. Warranties of Bravo. Bravo represents and warrants to Hood that the
label and package copy furnished and/or specified by Bravo for use upon the
packaging specified by Bravo, (a) shall comply with all applicable federal,
state and local laws and regulations, including the Act, (b) shall not infringe
or violate the trademark, trade-name, copyright, license rights or other
intellectual property rights of any person, and (c) shall be in accordance with
all requirements imposed by third parties in any license agreements or other
contractual arrangements between Bravo and such third parties. Bravo also
warrants and represents that it has full right and authority necessary to
authorize Hood to undertake the activities set forth herein, and that Bravo has
obtained any and all consents, approvals or other authorizations from third
party licensors necessary to authorize Hood to undertake the activities set
forth herein. Bravo further warrants and represents that the formulations for
the Products and the requirements of the Specifications do not infringe or
violate the rights of any other person, including without limitation, patent,
trade secret or other rights belonging to any other party, and that Bravo has
obtained the necessary permissions, approvals, consents or authorizations to
authorize Hood to undertake the activities set forth herein.
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SECTION 10--Indemnity
A. Indemnification by Hood. Hood agrees to defend, indemnify and hold
Bravo harmless from any and all claims, actions, causes of action, liabilities,
loss, cost, damage or expenses, including reasonable attorneys' fees
(collectively "Claims"), arising out of (i) any breach of Hood's warranties or
covenants herein contained; and (ii) any and all complaints, administrative
proceedings, legal actions or causes of action by any agency of federal, state
or local government or by any third parties regarding the manufacture,
processing, packaging, labeling, storage, shipment or handling of Products
prior to delivery to Bravo or Bravo's customers, unless such Claims are solely
or partially (in which case responsibility and liability shall be apportioned)
due to (x) the breach of Bravo's warranties or covenants contained herein or
(y) an act or omission of Bravo in connection with its activities in connection
with this Agreement. Hood shall be responsible for the proper formulation,
sanitation, processing procedures, packaging of Product and other factors under
its control. Hood shall not be responsible for normal product deterioration or
other damage to the Product once it has been delivered to Bravo or Bravo's
customer, nor shall Hood be responsible in any way for the success or failure
of the Products in the marketplace. Hood and Bravo agree to notify promptly the
other party of any assertion of any such claim or assertion of liability. Hood
shall maintain comprehensive general liability insurance having limits of not
less than Five Million Dollars ($5,000,000) per occurrence which contains both
Product Liability Broad Form Vendor's Coverage and Contractual Liability
Coverage for all obligations of Hood herein. Hood shall instruct its Workers
Compensation carrier to waive its right of subrogation with respect to any and
all claims arising out of this Agreement. Hood shall name Bravo as an
additional insured under all such policies and furnish Bravo with certificates
of insurance evidencing such coverage and waiver of subrogation on or before
the commencement date of this Agreement. Each certificate of insurance shall
provide that the insurer will endeavor to provide Bravo with thirty (30) days
advance notice of any cancellation or modification of the policy.
B. Indemnification by Bravo. Bravo agrees to defend, indemnify and hold
Hood harmless from any and all Claims arising out of or relating to (i) any
breach of Bravo's warranties or covenants herein contained; and (ii) Hood's
permitted use of the trademarks owned or licensed by Bravo under this Agreement
that infringes a trademark, trade name or license right of any third person.
Hood and Bravo agree to notify promptly the other party of any assertion of any
such claim or assertion of liability. Bravo shall maintain comprehensive
general liability insurance having limits of not less than Five Million Dollars
($5,000,000) per occurrence which contains both Product Liability Broad Form
Vendor's Coverage and Contractual Liability Coverage for all obligations of
Bravo herein. Bravo shall instruct its Workers Compensation carrier to waive
its right of subrogation with respect to any and all claims arising out of this
Agreement. Bravo shall name Hood as an additional insured under all such
policies and furnish Hood with certificates of insurance evidencing such
coverage and waiver of subrogation on or before the commencement date of this
Agreement. Each certificate of insurance shall provide that the insurer will
endeavor to provide Hood with thirty (30) days advance notice of any
cancellation or modification of the policy.
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SECTION 11--Force Majeure
Hood and Bravo shall each be relieved of its obligations under this
Agreement (except for the payment of money) if, when and to the extent that
either party is unable to perform or is limited in such performance because of
force majeure. As used herein, "force majeure" means any delay or
non-performance caused by acts of God, fires, floods, explosion, sabotage,
riot, terrorism, orders of, or failure to issue all necessary permits by, civil
or military authorities whether relating to discharge of materials into the
environment or otherwise, delays by suppliers of fuel, power, raw materials,
containers or transportation, breakage or failure of machinery, strikes,
lockouts or labor trouble, perils of the sea, or any other similar cause beyond
the reasonable control of the non-performing party. Such non-performing party
shall not be liable for breach of this Agreement with respect to such
non-performance, provided that the non-performing party gives prompt written
notice to the other party of the force majeure event and exercises all
reasonable efforts to resume performance of its affected obligations as soon as
reasonably practicable.
SECTION 12--Confidentiality
A. Protection of Confidential Information. Each party acknowledges that
in connection with the performance of the terms of the Agreement it will be
necessary for such party to provide or make available to the other party
certain confidential and proprietary information, including, without
limitation, product formulas (which term shall include, without limitation, (y)
the specific flavor ingredient formulas used to manufacture the Products and
(z) Bravo's contractual rights with third party licensors to duplicate a
particular flavor profile with such flavor ingredient formulas), services and
customers (any such confidential or proprietary information being hereinafter
referred to as "Confidential Information"). The party receiving any
Confidential Information from the other party shall not disclose, commercially
exploit or otherwise make use of such Confidential Information, except as
specifically authorized in writing by the other party or as required for the
performance of its obligations under the Agreement. Furthermore, the party
receiving Confidential Information shall use commercially reasonable means to
protect the confidentiality of that information and shall limit its disclosure
to its employees and agents who need to know the information to perform their
jobs and who agree to be bound by the limits on disclosure set forth herein.
Notwithstanding the foregoing, nothing contained in this Paragraph 13.A. shall
prevent the use or disclosure by either party of information which (i) is
generally available to the public at the time of the use or disclosure thereof
(other than through a breach on the part of such party of its obligations
hereunder), (ii) was already in the possession of the recipient at the time it
was provided by the other party or (iii) is required to be disclosed by
applicable legal process (provided, that the party receiving such process
complies fully with the provisions of Paragraph 12.B. below).
B. Legally Requested Disclosure. If either party is requested (whether by
oral questions, interrogatory, request for documents, subpoena, civil
investigative demand or other legal process) to disclose any part of the
Confidential Information provided by the other party, such party shall (i) give
prompt written notice to the other party of the existence of, and the
circumstances attendant to, such request, (ii) consult with the other party as
to the advisability of
Page 11
taking legally available steps to resist or narrow any such request or
otherwise to eliminate the need for such disclosure, and (iii) if disclosure is
required, cooperate with the other party in obtaining a protective order or
other reliable assurance in form and substance satisfactory to such party that
confidential treatment will be accorded to such portion of the Confidential
Information as is required to be disclosed.
SECTION 13--Early Termination
Either party shall have the right to terminate this Agreement, after
providing written notice to the other party and providing the other party with
at least thirty (30) days in which to cure the condition giving rise to the
right to terminate, in the event (a) of a material breach by the other party of
its warranties or covenants as set forth in this Agreement (including any
Exhibit or Schedule hereto), or (b) Hood ceases production of any Product for
any period of time not in the ordinary course of business and for reasons other
than an event of Force Majeure (as defined herein); provided, however, that if
any such condition can not be cured or remedied within such thirty (30) day
period, it shall be sufficient if the party in violation shall use its best
efforts to cure or remedy such violation promptly after receipt of the
aforesaid notice and shall complete such cure or remedy as soon as reasonably
practicable (provided, however, that in the case of Bravo's failure to pay for
Products when due, termination shall be effective ten (10) days after receipt
of such aforesaid notice unless the payment has been paid in full during such
period). Either party shall have the right to terminate this Agreement
immediately if the other party becomes insolvent or makes any assignment or
arrangement for the benefit of creditors or consents to the appointment of a
trustee or receiver, or a trustee or a receiver is appointed for such party or
for a substantial part of its property, or a bankruptcy, reorganization or
insolvency proceeding is instituted by or against such party and is not
discharged or withdrawn within thirty (30) days. A party seeking to invoke its
right of early termination hereunder shall give written notice as set forth in
Section 14 to the other party specifying the date upon which the termination
shall take effect.
SECTION 14--Grant of Warrants
As further consideration for the obligations of Hood as set forth herein,
Bravo hereby grants to Hood Common Stock Purchase Warrants ("Warrants") for the
purchase of up to Five Million Eight Hundred Seventy Thousand (5,870,000)
shares of the common stock of Bravo, $0.001 par value per share (the "Common
Stock") (the "Warrant Shares") on the terms and conditions set forth in the
Warrant Certificate attached hereto as Exhibit D and incorporated herein by
this reference.
SECTION 15--Notices
All notices hereunder shall be deemed to have been sufficiently given if
in writing and delivered by hand or by facsimile transmission (with written
confirmation as set forth below) or if sent registered or certified mail,
return receipt requested, by express courier or express mail, fees prepaid, or
by recognized overnight delivery service providing for a receipt, addressed as
indicated below:
Page 12
If to Bravo: Bravo! Foods International Corp.
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Hood: HP Hood LLC
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 16--Miscellany
A. Responsibilities upon Termination. In the event this Agreement is
terminated as provided herein, Hood shall, at Bravo's direction, either destroy
or deliver to Bravo inventories of the Product and packaging materials existing
on the effective date of such termination. Bravo shall pay Hood the
Manufacturing Fee and Hood's costs for inventories of the Product delivered
pursuant to this provision, and Hood's actual out-of-pocket costs, if any, for
unusable ingredients and packaging materials then held by Hood, which materials
were purchased within sixteen (16) weeks of the effective date of termination.
B. Assignment; Change of Control of Bravo. This Agreement and the
rights and obligations hereunder shall not be assigned or transferred, in whole
or in part, in any manner whatsoever by either party, including by the
operation of law, without the prior written consent of the other party;
provided however, this Agreement may be assigned (whether by operation or law
or otherwise) to any successor to all or substantially all of the business of
either party (whether by merger, consolidation, sale of assets or otherwise),
except that Bravo may not assign this Agreement without Hood's written consent
to a successor who either (a) is primarily in the dairy industry or (b) does
not have adequate financial strength as determined by Hood in its reasonable
judgment. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their successors and assigns.
If a party assigns this Agreement without the written consent of the other
party when required by this paragraph, the non-assigning party may, in its sole
discretion, elect to cancel this Agreement effective immediately by the
provision of prompt written notice to the assigning party. In addition, if the
ownership or control of Bravo is acquired by a party who either (a) is
primarily in the dairy industry or (b) does not have adequate financial
strength as determined by Hood in its reasonable judgment, Hood may elect to
cancel this Agreement effective immediately upon written notice to Bravo.
C. Relationship of the Parties. Neither Hood nor Bravo is the agent,
employee, joint venturer or partner of the other, and neither of the parties
hereto shall have the right, power or authority to bind the other to any
obligations whatever or to extend the credit of or to assume or agree to assume
any obligation or any liability in the name of the other party.
Page 13
D. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy but all
together will be deemed only one Agreement.
E. Governing Law. The laws of the Commonwealth of Massachusetts, without
giving effect to its choice of law principles, govern all matters arising under
or relating to this Agreement.
F. Arbitration. If at any time a controversy between Bravo and Hood
arises as to the meaning, enforcement or operation of this Agreement, it shall
be settled by arbitration administered by the American Arbitration Association
("AAA") under its Commercial Arbitration Rules ("CAR") in the City of Boston
before three arbitrators to be selected as set forth herein. Each party shall
select an arbitrator, who need not meet the requirements of neutrality
specified in the AAA rules and standards, and then the party-appointed
arbitrators, after consultation with the party which appointed them, shall
mutually agree on the appointment of a third arbitrator who shall be a neutral
arbitrator. If the party-appointed arbitrators are unable to agree on the
selection of the neutral arbitrator, then the American Arbitration Association
shall appoint the neutral arbitrator pursuant to its rules. Proceedings shall
be conducted in accordance with the rules of the American Arbitration
Association or any successor organization. The decision of the arbitrator shall
be binding on the parties and judgment on any award may be entered in any court
having jurisdiction thereof. The costs of the arbitration, including the
neutral arbitrator, shall be borne equally by the parties; however, unless
otherwise provided herein, each party shall be responsible for its own
arbitrator, attorney and expert fees. A party seeking interim relief may bring
such claim in the federal or state courts of the Commonwealth of Massachusetts.
G. Integration. This Agreement together with any exhibits attached
hereto, when fully executed, shall represent the entire understanding between
the parties hereto with respect to the subject matter hereof and supersedes all
previous representations, understandings or agreements, oral or written,
between the parties with respect to the subject matter hereof, other than the
License Agreements as provided herein.
H. Modification; Waiver. This Agreement may be modified or amended only
by a written instrument executed by both Bravo and Hood. A party entitled to
the benefits of any term or provision of this Agreement may waive its right to
such benefits only by a executing a written instrument. No failure by a party
to exercise any right, power or privilege available to it under this Agreement
shall operate as a waiver of such right, power or privilege, nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege granted
hereunder.
I. Severability. If any provision of this Agreement is determined to be
invalid or unenforceable, the remainder of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
Page 14
J. Captions; Construction. Section headings are used herein solely for
the convenience of the parties, and they shall have no substantive
significance. Each party hereto has reviewed and revised this Agreement and
therefore any usual rules of construction requiring that ambiguities are to be
resolved against a particular party shall not be applicable in the construction
and interpretation of this Agreement. Terms contained herein written in the
singular shall include the plural and those in the plural shall include the
singular where the context so requires.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate by their duly authorized officers as of the day and year first
above written.
BRAVO! FOODS INTERNATIONAL CORP. HP HOOD LLC
By: /s/ ▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------- -----------------------
Name: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇, Chairman
Its: President and CEO
Page 15
EXIHIBT A
SPECIFICATIONS
Page 16
EXHIBIT B
NOVEMBER AND DECEMBER 2006 AND 2007 PRODUCT MINIMUMS
Page 17
EXHIBIT C
PRICING FORMAT
Page 18
EXHIBIT D
WARRANT CERTIFICATE
Page 19
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
OTHER SECURITIES LAWS, STATE OR FEDERAL. THIS WARRANT AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO BRAVO! FOODS INTERNATIONAL CORP. (THE "COMPANY") IN
FORM, SCOPE AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
BRAVO! FOODS INTERNATIONAL CORP.
COMMON STOCK PURCHASE WARRANT
No. 2006 09-01 Issue Date: September 19, 2006
BRAVO! FOODS INTERNATIONAL CORP., a corporation organized under the laws
of the State of Delaware (the "Company"), hereby certifies that, for value
received (including, without limitation, the entry into a Contract Packaging
Agreement of even date herewith), HP HOOD LLC, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, or its assigns (the "Holder"), is entitled, subject to the terms set
forth below, to purchase from the Company at any time after the Issue Date
until 5:00 p.m., E.S.T on the sixth anniversary of the Issue Date (the
"Expiration Date"), subject to the limitations specified herein, up to
5,870,000 fully paid and nonassessed shares of the common stock of the Company,
par value $0.001 per share (the "Common Stock") at a per share purchase price
of $0.73. The $0.73 purchase price per share, as adjusted from time to time as
herein provided, is referred to herein as the "Purchase Price." The number of
shares of Common Stock issuable upon exercise of the Warrant and the Purchase
Price are subject to adjustment as provided herein. The Company may reduce the
Purchase Price without the consent of the Holder.
1. Definition.
As used herein the following terms, unless the context otherwise
expressly requires, have the following respective meanings:
(a) The term "Affiliate" of any Person (the "First Person") shall
mean any other Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control
with the First Person.
(b) The term "Common Stock" includes (a) the Company's Common
Stock, $.001 par value per share, and (b) any other securities into which
or for which any of the securities described in (a) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger,
sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other Person
(corporate or otherwise) which the Holder of this Warrant at any time
shall he entitled to receive, or shall have
received, on the exercise of this Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 hereof or otherwise.
(d) The term "Person" shall mean any natural person, corporation,
general partnership, limited partnership, limited liability company, sole
proprietorship, trust, union, association, enterprise, authority or other
form of business organization.
2. Exercise of Warrant.
2.1 Number of Shares Issuable upon Exercise. From and after the Issue
Date through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole, in accordance with
the terms of Section 2.2 hereof, or upon exercise of this Warrant in part, in
accordance with Section 2.3 hereof, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4 hereof.
2.2 Full Exercise. This Warrant may be exercised in full by the Holder
hereof by delivery of an original or facsimile copy of the form of warrant
exercise attached hereto as Exhibit A hereto (the "Exercise Form") duly
executed by such Holder and surrender of the original Warrant within three (3)
days of exercise, to the Company at its principal office or at the office of
its Warrant Agent (as provided hereinafter, if applicable), accompanied by
payment, in cash, wire transfer or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number
of shares of Common Stock for which this Warrant is then exercisable by the
Purchase Price then in effect.
2.3 Partial Exercise. This Warrant may be exercised in part (but not for
a fractional share) by surrender of this Warrant in the manner and at the place
provided in Section 2.2 hereof, except that the amount payable by the Holder on
such partial exercise shall be the amount obtained by multiplying (a) the
number of whole shares of Common Stock designated by the Holder in the Exercise
Form by (b) the Purchase Price then in effect. On any such partial exercise,
the Company, at its expense, will forthwith issue and deliver to or upon the
order of the Holder hereof a new Warrant of like tenor, in the name of the
Holder hereof or (upon payment by the Holder of any applicable transfer taxes)
as the Holder may request, for the whole number of shares of Common Stock for
which this Warrant may still be exercised.
2.4 Fair Market Value. Fair Market Value of a share of Common Stock as of
a particular date (the "Determination Date") shall mean:
(a) If the Company's Common Stock is traded on an exchange or is
quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ"), National Market System, the NASDAQ SmallCap Market
or the American Stock Exchange, LLC, then, the closing or last sale
price, respectively, reported for the last business day immediately
preceding the Determination Date;
(b) If the Company's Common Stock is not traded on an exchange or
on the NASDAQ National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, LLC, but is traded in the over-the-counter
market, then the average of the
-2-
closing bid and ask prices reported for the last business day immediately
preceding the Determination Date;
(c) Except as provided in Section 2.4(d), if the Company's Common
Stock is not publicly traded, then as determined by the independent
members of the Company's Board of Directors; provided that if the Holder
objects to the determination made by the independent members of the
Company's Board of Directors, the "Fair Market Value" shall be
determined, by arbitration in accordance with the rules then standing of
the American Arbitration Association, before a single arbitrator to be
chosen from a panel of persons qualified by education and training to
pass on the matter to be decided; or
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up of the Company, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the Company's charter,
then all amounts to be payable per share to holders of the Common Stock
pursuant to the Company's certificate of incorporation in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
Company's certificate of incorporation, assuming for the purposes of this
Section 2.4(d) that all of the shares of Common Stock then issuable upon
exercise of this Warrant are outstanding at the Determination Date.
2.5 Company Acknowledgment. The Company will, at the time of the exercise
of this Warrant, upon the request of the Holder hereof acknowledge in writing
its continuing obligation to afford to this Holder any rights to which the
Holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to
afford to the Holder any such rights.
2.6 Trustee Appointment. In the event that a bank or trust company shall
have been appointed as trustee for the Holder of this Warrant and any other
securities of the Company pursuant to Section 3.2 hereof, such bank or trust
company shall have all the powers and duties of a warrant agent (as hereinafter
described) and shall accept, in its own name for the account of the Company or
such successor person as may be entitled thereto, all amounts otherwise payable
to the Company or such successor, as the case may be, upon the exercise of this
Warrant.
2.7 Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock issuable and purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such shares as provided for
herein. As soon as practicable after the exercise of this Warrant in full or in
part, and in any event within three (3) business days thereafter, the Company
at its expense (including the payment by it of any applicable issue taxes) will
cause to be issued in the name of and delivered to the Holder hereof, or (upon
payment by the Holder of any applicable transfer taxes) as the Holder may
direct in compliance with applicable securities laws, a certificate or
certificates for the number of duly and validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) to which the Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which the Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then Fair Market Value of one full share of
-3-
Common Stock, together with any other stock or other securities and property
(including cash, where applicable) to which such Holder is entitled to upon the
exercise of this Warrant.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1 Reorganization, Consolidation, Merger, etc. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other Person or (c) transfer all or
substantially all of its properties or assets to any other Person under any
plan or arrangement contemplating the dissolution of the Company, then, in each
such case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof, at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which the Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto.
3.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense, deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of this Warrant after the effective date
of such dissolution pursuant to this Section 3 to a bank or trust company (a
"Trustee") having its principal office in New York, New York, as trustee for
the Holder of the Warrants.
3.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the Other Securities and property receivable on
the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the Person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such Person shall have expressly assumed the terms of this Warrant. In the
event this Warrant does not continue in full force and effect after the
consummation of the transaction described in this Section 3, then only in such
event will the Company's securities and property (including cash, where
applicable) receivable by the Holder of this Warrant be delivered to the
Trustee as contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the
number of shares of Common
-4-
Stock outstanding immediately after such event, and the product so obtained
shall thereafter be the Purchase Price then in effect. The Purchase Price, as
so adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4. The number of
shares of Common Stock that the Holder of this Warrant shall thereafter, on the
exercise hereof as provided in Section 1, be entitled to receive shall be
adjusted to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 4) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 4)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on
the exercise of the Warrants, the Company will promptly cause its Chief
Financial Officer or other appropriate designee to compute such adjustment or
readjustment in accordance with the terms of this Warrant and prepare a
certificate (which shall be promptly sent to the Holder) setting forth such
adjustment or readjustment and showing in reasonable detail the facts upon
which such adjustment or readjustment is based.
6. Reservation of Stock, etc. Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, such number of shares of Common Stock
from time to time issuable on the exercise of the Warrant.
7. Assignment; Exchange of Warrant. Subject to compliance with all
applicable securities laws and regulations, this Warrant, and the right
evidenced hereby, may be transferred by the Holder only to an Affiliate of the
Holder without the prior written consent of the Company. On the surrender for
exchange of this Warrant, with the Holder's endorsement in the form of Exhibit
B attached hereto (the "Transferor Form") and together with an opinion of
counsel from counsel reasonably satisfactory to the Company, which opinion
shall be in form, substance and scope reasonably acceptable to the Company, and
to the effect that the transfer of this Warrant will be in compliance with
applicable securities laws, the Company at its expense, twice, only, but with
payment by the transferor of any applicable transfer taxes, will issue and
deliver to or on the order of the transferor thereof a new Warrant or Warrants
of like tenor, in the name of the transferor and/or the transferee(s) specified
in such Transferor Form, calling in the aggregate on the face or faces thereof
for the number of shares of Common Stock called for on the face or faces of the
Warrant so surrendered by the Transferor. No such transfers shall result in a
public distribution of this Warrant.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense, twice only, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
-5-
9. Registration Rights. (a)Filing Upon the written request of Holder,
which request may not be made before the date that is six months after the
Issue Date, the Company shall promptly file a registration statement on Form
SB-2 or other applicable form (the "Registration Statement") to register the
shares of Common Stock underlying this Warrant (the "Registrable Securities")
under the Securities Act of 1933, as amended (the "Securities Act"). The
Company shall use its best efforts to cause such Registration Statement to
become effective and to remain effective for two years following the earliest
date on which the Holder no longer has any right to exercise any portion of
this Warrant.
(b) Notices. The Company shall, prior to filing a Registration
Statement or prospectus, or any amendment or supplement thereto, furnish
without charge to the Holder, and the Holder's legal counsel, draft
copies of such Registration Statement as proposed to be filed, each
amendment and supplement to such Registration Statement (in each case
including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such Registration Statement
(including each preliminary prospectus), for their review. The Holder's
legal counsel shall furnish any comments therein to the Company's legal
counsel within five (5) days after receipt of the draft Registration
Statement. After the filing of a Registration Statement, the Company
shall promptly notify the Holder of such filing, and shall further notify
Holder promptly upon the occurrence of any other of the following: (i)
when such Registration Statement becomes effective; (ii) when any
post-effective amendment to such Registration Statement becomes
effective; (iii) the issuance by the Securities and Exchange Commission
(the "Commission ") of any stop order; and (iv) any request by the
Commission for any amendment or supplement to such Registration Statement
or any prospectus relating thereto or for additional information or of
the occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus.
(c) Registration Expenses. The Company shall bear all costs and
expenses incurred in connection with the preparation and filing of the
Registration Statement, whether or not the Registration Statement becomes
effective, including, without limitation: (i) all registration and filing
fees; (ii) fees and expenses of compliance with securities or "blue sky"
laws (including fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities); (iii) printing
expenses; (iv) the Company's internal expenses; (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities;
(vi) National Association of Securities Dealers, Inc. fees; and (vii)
fees and disbursements of counsel for the Company and fees and expenses
for independent certified public accountants retained by the Company. The
Company shall have no obligation to pay any underwriting discounts or
selling commissions attributable to the Registrable Securities being sold
by the Holder, which underwriting discounts or selling commissions shall
be borne by the Holder.
(d) Indemnification by the Company. The Company agrees to indemnify
and hold harmless the Holder, and each of its officers, employees,
affiliates, directors, partners, members, attorneys and agents, and each
person, if any, who controls the Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) (each, an
"Investor Indemnified Party"), from and against any expenses, losses,
judgments, claims, damages or liabilities, whether joint or several,
arising out of or based upon any untrue statement (or allegedly untrue
statement) of a material fact contained in any Registration Statement
under which the sale of such Registrable Securities was registered under
the Securities
-6-
Act, any preliminary prospectus, final prospectus or summary prospectus
contained in the Registration Statement, or any amendment or supplement
to such Registration Statement, or arising out of or based upon any
omission (or alleged omission) to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with
any such registration; and the Company shall promptly reimburse the
Investor Indemnified Party for any legal and any other expenses
reasonably incurred by such Investor Indemnified Party in connection with
investigating and defending any such expense, loss, judgment, claim,
damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such expense, loss,
claim, damage or liability arises out of or is based upon any untrue
statement or allegedly untrue statement or omission or alleged omission
made in such Registration Statement, preliminary prospectus, final
prospectus, or summary prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information furnished to the
Company, in writing, by the Holder.
(e) Indemnification by the Holder. The Holder agrees to indemnify
and hold harmless the Company, each of its directors and officers and
each underwriter (if any), and each other person, if any, who controls
such selling holder or such underwriter within the meaning of the
Securities Act, against any losses, claims, judgments, damages or
liabilities, whether joint or several, insofar as such losses, claims,
judgments, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or allegedly untrue
statement of a material fact contained in any Registration Statement
under which the sale of such Registrable Securities was registered under
the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out of or
are based upon any omission or the alleged omission to state a material
fact required to be stated therein or necessary to make the statement
therein not misleading, if the statement or omission was made in reliance
upon and in conformity with information furnished in writing to the
Company by the Holder, and shall reimburse the Company, its directors and
officers, and each such controlling person for any legal or other
expenses reasonably incurred by any of them in connection with
investigation or defending any such loss, claim, damage, liability or
action.
(f) Indemnification Procedures. Promptly after receipt by any
person of any notice of any loss, claim, damage or liability or any
action in respect of which indemnity may be sought pursuant to Section 9
(d) or (e), such person (the "Indemnified Party") shall, if a claim in
respect thereof is to be made against any other person for
indemnification hereunder, notify such other person (the "Indemnifying
Party") in writing of the loss, claim, judgment, damage, liability or
action; provided, however, that the failure by the Indemnified Party to
notify the Indemnifying Party shall not relieve the Indemnifying Party
from any liability which the Indemnifying Party may have to such
Indemnified Party hereunder, except and to the extent the Indemnifying
Party is actually prejudiced by such failure. If the Indemnified Party is
seeking indemnification with respect to any claim or action brought
against the Indemnified Party, then the Indemnifying Party shall be
entitled to participate in such claim or action, and, to the extent that
it wishes, to assume control of the defense thereof with counsel
reasonably satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume
control of the defense of such claim or action, the Indemnifying Party
shall
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not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that in any action in which both the Indemnified Party and the
Indemnifying Party are named as defendants, the Indemnified Party shall
have the right to employ separate counsel (but no more than one such
separate counsel) to represent the Indemnified Party and its controlling
persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Indemnified Party against
the Indemnifying Party, with the fees and expenses of such counsel to be
paid by such Indemnifying Party if, based upon the written opinion of
counsel of such Indemnified Party, representation of both parties by the
same counsel would be inappropriate due to conflicts of interest between
them. No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, consent to entry of judgment or effect any
settlement of any claim or pending or threatened proceeding in respect of
which the Indemnified Party is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Party, unless such
judgment or settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such claim or
proceeding.
(g) Contribution. If the indemnification provided for in the
foregoing Sections (d) or (e) is unavailable to any Indemnified Party in
respect of any loss, claim, damage, liability or action referred to
herein, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, claim, damage, liability or
action in such proportion as is appropriate to reflect the relative fault
of the Indemnified Parties and the Indemnifying Parties in connection
with the actions or omissions which resulted in such loss, claim, damage,
liability or action, as well as any other relevant equitable
considerations. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
10. Call. At any time on or after the date which is 36 months from the
Issue Date (the "Threshold Date"), the Company shall have the option to "call"
the exercise of the Holder's purchase of up to 5,870,000 shares of Common Stock
issuable upon exercise of this Warrant (the "Warrant Call"), in accordance with
and governed by the following:
(a) The Company shall exercise the Warrant Call by giving to the
Holder a written notice of call (the "Call Notice") on or after the
Threshold Date. The effective date of each Call Notice (the "Call Date")
is the date on which notice is effective as provided for herein. The Call
Notice shall specify the number of shares of Common Stock to which the
Warrant Call is being exercised.
(b) A Call Notice may not be given sooner than five (5) trading
days after the prior Call Date.
(c) A Call Notice may be given by the Company only within ten (10)
days after the Common Stock has had a closing price as reported for the
principal securities market on which the Company's Common Stock at the
time is listed or authorized to be traded (the "Principal Market") of not
less than $1.46 for twenty (20) consecutive trading days ("Lookback
Period").
-8-
(d) As a condition precedent to the Company's exercise of the
Warrant Call, the Company shall not have received a notice from the
Principal Market during the ninety calendar days prior to the Call Date
that the Company or its Common Stock does not meet the requirements for
continued quotation, listing or trading on the Principal Market.
(e) As a condition precedent to the Company's exercise of the Warrant Call, the
Company and the Common Stock shall meet the requirements for
continued
quotation, listing or trading on the Principal Market for the Lookback Period
and through the Call Date.
(f) Upon exercise of the Warrant Call in accordance with this
Section 10, the Holder shall either (i) exercise this Warrant and
purchase the Shares of Common Stock called in the Call Notice and pay for
same within ninety (90) trading days after the Call Date, or (ii) forfeit
its right to exercise this Warrant with respect to the Shares of Common
Stock that are subject to the Call Notice.
11. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing
Common Stock (or Other Securities) on the exercise of this Warrant, exchanging
this Warrant as provided for herein, and replacing this Warrant as provided for
herein, or any of the foregoing, and thereafter any such issuance, exchange or
replacement, as the case may he, shall be made at such office by such Warrant
Agent.
12. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall he (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile,
addressed as set forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by facsimile in each case if delivered during regular
business hours), with, in the case of facsimile transaction, accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the business day following
the date of mailing by overnight express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be: (i) if to
the Company to: Bravo! Foods International Corp., ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇ ▇. ▇▇▇▇▇▇, President, facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇ and (ii) if to the Holder, to HP Hood LLC, ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: President, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇.
-9-
14. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, applicable to agreements
made and performed in the State of Delaware, without regard to any of its
conflicts of law principles which would result in the application of the laws
of another jurisdiction.
15. Miscellaneous. This Warrant and any term hereof may be amended,
modified, waived, or terminated except by an instrument in writing signed by
the holder of this Warrant and the Company. This Warrant and its terms and
provisions shall inure to the benefit of and be binding upon the Company and
its successors and assigns and the Holder and its successors and permitted
assigns. The section headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof or the
construction or interpretation of this Warrant. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
one of its duly authorized officers as of the date first written above.
BRAVO! FOODS INTERNATIONAL CORP.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: President and CEO
-10-
Exhibit A
FORM OF EXERCISE
(to be signed only on exercise of Warrant)
TO: BRAVO! FOODS INTERNATIONAL CORP.
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No. 2006 09-01), hereby irrevocably elects to purchase (check applicable box):
______________ shares of the Common Stock covered by such Warrant; or
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$______________.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to __________________________________________________
whose address is
________________________________________________________________________________
________________________________________________________________________________
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the Securities
Act of 1933, as amended (the "Securities Act"), or pursuant to an exemption
from registration under the Securities Act and other applicable securities
laws.
Dated:_____________________ _____________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_____________________________________
_____________________________________
(Address)
-11-
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of common stock of BRAVO! FOODS INTERNATIONAL CORP. to which the within
Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred" respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the
books of BRAVO! FOODS INTERNATIONAL CORP. with full power of substitution in
the premises.
---------------------- -------------------------------- ------------------------
Transferees Percentage Transferred Number Transferred
---------------------- -------------------------------- ------------------------
---------------------- -------------------------------- ------------------------
---------------------- -------------------------------- ------------------------
---------------------- -------------------------------- ------------------------
---------------------- -------------------------------- ------------------------
---------------------- -------------------------------- ------------------------
---------------------- -------------------------------- ------------------------
Dated:____________________________ ______________________________________
(Signature must conform to name of holder
as specified on the face of the warrant)
Signed in the presence of:
__________________________________ ______________________________________
(Name)
______________________________________
(address)
ACCEPTED AND AGREED: ______________________________________
[TRANSFEREE]
______________________________________
(address)
__________________________________
(Name)