REGISTRATION RIGHTS AGREEMENT
Dated as of May 1, 1997
Between
BAB HOLDINGS, INC. ("the Company")
AND
OWEN STERN, RUTH STERN, ILONA STERN AND PIERCE W. HANCE
(THE "HOLDERS")
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made as
of May 1, 1997 between BAB Holdings, Inc., an Illinois
corporation (the "Company"), and Owen Stern, Ruth Stern, Ilona
Stern, and Pierce W. Hance (individually, a "Holder" and,
collectively, the "Holders").
RECITALS
WHEREAS, pursuant to the terms of an Acquisition Agreement
dated as of May 1, 1997 (the "Acquisition Agreement"), by and
among the Owen Stern, Ruth Stern and Ilona Stern, My Favorite
Muffin, Too, Inc. ("MFM Too") and Muffin Holdings of Pennsylvania
("MH"), and the Company, the Holders have acquired an aggregate
of 432,608 shares of Common Stock, no par value per share (the
"Common Stock"), of the Company (the "Shares"); and
WHEREAS, the Company has agreed to register the Shares on
the terms and conditions set forth herein, and in any event, to
register the Shares not later than December 31, 1997;
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties herein set forth, it
is hereby agreed among the Company and the Holders as follows:
ARTICLE I
REGISTRATION RIGHTS
Section 1.1. Registration. Notwithstanding anything herein
deemed to be to the contrary, the Company, pursuant to Section
1.3 hereof, shall register the Shares held by the Holders not
later than December 31, 1997.
Section 1.2. Participation in Registration.
(a) If, at any time or from time to time after May 1, 1997
and prior to December 31, 1997, the Company shall determine to
register any of its securities, either for its own account or the
account of a security holder or holders exercising their
respective demand registration rights, other than (i) a
registration relating solely to employee benefit plans on Form S-
1 or S-8 or similar forms which may be promulgated in the future,
or (ii) a registration on Form S-4 or similar form which may be
promulgated in the future relating to an SEC Rule 145
transaction, the Company will:
(i) promptly give to the Holders written notice
thereof (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such
securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and
in any underwriting involved therein, all Registrable
Securities specified in a written request or requests, made
within 30 days after receipt of such written notice from the
Company, by the Holders.
(b) If the registration of which the Company gives notice
is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 1.1(a)(i). In such event, the
right of the Holders to registration pursuant to Section 1.1
shall be conditioned upon the Holders' agreeing to participate in
such underwriting and in the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided
herein. The Holders proposing to distribute their securities
through such underwriting shall (together with the Company and
the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such
underwriting by the Company or by other holders exercising their
demand registration rights. Notwithstanding any other provision
of this Section 1.1, if the underwriter determines that marketing
factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Registrable
Securities to be included in the registration and underwritten
public offering on a pro rata basis based on the respective
amounts of Registrable Securities owned by the Holders and
securities of the Company owned by each other holder seeking to
distribute his securities through the public offering; provided,
however, that the Company shall not exclude more than that number
of shares which, in the reasonable opinion of such underwriter,
must reasonably be excluded in light of such marketing factors.
The Company shall so advise the Holders and the other holders
distributing their securities through such underwriting, and the
number of Registrable Securities and other securities that may be
included in the registration shall be allocated among all holders
thereof (other than holders who are exercising demand
registration rights) in proportion, as nearly as practicable, to
the respective amounts of securities entitled to inclusion in
such registration held by such holders at the time of filing the
registration statement. If the Holders disapprove of the terms
of any such underwriting, they may elect to withdraw therefrom by
written notice to the Company and the underwriter, which notice,
to be effective, must be received by the Company at least two
business days before the anticipated effective date of the
registration statement. The Company may at any time withdraw or
abandon any registration statement which triggers the provisions
of this Section 1.1 without any liability to the Holders. Any
securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
Section 1.3. Demand Registration Rights. On and after the
Eligibility Date, and for a period of one (1) year thereafter,
the Holders, by written notice signed by the Holders (or by
permitted assignees who hold not less than 25% of the Registrable
Securities) may demand that the Company file a registration
statement on Form S-3 to permit resale of the Registrable
Securities of the Holders during the period of effectiveness of
such Form S-3 registration statement; provided that if the
Eligibility Date is later than December 1, 1997, the Holders'
demand and the Company's obligation shall not be limited to
Form S-3 but shall extend to any Form then available to the
Company for registration of the Registrable Securities. Any such
registration shall be subject to the following limitations:
(a) The Company shall not be required to maintain and keep
any such registration effective for a period exceeding ninety
(90) days from the effective date thereof;
(b) The Company shall not be required to effect more than
one (1) registration pursuant to this Section 1.3;
(c) The Company shall not be required to prepare or effect
any registration pursuant to this Section 1.3 unless the
Registrable Securities to be sold by the Holders represent not
less than 25% of the total Registrable Securities;
(d) If the Company shall furnish to the Holders a
certificate, signed by the Company's president or chief executive
officer, stating that (i) the Company is conducting or is about
to conduct an offering of its securities and is advised by its
managing underwriter that such offering might be affected
adversely by the registration on behalf of the Holders or (ii) in
the good faith judgment of the Board of Directors of the Company
the Holders' proposed offering would interfere with a pending or
contemplated financing, merger, sale of assets, recapitalization
or other similar corporate action of the Company if such
registration statement would be filed on or before the date
filing would be required and it is therefore essential to defer
the filing of such registration statement, the Company shall have
the right, exercisable only once during any period of twelve
consecutive months, to defer filing the registration statement
for a period of not more than 120 days; provided, however, that
the time period set forth in Section 1.3 with respect to the
exercise by the Holders of their registration rights shall be
extended by the number of days by which any registration is
deferred under the terms of this paragraph (d);
(e) The Company may include in such registration statement
securities of other selling security holders, without limitation,
and securities offered for its own account, if permitted by the
registration form used; and
(f) The Company hereby undertakes to use its best effort to
meet the criteria for use of Form S-3 at the earliest possible
date, to continue to qualify for such use for a period of one (1)
year following the Eligibility Date, and, in any case, to cause
the Registrable Securities to be registered under the Securities
Act not later than December 31, 1997.
(g) The Company shall not be required to prepare or effect
any registration pursuant to this Section 1.3 if the Company has
effected any registration in which the Holders were entitled to
participate under Section 1.2 hereof, and all rights of the
Holders to demand registration under Section 1.3 shall terminate
upon the SEC effective date of such Section 1.2 registration.
Section 1.4. Expense of Registration. All Registration
Expenses incurred in connection with any registration,
qualification or compliance pursuant to Article I shall be borne
by the Company. All Selling Expenses relating to securities
registered by the Holders or other holders shall be borne by the
holders of such securities pro rata on the basis of the number of
shares so registered and to be sold by each.
Section 1.5. Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company
pursuant to this Article I, the Company will keep the Holders
advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof.
At its expense, the Company will:
(a) Keep such registration, qualification or compliance
effective for a period of ninety (90) days or until the Holders
have completed the distribution described in the registration
statement relating thereto, whichever first occurs.
(b) Furnish such number of prospectuses and other documents
incident thereto as Holders from time to time may reasonably
request, but only during the period that the Company would be
required to keep the registration effective.
(c) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus
used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders, provided that the Company
shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement,
in usual and customary form, with the managing underwriter of
such offering. The Holders participating in such underwriting
shall also enter into and perform their obligations under such
agreement.
(f) Notify the Holders of Registrable Securities covered by
such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities
Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing.
Section 1.6. Indemnification.
(a) The Company will indemnify the Holders with respect to
which registration, qualification or compliance has been effected
pursuant to this Article I, and each underwriter, if any, and
each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on
any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus,
offering circular or other document, or any amendment or
supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading, or
any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company
and relating to action or inaction required of the Company in
connection with any such registration, qualification or
compliance, and will pay to such Holders, each such underwriter
and each person who controls any such underwriter, as incurred,
any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of
or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity
with written information furnished to the Company by an
instrument duly executed by such Holders or underwriter and
stated to be specifically for use therein.
(b) The Holders will, if Registrable Securities held by
such Holders are included in the securities as to which such
registration, qualification or compliance is being effected,
indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or
such underwriter within the meaning of Section 15 of the
Securities Act, and each other such holder, each of its officers,
directors or partners and each person controlling such holder
within the meaning of Section 15 of the Securities Act, against
all expenses, claims, losses, damages and liabilities (or actions
in respect thereof) including any of the foregoing incurred in
settlement of any litigation commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any amendment
or supplement thereto, incident to any such registration,
qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading, or
any violation by the Holders of any rule or regulation
promulgated under the Securities Act applicable solely to the
Holders (which is not otherwise applicable to or violated by the
Company) and relating to action or inaction required solely of
the Holders (and not relating to or required of the Company) in
connection with such registration, qualification or compliance,
and will pay to the Company, such holders, such directors,
officers, partners, persons, underwriters or control persons, as
incurred, any legal or any other expenses reasonably incurred in
connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering
circular or other document or any amendment or supplement thereto
in reliance upon and in conformity with written information
relating to such Holders which shall have been furnished to the
Company by an instrument duly executed by such Holders and stated
to be specifically for use therein; provided, however, that the
obligations of such Holders hereunder shall be limited to an
amount equal to the net proceeds to such Holders of Registrable
Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this
Section 1.6 (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not be unreasonably withheld), and
the Indemnified Party may participate in such defense at its own
expense, and provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this
Article I unless such failure resulted in actual detriment to the
Indemnifying Party. Notwithstanding the above, however, if
representation of one or more Indemnified Parties by the counsel
retained by the Indemnifying Party would be inappropriate due to
actual conflicting interests between such Indemnified Parties
(the "Conflicting Indemnified Parties") and any other party
represented by such counsel in such proceeding, then such
Conflicting Indemnified Parties shall have the right to retain
one separate counsel, chosen by the holders of a majority of the
Registrable Securities included in the registration, at the
expense of the Indemnifying Party. No Indemnifying Party, (i) in
the defense of any such claim or litigation, shall, except with
the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation, or (ii) shall
be liable for amounts paid in any settlement if such settlement
is effected without the consent of the Indemnifying Party.
Section 1.7. Information by Holders. The Holders of
Registrable Securities included in any registration shall furnish
to the Company such information regarding such Holders and the
distribution proposed by such Holders as the Company may
reasonably request in writing and as shall be reasonably required
in connection with any registration, qualification or compliance
referred to in this Article I.
Section 1.8. Rule 144 Reporting. With a view to making
available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the
Restricted Securities to the public without registration, the
Company agrees to:
(a) Use its best efforts to make and keep public
information available, as those terms are understood and defined
in Rule 144 under the Securities Act at all times after the date
hereof.
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the
Company under the Securities Act and the Securities Exchange Act
of 1934, as amended (at any time it is subject to such reporting
requirements).
(c) So long as the Holders own any Restricted Securities,
to furnish to the Holders forthwith upon request a written
statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after
the effective date of the first registration statement filed by
the Company for an offering of its securities to the general
public) and of the Securities Act and the Securities Exchange Act
of 1934 (at any time after it has become subject to such
reporting requirements) and a copy of the most recent annual or
quarterly report of the Company.
Section 1.9. Transfer of Registration Rights. Rights to
cause the Company to register securities granted under Article I
may not be assigned without the prior written consent of the
Company in each instance, except pursuant to will or the laws of
descent and distribution. No transferee, assignee or other
person purporting to exercise rights under this Article I who is
not a signatory to this Agreement shall be entitled to do so
unless and until such person agrees to be bound by the terms of
this Article I. The Company shall not unreasonably withhold its
consent to a request to transfer the registration rights granted
hereunder.
Section 1.10. "Market Stand Off" Agreement. The Holders
hereby agree that they shall not, to the extent required by the
Company and an underwriter of Common Stock (or other securities)
of the Company, sell or otherwise transfer or dispose (other than
to donees who agree to be similarly bound) of Shares during the
ninety (90) day period following the effective date of a
registration statement of the Company filed under the Securities
Act; provided, however, that such agreement shall not apply to
Registrable Securities being registered and sold pursuant to such
registration statement.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Shares of
the Holders until the end of such ninety (90) day period.
Section 1.11. Plan of Distribution. To preserve an orderly
market in any publicly owned securities of the Company, in the
event that the aggregate number of Registrable Securities to be
registered pursuant to a registration statement under Section 1.3
exceeds 5% of the Company's outstanding securities, the Holders
will provide advance notice to the Company of their intended
marketing and distribution arrangements in connection with such
registration, including information with respect to any
investment banking firm or broker-dealer retained by the Holders
to manage the distribution.
Section 1.12. Limitation on Resale. The undersigned
Holders, with the exception of Pierce W. Hance, hereby
acknowledge and affirm their agreement, as set forth in the
Acquisition Agreement, to refrain from any sale or disposition of
any of the Shares prior to January 1, 1999; however, this
limitation shall not apply to Pierce W. Hance.
ARTICLE II
MISCELLANEOUS
Section 2.1. Governing Law. This Agreement shall be
governed in all respects by the laws of the State of Illinois.
Section 2.2. Successors and Assigns. Except as otherwise
provided herein, the provisions hereof shall inure to the benefit
of, and be binding upon, the successors and permitted assigns of
the parties hereto. Except as otherwise provided herein, no
assignment of this Agreement may be made by either party at any
time, without the other party's prior written consent.
Section 2.3. Entire Agreement; Amendment. This Agreement
constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof. Except
as expressly provided herein, neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other
than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or
termination is sought.
Section 2.4. Notices, Etc. All notices and other
communications required or permitted hereunder shall be in
writing and shall be mailed by registered or certified mail,
postage prepaid, or otherwise delivered by hand or by messenger
addressed (a) if to the Company, at 8501 West Higgins Road, Suite
320, Chicago, IL 60631, Attention: General Counsel, or at such
other address as the Company shall have furnished to the Holders
in writing and (b) if to the Holders, at such address as is set
forth on the signature page hereto, or at such other address as
the Holders shall have furnished to the Company in writing. Each
such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when
delivered if delivered personally, or, if sent by mail, at the
earlier of its receipt or 72 hours after the same has been
deposited in a regularly maintained receptacle for the deposit of
the United States mail, addressed and postage prepaid as
aforesaid.
Section 2.5. Delays or Omissions. Except as expressly
provided herein, no delay or omission to exercise any right,
power or remedy accruing to the Company or the Holders upon any
breach or default of any party under this Agreement, shall impair
any such right, power or remedy of the Company or such Holders
nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of
any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on
the part of the Company or any Holders of any breach or default
under this Agreement, or any waiver on the part of any such party
of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to the Company or the
Holders, shall be cumulative and not alternative.
Section 2.6. Counterparts; Facsimile Signature. This
Agreement may be executed in any number of counterparts, each of
which may be executed by only one of the parties hereto, each of
which shall be enforceable against the party actually executing
such counterpart, and all of which together shall constitute one
instrument. Facsimile signatures to this Agreement shall
constitute the original signature of the signing party.
Section 2.7. Severability. In the event that any provision
of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provisions;
provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any
party.
Section 2.8. Titles and Subtitles. The titles and
subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this
Agreement.
Section 2.9. Definitions. As used in this Agreement, the
following terms have the meanings specified or referred to in
this Section 2.9:
"Agreement" has the meaning specified in the first
paragraph of this Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering
the Securities Act.
"Company" has the meaning specified in the first paragraph
of this Agreement.
"Eligibility Date" shall mean the earliest date after the
date hereof upon which the Company meets the criteria for use of
Form S-3.
"Form S-1," "Form S-3," "Form S-4" and "Form S-8" shall mean
such forms, as currently identified, for registration of
securities under the Securities Act, or any substantially
similar, equivalent or successor forms under the Securities Act.
"Holders" shall mean the persons named on the signature page
hereof and any permitted transferee of registration rights.
"Registrable Securities" means Shares which are issued and
outstanding and which have not been sold to the public, plus
shares of the Company's Common Stock issued with respect to the
Shares upon any stock split, stock dividend, recapitalization, or
similar event, which have not been sold to the public, which, in
each case, are not eligible for resale in reliance upon Rule 144
under the Securities Act.
"Registration Expenses" shall mean all expenses incurred by
the Company in complying with Article I hereof, including,
without limitation, all registration, qualification and filing
fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees
of the Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean any share certificate
representing Registrable Securities bearing a legend restricting
further public distribution thereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale and all fees and
disbursements of counsel for any holder.
IN WITNESS WHEREOF, the Company has caused the foregoing
Agreement to be executed by one of its duly authorized officers,
and the Holders have each executed the foregoing Agreement, each
as of the date first above written.
BAB HOLDINGS, INC.
By s/Michael W. Evans
_______________________________
Its President and CEO
s/ Owen Stern
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Address: 7 Maurice Ct.
Kendall Park, NJ 08824
s/ Ruth Stern
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Address: 7 Maurice Ct.
Kendall Park, NJ 08824
s/ Ilona Stern
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Address: 20 Mill Road
Matawan, NJ 07747
s/ Pierce W. Hance
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Address: 253 Main Street
Sag Harbor, NY 11963