-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S+nQp1wzbz7GsbaG7ZUfhE1XXVaOUhXUiw/wniS3w/xavLnnArD4FkEe7g1cvKDq O6y8MewPB1Y1HUFSK7pWbA== 0000950123-07-008304.txt : 20070605 0000950123-07-008304.hdr.sgml : 20070605 20070605152422 ACCESSION NUMBER: 0000950123-07-008304 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20070605 DATE AS OF CHANGE: 20070605 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SYNERGY BRANDS INC CENTRAL INDEX KEY: 0000870228 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & GENERAL LINE [5141] IRS NUMBER: 222993066 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-42354 FILM NUMBER: 07900848 BUSINESS ADDRESS: STREET 1: 223 UNDERHILL BLVD CITY: SYOSSET STATE: NY ZIP: 11791 BUSINESS PHONE: 5167148200 MAIL ADDRESS: STREET 1: 223 UNDERHILL BLVD CITY: SYOSSET STATE: NY ZIP: 11791 FORMER COMPANY: FORMER CONFORMED NAME: KRANTOR CORP DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: DELTA VENTURES INC DATE OF NAME CHANGE: 19600201 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MILLER LLOYD I III CENTRAL INDEX KEY: 0000949119 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 4650 GORDON DRIVE CITY: NAPLES STATE: FL ZIP: 33940 BUSINESS PHONE: 9412628577 SC 13D/A 1 y3579531sc13dza.txt AMENDMENT #31 TO SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(a) (AMENDMENT NO. 31)(1) Synergy Brands Inc. (Name of Issuer) Common Stock, $.001 per share (Title of Class of Securities) 87159E402 (CUSIP Number) Lloyd I. Miller, III, 4550 Gordon Drive, Naples, Florida, 34102 (Tel.) (239) 262-8577 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 18, 2007 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) Page 1 of 5 pages - ---------- (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ------------------- ----------- CUSIP NO. 87159E402 13D PAGE 2 of 7 - ------------------- ----------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Lloyd I. Miller, III ###-##-#### - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ] (B) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF-OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 2,049,248 NUMBER OF ----------------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 470,224 EACH ----------------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 2,049,248 ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 470,224 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,519,472 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN-IA-OO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! Page 3 of 5 INTRODUCTION This constitutes Amendment No. 31 (the "Amendment") to the statement on Schedule 13D, filed on behalf of Lloyd I. Miller, III ("Mr. Miller"), dated September 26, 2001, as amended (the "Statement"), relating to the common stock, par value $0.001 per share (the "Shares") of Synergy Brands Inc., a Delaware corporation (the "Company"). The Company has its principal executive offices at 223 Underhill Blvd., Syosset, New York 11791. Unless specifically amended hereby, the disclosure set forth in the Statement shall remain unchanged. ITEM 4. PURPOSE OF THE TRANSACTION Item 4 of the Statement is hereby amended by adding the following at the end thereof: The purpose of this Amendment is to report that since the filing of Amendment No. 30 to the Statement, dated January 25, 2007, Milfam I L.P., an affiliate of the reporting person ("Milfam"), entered into a letter agreement, dated May 18, 2007 (the "Letter and Option Agreement"), with Quality Food Brands, Inc., a Nevada corporation and an indirect, majority-owned subsidiary of the Company ("QFB") and Laurus Master Fund, Ltd. ("Laurus"), pursuant to which QFB granted to Milfam an irrevocable right and option to enter into a securities purchase agreement and a related security agreement and to receive from QFB in connection therewith a 9% secured promissory note in the outstanding principal amount of $2,375,000 and a warrant to acquire up to 15% of the shares of the common stock of QFB on a fully diluted basis (collectively the "QFB/Milfam Loan Documents"). As more specifically described in the Letter and Option Agreement and pursuant to the terms thereof, if Milfam exercises its right to enter into the QFB/Milfam Loan Documents, such agreements shall be substantially similar to the loan agreements (the "QFB/Laurus Loan Documents"), executed by and between QFB and Laurus, dated as of May 18, 2007. The QFB/Laurus Loan Documents are hereby incorporated by reference herein to that certain Form 8-K filed by the Company on May 23, 2007 and attached as exhibits thereto. Milfam's right to exercise its option pursuant to the Letter and Option Agreement shall expire no later than August 31, 2007. In connection with entering into the Letter and Option Agreement, Milfam also entered into that certain Right of First Refusal Agreement, dated as of May 18, 2007, by and among QFB, Laurus and Milfam (the "QFB ROFR"). As more specifically set forth therein and provided that Milfam exercises its option to enter into the QFB/Milfam Loan Documents, Laurus will be required (prior to transferring all or a portion of its warrant to acquire a 15% equity interest in QFB to any third party) to give the Company, and then Milfam (in the event the Company declines to exercise it's right of first refusal) an opportunity to purchase such portion of Laurus' warrant pursuant to the same terms as Laurus shall have offered an unrelated third party. The foregoing descriptions of the Letter and Option Agreement and the QFB ROFR does not purport to be complete and is qualified in its entirety by reference to such documents, copies of which are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively. As Mr. Miller is a director of the Company and as QFB is an indirect, majority-owned subsidiary of the Company, the terms and conditions of the Letter and Option Agreement, the QFB ROFR and the other related QFB/Milfam Loan Documents were negotiated between the parties at arm's length and all Page 4 of 7 parties were represented by independent professional advisors in evaluating the terms of the aforementioned transaction documents. The material terms and conditions and the fact that the transaction between an indirect, majority-owned subsidiary of the Company was a related party transaction was fully disclosed to the board of directors of the Company and such persons used their reasonable business judgment in determining that such transaction was in the best interest of the shareholders of the Company. Except as described above in this Item 4 and herein and in engaging in matters as a member of the board of directors of the Company, Mr. Miller does not have any specific plans or proposals that relate to or would result in any of the actions or events specified in clauses (a) through (j) of Item 4 of Schedule 13D. Mr. Miller reserves the right to change plans and take any and all actions that Mr. Miller may deem appropriate to maximize the value of his investments, including, among other things, purchasing or otherwise acquiring additional securities of the Company, selling or otherwise disposing of any securities of the Company beneficially owned by him, in each case in the open market or in privately negotiated transactions or formulating other plans or proposals regarding the Company or its securities to the extent deemed advisable by Mr. Miller in light of his general investment policies, market conditions, subsequent developments affecting the Company and its subsidiaries and the general business and future prospects of the Company and its subsidiaries. Mr. Miller may take any other action with respect to the Company or its subsidiaries or any of the Company's or its subsidiaries debt or equity securities in any manner permitted by applicable law. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER Item 5 of the Statement is hereby amended and restated in its entirety as follows: "(a) Mr. Miller beneficially owns 2,519,472 Shares which is 30.1% of the 8,365,042 outstanding Shares pursuant to the Company's 10Q filed on May 15, 2007. As of the date hereof, 404,272 of such beneficially owned Shares are owned of record by Trust A-4; 15,952 of such beneficially owned Shares are owned of record by Trust C; 1,167,500 of such beneficially owned Shares are owned of record by Milfam I L.P.; 45,900 of such beneficially owned Shares are owned of record by Milfam II L.P.; 835,848 of such beneficially owned Shares are owned of record by Mr. Miller directly; 25,000 of such beneficially owned Shares are owned of record by Trust A-2; and 25,000 of such beneficially owned Shares are owned of record by Trust A-3. (b) Mr. Miller has or may be deemed to have shared voting power and shared dispositive power for all such shares held of record by Trust A-4, Trust C, Trust A-2 and Trust A-3. Mr. Miller has or may be deemed to have sole voting power and sole dispositive power for all such shares held of record by Milfam I L.P., Milfam II L.P. and Mr. Miller directly. (c) The following table details the transactions effected during the past sixty days: MILFAM I L.P. Date of Transaction Number of Shares Acquired Price Per Share April 9, 2007 18,000 *
Page 5 of 7 April 9, 2007 10,000 ** LLOYD I. MILLER, III Date of Transaction Number of Shares Acquired Price Per Share April 9, 2007 10,000 ** TRUST A-2 Date of Transaction Number of Shares Acquired Price Per Share April 9, 2007 5,000 ** TRUST A-3 Date of Transaction Number of Shares Acquired Price Per Share April 9, 2007 5,000 **
* These shares were beneficially acquired by Mr. Miller pursuant to Section 14(b) of the subscription agreement dated as of November 1, 2004 between the Company and Milfam I L.P., (the "November Subscription Agreement"). The November Subscription Agreement was filed as Exhibit 100.2 to Mr. Miller's Amendment No. 21 to the Statement and is hereby incorporated by reference. No additional consideration was paid by Mr. Miller for these Shares. ** Each of the reporting person, Milfam I L.P., Trust A-2 and Trust A-3 (collectively, the "Investors") is party to a subscription agreement dated as of March 31, 2003 with the Company (the "March Subscription Agreements"), pursuant to which the Investors subscribed to shares of Series A Class B Preferred Stock and Common Stock of the Company (as reported in Amendment No. 11 to the Statement, filed by Mr. Miller on April 4, 2003). The shares reported were issued to the Investors pursuant to Section 15 of the Agreements. No additional consideration was paid by the Investors for these Shares. (d) Persons other than Mr. Miller have the right to receive and the power to direct the receipt of dividends from, or the proceeds from, the sale of the reported securities. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Page 6 of 7 As more specifically described in Item 4, on May 18, 2007, Milfam, QFB, and Laurus entered into the Letter and Option Agreement pursuant to which QFB granted to Milfam an irrevocable right and option to enter into the QFB/Milfam Loan Documents for the issuance of (i) a 9% secured promissory note in the outstanding principal amount of $2,375,000 and (ii) a warrant to purchase up to 15% of the shares of the common stock of QFB on a fully diluted basis. Contemporaneously with entering into the Letter and Option Agreement, Milfam, QFB and Laurus entered into the QFB ROFR where under certain circumstances Laurus will be required (prior to transferring its warrant to acquire an equity interest in QFB to any third party) to give the Company, and then Milfam (in the event the Company declines) an opportunity to purchase such warrant pursuant to the same terms as Laurus shall have offered an unrelated third party. The foregoing descriptions of the Letter and Option Agreement and the QFB ROFR does not purport to be complete and is qualified in its entirety by reference to such documents, copies of which are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively. ITEM 7. MATERIALS TO BE FILED AS EXHIBITS 99.1 Letter and Option Agreement, dated as of May 18, 2007, by and among Quality Food Brands, Inc., Laurus Master Fund, Ltd. and Milfam I L.P. 99.2 Quality Food Brands Inc. - Right of First Refusal, dated as of May 18, 2007, by and among Quality Food Brands, Inc., Laurus Master Fund, Ltd. and Milfam I L.P. Page 7 of 7 After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in the statement is true, complete and correct. Dated: June 5, 2007 /s/ Lloyd I. Miller, III ---------------------------------------- Lloyd I. Miller, III EX-99.1 2 y3579531exv99w1.txt EX-99.1: LETTER AND OPTION AGREEMENT Quality Food Brands, Inc. 317 West Front Street Monroe, MI 48161 May 18, 2007 Laurus Master Fund, Ltd. c/o M&C Corporate Services Limited P.O. Box 309 GT Ugland House George Town South Church Street Grand Cayman, Cayman Islands Milfam I L.P. 4550 Gordon Drive Naples, Florida, 34102 Re: Quality Food Brands/Laurus/Milfam Quality Food Brands, Inc., a Nevada corporation (the "Company"), for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby grants to Milfam I L.P., a Georgia limited partnership ("Milfam"), the irrevocable right and option (collectively, the "Option"), exercisable by Milfam's giving written notice (the "Milfam Notice") to the Company and to Laurus Master Fund, Ltd., a Cayman Islands company ("Laurus") not later than August 31, 2007, to enter into that certain Securities Purchase Agreement with the Company in the form annexed hereto (together with the documents and instruments annexed as Exhibits thereto, the "Milfam Securities Purchase Agreement") and to consummate the transactions contemplated thereby including, without limitation, upon the funding called for thereby on the part of Milfam, the issuance and delivery to Milfam of the Note and Warrant and the grant of the security interest to Milfam by the Company as contemplated by the Master Security Agreement (capitalized terms used, but not otherwise defined herein, having the meaning given to such terms in the Milfam Securities Purchase Agreement). It is expressly understood and agreed that, notwithstanding anything to the contrary expressed or implied herein, Milfam shall have the right to exercise or decline to exercise the Option in accordance herewith solely at its sole discretion and, accordingly, shall be under no obligation whatsoever to enter into the Milfam Securities Purchase Agreement or consummate the transactions contemplated thereby unless and until it exercises the Option. It is agreed by the parties hereto that, prior to the first to occur of (x) the Closing and (y) August 31, 2007: (i) no modifications, amendments and or supplements, may be made to the attached forms of the Milfam Securities Purchase Agreement, the Note, the Warrant, the Master Security Agreement, or any other related agreement attached hereto without the prior written consent of Laurus; and (ii) no modifications, amendments and or supplements, may be made to the Laurus Securities Purchase Agreement, the Laurus Note, that certain warrant, issued pursuant to the Laurus Securities Purchase Agreement and exercisable by Laurus, to purchase up to 15% shares of the common stock of the Company, that certain Master Security Agreement dated as of the date of the Laurus Securities Purchase Agreement, or any other related agreement attached thereto, in each case in the form in effect on the date hereof, without the prior written consent of Milfam. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (c) three (3) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All such notices shall be sent to the addresses set forth in Schedule A hereto or at such other address as the Company, Laurus or Milfam may designate by written notice to the other parties hereto given in accordance herewith If Milfam exercises the Option in accordance herewith, the execution and delivery of the Milfam Securities Purchase Agreement and the consummation of the transactions contemplated thereby shall take place at a closing (the "Closing") that shall occur on a date within ten (10) days after the date of the Milfam Notice. Without limiting the generality of the foregoing, due execution and delivery by the Company of the Note and Warrant to Milfam shall be made on such date against payment of the purchase price therefor and the Company shall further execute and deliver the Master Security Agreement in favor of Milfam on such date. It is understood and agreed that, as provided in Section 6.5 of the Milfam Securities Purchase Agreement, cash proceeds (the "Cash Proceeds") received by the Company from Milfam under the Milfam Securities Purchase Agreement in an amount equal to one-half of the principal amount of the Laurus Note outstanding as at the time of the Closing shall be paid by the Company to Laurus to prepay in part principal under the Laurus Note by such amount. Notwithstanding anything to the contrary expressed or implied in the Laurus Securities Purchase Agreement, Laurus hereby acknowledges and consents to (i) the grant by the Company to Milfam of the Option and (ii) upon Milfam's exercising the Option in accordance herewith, Milfam's and the Company's entering into the Milfam Securities Purchase Agreement and the consummation of the transactions contemplated thereby (including, without limitation, the issuance and delivery by the Company to Milfam of the Note and Warrant and the grant by the Company to Milfam of the security interest called for by the Master Security Agreement. Laurus further acknowledges and agrees that, upon the occurrence of the closing (i) Milfam shall be, and for all purposes be deemed to be a "Senior Creditor" under, and as such term is defined in, that certain Intercreditor and Subordination Agreement, dated as of May [_____], 2007, among the Company, Laurus and Milfam; (ii) that certain Right of First Refusal Agreement, dated as of May [_____], 2007, among the Company, Laurus and Milfam shall be fully effective and in force; 2 and (iii) Laurus shall apply the amount received from the Company as provided in the preceding paragraph to the prepayment of the principal amount of the Laurus Note. This letter shall be governed by and construed in accordance with the laws of the State of New York. 3 If the foregoing correctly sets forth our understanding of the subject matter hereof, kindly so indicate by signing below in the space provided for your signature, whereupon this letter shall be our binding agreement concerning such subject matter. Very truly yours, QUALITY FOOD BRANDS, INC. By: /s/ Mitchell Gerstein ------------------------------------ Name: Mitchell Gerstein Title: Treasurer LAURUS MASTER FUND, LTD. By: /s/ David Grin --------------------------------- Name: David Grin Title: Director MILFAM I L.P. By: Milfam LLC Its: General Partner By: /s/ Lloyd I. Miller, III --------------------------------- Name: Lloyd I. Miller, III Title: Manager Signature page EX-99.2 3 y3579531exv99w2.txt EX-99.2: RIGHT OF FIRST REFUSAL AGREEMENT ================================================================================ QUALITY FOOD BRANDS, INC. RIGHT OF FIRST REFUSAL AGREEMENT MAY 18, 2007 ================================================================================ QUALITY FOOD BRANDS, INC. RIGHT OF FIRST REFUSAL AGREEMENT THIS RIGHT OF FIRST REFUSAL AGREEMENT (the "AGREEMENT") is made as of May 18, 2007 by and among Quality Food Brands, Inc., a Nevada corporation (the "COMPANY"), Laurus Master Fund, Ltd., a Cayman Islands company ("LAURUS"), and Milfam I L.P. ("MILFAM"). RECITALS WHEREAS, the Company proposes to enter into a Securities Purchase Agreement with Laurus, pursuant to which the Company will issue to Laurus (i) a senior secured promissory note in an aggregate principal amount of $4,750,000 million and (ii) a warrant (the "WARRANT") to purchase up to 15% of the shares of the Company (the "SHARES") of the common stock, $0.001 par value per share ("COMMON STOCK") of the Company on a fully diluted basis (the Warrant, together with any Shares issued upon any exercise of the Warrant, being called, collectively, the "EQUITY SECURITIES"); WHEREAS, the Company also proposes to enter into a Securities Purchase Agreement with Milfam, pursuant to which the Company will issue (i) a senior secured promissory note to Milfam in an aggregate principal amount of $2,375,000 million and (ii) a Warrant to purchase up to 15% of the shares of the Common Stock of the Company on a fully diluted basis (the "MILFAM SECURITIES PURCHASE AGREEMENT"); WHEREAS, it is a condition to the Milfam Securities Purchase Agreement that the Company and Laurus execute and deliver this Agreement to Milfam. NOW, THEREFORE, the Parties hereby agree as follows: 1. RESTRICTIONS ON TRANSFER OF EQUITY SECURITIES BY LAURUS. Except as otherwise provided in this Agreement, Laurus will not sell, assign, transfer, pledge, hypothecate, or otherwise encumber or dispose (a "TRANSFER") of in any way, all or any part of or any interest in the Equity Securities. Any Transfer of Equity Securities not made in conformance with this Agreement shall be null and void, shall not be recorded on the books of the Company and shall not be recognized by the Company. 2. RIGHT OF FIRST REFUSAL. (a) If at any time or from time to time Laurus should desire to Transfer any of the Equity Securities, Laurus shall, prior to consummating the Transfer, first offer such Equity Securities (the "PROPOSED SALE SECURITIES") to the Company. Laurus shall deliver to the Company and Milfam written notice (a "SALE NOTICE") of its intention to make the Transfer, setting forth in such Sale Notice: (i) a certificate by Laurus that the Transfer is a bona fide offer to acquire such Proposed Sale Securities entirely for cash made by a prospective transferee who is not a competitor of the Company or an affiliate of Laurus and who is acting at arm's-length with Laurus; (ii) the name and address of the prospective transferee; (iii) in the case of a proposed Transfer of a Warrant, the number of Shares in respect of which such Warrant is exercisable and, in the case of a proposed Transfer of Common Stock, the number of such Shares; and (iv) the price, payment of which must be made in cash, for which Laurus intends to Transfer such Proposed Sale Securities. The Company shall have the right and option (but not the obligation), exercisable for a period of twenty-five (25) days after the date of the Company's receipt of the Sale Notice, to elect to repurchase the Proposed Sale Securities to be sold by Laurus at the price and upon the terms specified in the Sale Notice by giving written notice of such election to Laurus and to Milfam (a "COMPANY NOTICE") within said twenty-five (25)-day period, which notice shall state, in the case of a proposed Transfer of a Warrant, the number of Shares in respect of which such Warrant is exercisable and in the case of a proposed Transfer of Common Stock, the number of such Shares, as the case may be, that the Company elects to repurchase. If the Company elects not to repurchase all of the Proposed Sale Securities, Milfam shall have the right and option (but not the obligation), exercisable for a period of ten (10) days after the date of Milfam's receipt of the Company Notice, to purchase any of the Proposed Sale Securities that the Company has not elected to repurchase, such purchase by Milfam to be upon the terms specified in the Sale Notice by giving written notice to Laurus (the "MILFAM NOTICE"). The Milfam Notice shall be given within the aforesaid ten (10)-day period and shall state, in the case of a proposed Transfer of a Warrant, the number of Shares in respect of which such Warrant is exercisable and in the case of a proposed Transfer of Common Stock, the number of such Shares, as the case may be, that Milfam has elected to purchase. (b) Any Transfer of Equity Securities to the Company and/or Milfam, as the case may be, under the terms of Section 2(a) hereof shall be made at the offices of the Company on a mutually satisfactory date within ten (10) days after the expiration of the ten (10) day period described in Section 2(a) hereof. Delivery of certificates or other instruments evidencing such Equity Securities duly endorsed for transfer shall be made on such date against payment of the purchase price therefor. (c) If a Company Notice or Milfam Notice shall not be delivered pursuant to Section 2(a) hereof with respect to all of the shares of Proposed Sale Securities offered for sale pursuant to the Sale Notice, then Laurus may Transfer all of the remaining Proposed Sale Securities that were the subject of such Sale Notice, but that were not the subject of such Company Notice or Milfam Notice, but only upon terms and conditions in all respects, including, without limitation, price, which are no more favorable to the purchaser thereof than those set forth in the Sale Notice, at any time within twenty-five (25) days after the expiration of the ten (10)-day period referred to in Section 2(a) hereof. In the event that such Proposed Sale Securities are not Transferred by Laurus during such twenty-five (25) day period, the right of Laurus to Transfer such Proposed Sale Securities shall expire and the obligations of Laurus under this Section 2 shall be reinstated. 3. CHANGES IN SECURITIES. If, from time to time during the term of this Agreement: (i) there is a dividend of any security, stock split or other change in the character or quantity of any of the outstanding securities of the Company; or 2 (ii) there is any consolidation or merger immediately following which stockholders of the Company hold more than fifty percent (50%) of the voting equity securities of the surviving corporation, then, in such event, any and all new, substituted or additional securities or other property to which Laurus is entitled by reason of ownership of its Equity Securities shall be immediately subject to the provisions of this Agreement for all purposes of this Agreement with the same force and effect as the securities of the Company presently subject to this Agreement and with respect to which such securities or property were distributed. 4. LEGENDS. All certificates or other evidence of the Equity Securities shall have endorsed thereon a legend to substantially the following effect: "THE RIGHT TO SELL, TRANSFER OR OTHERWISE DISPOSE OF OR PLEDGE THE EQUITY REPRESENTED HEREBY IS SUBJECT TO A RIGHT OF FIRST REFUSAL SET FORTH IN A RIGHT OF FIRST REFUSAL AGREEMENT. A COPY OF SUCH AGREEMENT IS ON FILE AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS." 5. TRANSFER OF SECURITIES. The Company shall not: (i) permit any Transfer on its books of any securities of the Company which shall have been transferred in violation of any of the provisions set forth in this Agreement; or (ii) treat as the owner of such securities or to accord the right to vote as owner or to pay dividends to any transferee to whom such securities shall have been sold or transferred in violation of any of the provisions set forth in this Agreement. Any transfer not done in conformity with the terms and conditions herein shall be deemed null and void. 6. NOTICES. Any notice to the Company, Laurus or Milfam (each a "PARTY," and collectively the "PARTIES") required or permitted hereunder shall be given in writing and shall be given by personal delivery, by facsimile or by overnight courier (by a courier firm of good repute and national reputation) with postage and fees prepaid, addressed to the applicable Party at its address as shown on the Company's books, or at such other addresses as it may designate by ten (10) days' advance written notice to the applicable Party. Any notice shall be deemed received: (i) if delivered, when physically delivered to the notice address; (ii) if faxed, upon receipt of the sending fax machine of automatic fax confirmation; or (iii) if by overnight courier, one (1) business day after deposit with such overnight service. 7. GOVERNING LAW; SUCCESSORS AND ASSIGNS. This Agreement shall be governed by and construed under the laws of the State of New York, without reference to the conflict of laws provisions thereof. The Agreement shall inure to the benefit of the Parties and their respective successors and permitted assigns and, subject to the restrictions on transfer herein set forth, be binding upon each Party and its respective heirs, executors, administrators, guardians, successors and assigns. 8. AGGREGATION OF STOCK. All Equity Securities held or acquired by affiliated entities or persons, or entities or persons under common investment management, shall be 3 aggregated together for the purpose of determining the availability of any rights or obligations under this Agreement. 9. ENTIRE AGREEMENT; AMENDMENT. This Agreement represents the entire understanding of the Parties with respect to the subject matter hereof and supersedes all previous understandings, written or oral. This Agreement may be amended only with the written consent of the Company and the holders of a majority of the common stock then held by the Parties. 10. ADDITIONAL HOLDERS. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of Equity Securities, any purchaser of such securities may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an a Party hereunder. 11. CONDITION TO EFFECTIVENESS. Notwithstanding anything to the contrary contained herein, this Agreement shall only take effect upon the occurrence of the Closing under, and as defined in, that certain Right and Option Agreement, dated as of the date hereof, among the Company, Laurus and Milfam (the form of which is annexed hereto as Exhibit A). Remainder of page intentionally left blank 4 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. QUALITY FOOD BRANDS, INC. /s/ Mitchell Gerstein - ------------------------------------ Name: Mitchell Gerstein Title: Treasurer 5 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. LAURUS MASTER FUND, LTD. /s/ David Grin - ------------------------------------ Name: David Grin Title: Director 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. MILFAM I L.P. By: Milfam LLC Its: General Partner By: /s/ Lloyd I. Miller, III -------------------------------- Name: Lloyd I. Miller, III Title: Manager 7 -----END PRIVACY-ENHANCED MESSAGE-----