AMENDED ACQUISITION AGREEMENT
AGREEMENT (the "Agreement") made as of the 28th day of July, 1998, by and
between MANHATTAN BAGEL COMPANY, INC., Debtor in Possession, a New Jersey
corporation ("MBC") and NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation
("NWCB").
RECITALS
MBC filed a petition for reorganization under Chapter 11 of the Bankruptcy
Code on or about November 19, 1997, as a debtor in possession, and its
wholly-owned subsidiary, I & J Bagels, Inc. a California corporation ("I&J"),
filed a petition for reorganization under Chapter 11 of the Bankruptcy Code on
or about December 31, 1997, as a debtor in possession. Except as the context
otherwise requires, the term "MBC" shall include MBC and I&J.
As presently constituted, the business of MBC includes the operation of a
franchise company for Manhattan Bagel stores, the ownership and operation of 11
Manhattan Bagel stores, and the manufacture of bagels and related products at
two locations for sale to franchisees and others.
MBC and NWCB have agreed to co-propose a plan of reorganization (the
"Plan") for confirmation by the United States Bankruptcy Court for the District
of New Jersey (the "Bankruptcy Court") pursuant to which NWCB would acquire MBC
and through MBC's ownership of its subsidiaries' stock, its subsidiaries.
The purpose of this Agreement is to set forth the terms of the acquisition,
the manner in which the Plan will be put forward, approved and implemented, and
certain other matters as set forth herein.
NOW, THEREFORE, it is agreed by and between the parties hereto as follows:
SECTION 1
PLAN OF REORGANIZATION
1.1 The Plan. MBC and NWCB will prepare and will file with the Bankruptcy
Court the Plan, as promptly as practicable, but in no event later than September
4, 1998. The Plan shall adopt this Agreement, shall include the provisions set
forth herein, and shall provide for modification as necessary to conform the
Plan to applicable law. Any modification that affects in any way the
consideration being paid or provided by NWCB hereunder or under the Plan or the
economic treatment of any class of claim or interest must first be approved by
NWCB in writing prior to filing with the Bankruptcy Court.
1.2 Approval of the Plan. MBC and NWCB will prepare and will file with the
Bankruptcy Court contemporaneously with the Plan the "disclosure statement"
required by 11 U.S.C. ss.1125. Thereafter,
MBC and NWCB shall take all steps which are necessary or advisable in the
opinion of the parties and their counsel to obtain approval of the disclosure
statement, to obtain consent to the Plan by voting holders of claims or
interests, and to obtain confirmation of Plan by the Bankruptcy Court.
1.3 Effectiveness of the Plan. The date upon which the Plan shall become
effective, following requisite approval by the Bankruptcy Court, is referred to
as the "Effective Date."
SECTION 2
CONTRACT DEPOSIT
2.1 Deposit. Upon the execution and delivery of this Agreement, NWCB shall
deliver a check payable to MBC's counsel in the sum of $100,000. Such funds
shall be deposited in an interest bearing escrow account of such counsel. The
balance in such account from time to time, is referred to as the Escrow Amount.
2.2 Effective Date. On the Effective Date, the Escrow Amount shall be
applied to meet NWCB's payment obligations under the Plan.
2.3 Termination. If this Agreement terminates for any reason other than the
default of NWCB, the Escrow Amount shall be delivered to NWCB on the first
business day after the date of termination.
SECTION 3
NWCB'S PLAN OBLIGATIONS
3.1 Payment of Secured Creditors. On the Effective Date, pursuant to the
Plan, NWCB shall pay to MBC exclusively for satisfaction of the allowed claims
of MBC's secured creditors $3.5 million or such lesser amount equal to all of
the allowed claims of MBC's secured creditors. MBC, together with its Unsecured
Creditors' Committee, may settle and compromise the claims of First Union
National Bank ("FUNB") in its reasonable discretion, without causing an increase
of the amount alleged by FUNB as the balance due to it, substantially in
accordance with the term sheet annexed hereto; provided, that, fifty (50%)
percent of any reduction, net of the associated costs, from $3,500,000 in FUNB's
allowed claim and fifty (50%) percent of any recovery from FUNB, net of the
associated costs, shall be added to the payments to be made to unsecured
creditors under section 3.2 hereof.
3.2 Payment of Unsecured Creditors. On the Effective Date, pursuant to the
Plan, NWCB shall deliver to MBC (or to a creditor trust) exclusively for
satisfaction of the allowed claims of MBC's unsecured creditors (i) $4,000,000,
(ii) the greater of (a) shares
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of NWCB's common stock having a then market value of $2,250,000 to be determined
in accordance with section 3.3 hereof, (b) 750,000 shares (the "Shares"), (iii)
a promissory note in the principal amount of $5,500,000, with interest at nine
(9%) per annum payable quarterly in arrears, and with the principal amount to be
paid quarterly in installments of $687,500 commencing 15 months after the
Effective Date, such promissory note to be secured by a lien on the assets of
NWCB and its subsidiaries junior only to the lien granted to NWCB's senior
lenders to secure loans not in excess of $10,000,000; provided, that, should the
note be secured by a first (rather than a junior) lien on the notes payable
issued to MBC by Bagel Bros. or the stores which secure such notes and a junior
lien on all other assets, then the interest rate shall be six (6%) percent per
annum payable quarterly in arrears; and (iv) all causes of action accruing to
MBC pursuant to 11 U.S.C. ▇▇.▇▇. 544(b), 547, 548, 549, 550 and 553.
3.3 The Shares. NWCB shall include the Shares in a registration statement
under the Securities Act of 1933, as amended, to be filed within 60 days after
the Effective Date. The number of Shares will be determined by using the average
daily trading price for twenty (20) trading days prior to the Confirmation Date.
Sales of the Shares, other than as approved by NWCB or a single "block" sale,
shall be restricted to $250,000 per month.
SECTION 4
OWNERSHIP OF MBC BY NWCB
On the Effective Date, MBC shall deliver to NWCB a certificate representing
100 shares of the common stock of MBC, as reorganized pursuant to the Plan
("Reorganized MBC"), registered in the name of NWCB, which shall represent all
of the authorized, issued, and outstanding common stock of Reorganized MBC.
SECTION 5
REPRESENTATIONS OF MBC
For the purposes of this section MBC means only Manhattan Bagel Company,
Inc. and I&J Bagels, Inc. MBC represents and warrants to NWCB as follows (it
being expressly understood by the parties that, as used in this Section 5, the
phrases "to the best of MBC's knowledge," "to the knowledge of MBC," "to MBC's
knowledge," and other similar phrases shall mean that MBC is making the
particular referenced representation and warranty after a determination of its
accuracy by reasonable investigation and due inquiry). Any exceptions shall be
set forth on a Disclosure Schedule delivered within seven (7) days of the date
hereof, with specific references to the applicable subsection of this Section 5.
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The information set forth on the Disclosure Schedule shall be deemed
confidential information.
5.1 Organization and Status of MBC. MBC is a corporation duly incorporated
and in good standing under the laws of the State of New Jersey. MBC is duly
qualified to do business and is in good standing in every other jurisdiction in
which the property owned, leased or operated by it, or the nature of the
business conducted by it, makes such qualification or licensing necessary.
5.2 No Interests. MBC does not own an interest, or have an investment, in
any other person, other than its subsidiaries or other entities set forth in the
Disclosure Schedule.
5.3 Due Execution. The execution and delivery of this Agreement by MBC and
the consummation by MBC of the transactions contemplated hereby and any
associated agreements signed in connection herewith, have been duly authorized
by all requisite action of the Board of Directors of MBC. Subject to Bankruptcy
Court approval the Agreement constitutes the valid and legally binding
obligations of MBC enforceable against MBC in accordance with its terms.
5.4 No Violation. Other than to the extent MBC requires Bankruptcy Court
approval of provisions hereof and implementation of the Plan, neither the
execution, delivery nor consummation of this Agreement by MBC will, with the
passage of time, the giving of notice, or otherwise, result in a violation or
breach of, or constitute a default under, any term or provision of any law,
rule, regulation, order, decree, judgment, indenture, mortgage, deed of trust,
lease, instrument, contract, agreement or other restriction to which MBC is a
party or to which MBC or its property is subject or bound; nor will it result in
the creation of any lien or other charge or encumbrance on any of the assets of
MBC, nor will it result in an acceleration or termination of any loan or
security agreement or similar agreement or instrument to which MBC is a party or
to which MBC's property is subject.
5.5 Ownership of the Assets. MBC is the true and lawful owner of its assets
and business, free and clear of all claims, liabilities, liens, pledges,
charges, encumbrances and equities of any kind or nature whatsoever other than
as provided in MBC's schedules and statement of financial affairs filed with the
Bankruptcy Court or in the Disclosure Schedule.
5.6 Business Information. The Disclosure Schedule contains a list of each
of the following items, true and correct copies of which have heretofore been
delivered, or will be delivered as soon as practicable after execution hereof,
to NWCB:
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(a) All insurance policies of or for MBC in force on the date hereof.
(b) All oral or written employment, union contracts, pension,
profit-sharing, bonus or retirement plans or other similar arrangements of MBC
which are in force or have otherwise been agreed to, and the names and current
annual salary rates of all persons whose total current salary and compensation
from MBC exceeds Fifty Thousand Dollars ($50,000.00) per annum, together with
the date and amount of the last salary increase awarded to each such person. All
information contained in this section shall be considered confidential and shall
not be revealed without MBC's prior written consent, which shall not be
unreasonably withheld.
(c) All instruments or other documents relating to any indebtedness owed by
or to MBC, and all leases, and conditional sales contracts, chattel mortgages
and other security agreements with respect to personal property used by MBC.
(d) A list of each MBC franchise agreement, including the name and address
of the franchisee, the date of the store opening, and any defaults under the
agreement known to MBC, or alleged by franchisees. Except as set forth in the
Disclosure Schedule, MBC is not in default under any franchise agreement.
(e) A description of each parcel of real property leased or owned by MBC
("Real Property") or as to which MBC has guaranteed the payments.
(f) A description of each Real Property lease and lease guaranty and any
defaults thereunder known to MBC, or alleged by lessors.
(g) A list of the machinery and equipment owned or leased by MBC.
(h) A list of all motor vehicles owned or leased by MBC.
(i) A list of customers of bagel and related products other than the
franchisees of MBC.
(j) A list of the 20 largest suppliers to MBC.
(k) Each state, and the status therein as franchisor, in which MBC
maintains a franchise agreement.
(l) A list of inventory on hand.
(m) A list of each agreement or contract to which MBC is
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a party, unless delivered pursuant to the paragraphs above, having a term of one
year or more or involving the receipt or expenditure of $25,000.00 or more.
5.7 Condition, etc., of Assets. Except as set forth in the Disclosure
Schedule:
(a) The cash on hand on the date prior to July 28, 1998 is not less than
$2,730,000, before the settlement with FUNB.
(b) Except for the Advertising Fund Receivables, the accounts receivable of
MBC set forth in the Disclosure Schedule; net of applicable reserves, are all
due and payable, to the knowledge of MBC, without defense, setoff, or
counterclaim.
(c) The inventory of MBC set forth in the Disclosure Schedule; net of
applicable reserves, is composed of usable and saleable goods and is valued, for
financial statement purposes, at the lower of cost or market.
(d) All of the machinery and equipment of MBC set forth in the Disclosure
Schedule is in good repair and generally usable for the purposes intended, and
to the best of MBC's knowledge, is in compliance with all laws, rules and
regulations.
(e) MBC is the sole and exclusive owner of all intangible property and all
designs, permits, labels and packages used on or in connection therewith used in
the course of its business, and the same are set forth in the Disclosure
Schedule (the "Intangible Property").
(f) The Intangible Property is sufficient to manufacture, market and sell
all of the products heretofore manufactured, marketed or sold by MBC and for the
conduct of its franchise business.
(g) MBC has received no notice of, and MBC has no knowledge of any basis
for, a claim against it that it, or any of MBC's operations, activities,
products or publications infringes on any patent, trademark, trade name,
copyright or other property right of a third party, or that MBC is illegally or
otherwise using the trade secrets, formulae or any property rights of others.
MBC has no disputes with or claims against any third party for infringement by
such third party of any trade name or other Intangible Property. MBC has taken
all steps reasonably necessary to protect MBC's right, title and interest in and
to the Intangible Property.
5.8 No Required Consents or Approvals. No consent or
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approval is required for the execution of this Agreement or, other than to the
extent MBC requires Bankruptcy Court approval of provisions hereof and of the
Plan, the consummation of any of the transactions contemplated hereby under any
law, rule or regulation, or to avoid the violation of, breach of, default under,
or creation of a lien on the assets of MBC pursuant to the terms of, any law,
rule, regulation, order, decree or award of any court or governmental agency or
any lease, contract, mortgage, note or any other instrument to which MBC is
bound or to which it or any of its property is subject.
5.9 Tax Returns and Audits. MBC has accurately prepared, and timely filed,
all income, franchise, sales, and other tax returns and reports of every nature
required to be filed by it and has paid in full all taxes reflected thereon as
due and payable by it. MBC has no knowledge of any unassessed tax deficiency
proposed or threatened against MBC as a result of the operation of its business,
and there is no tax investigation pending. The tax returns of MBC have never
been audited except as set forth in the Disclosure Schedule. MBC is not a party
to any audit, action or proceeding by any governmental authority for assessment
or collection of taxes, nor has any such event, to MBC's knowledge, been
asserted or threatened.
5.10 Compliance with Laws. MBC is not in violation in any material respect
of any law, regulation or ordinance including, without limitation, laws,
regulations or ordinances relating to the conduct of its business. Any
retirement plan maintained by MBC is in full compliance with all applicable
laws.
5.11 Litigation. Except as disclosed in the Disclosure Schedule, (a) MBC is
not a party to any litigation nor is its property affected by any litigation,
(b) MBC is not a party to any governmental proceeding or investigation, (c) none
of the foregoing has been threatened, and (d) to the best of MBC's knowledge, no
facts exist which are likely to result in any of the matters described in (a),
(b) or (c) hereof.
5.12 Conflicts of Interest. Except as disclosed in the Disclosure Schedule,
no officer, director, or other insider (as defined in 11 U.S.C. ss.101) of MBC,
directly or through an entity in which it, he or any relative has an interest of
any description, conducts any business with MBC of any description, including
the sale or lease of property, the provision of services, the lending of funds
or otherwise.
5.13 Financial Statements. The Disclosure Schedule includes a list of all
of the financial information and statements (the "Financial Statements") filed
by MBC with the Bankruptcy Court
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and the Securities and Exchange Commission, including all information concerning
assets, liabilities, revenues and expenses, copies of which have been provided
or, with the Disclosure Schedule, will be provided to NWCB. The Financial
Statements (including the notes thereto, if any): (a) are true and complete in
all material respects, (b) are in accordance with the books and records of MBC,
and (c) present fairly the financial position and results of operations of MBC
as of the dates and for the periods indicated.
5.14 Encumbrances. Except as disclosed in the Disclosure Schedule, MBC owns
outright all the property and assets, real, personal or mixed, tangible or
intangible, reflected in the Financial Statements, subject to no mortgages,
liens, security interests, pledges, charges or other encumbrances of any kind.
5.15 Permits, Licenses and Franchises. MBC has all licenses, corporate
franchises and other authorizations necessary for the conduct of its business in
the manner and in the areas in which such business is presently being conducted,
as listed in the Disclosure Schedule, and all such permits, licenses, corporate
franchises and authorizations are valid and effective. MBC has not taken any
action or failed to take any action which would cause the revocation or
suspension of any such permits, licenses, franchises or authorizations, and no
action or proceeding looking to or contemplating the revocation or suspension of
any thereof is pending or, to MBC's knowledge, threatened.
5.16 Environmental Matters. To the best of MBC's knowledge as to each
parcel of Real Property:
(a) There is no hazardous waste, hazardous or toxic substance, or the
discharge, spillage or other release or filtration of any hazardous waste or
hazardous or toxic substance on, in, about or under the Real Property, or
emanating from or otherwise originating at the Real Property;
(b) There has been no activity carried on or undertaken at the Real
Property in connection with the handling, treatment, removal, storage,
decontamination, clean up, transport or disposal of any hazardous waste or
hazardous or toxic substance at any time located or present on, in, about or
under the Real Property;
(c) There has been no failure by MBC to comply with the terms of any order
or other ruling or decision issued by any Federal, state or municipal government
department or agency having regulatory authority over environmental matters
regarding or concerning the Real Property or regarding or concerning any
activity carried on or undertaken at the Real Property; and
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(d) There has been no lien, claim, assessment or other charge imposed upon
or against the Real Property by any Federal, state or municipal government
department or agency having regulatory authority over environmental matters
pursuant to any statute, regulation or order now in effect.
As used herein, the terms "hazardous waste" and "hazardous or toxic substance"
shall have the same meanings as defined and used in any applicable Federal or
New York State statutes, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ▇▇.▇▇. 9601 et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. ▇▇.▇▇. 6901 et seq.;
the Hazardous Materials Transport action Act, 49 U.S.C. ▇▇.▇▇. 1801 et seq.; the
Toxic Substances Control Act, 15 U.S.C. ▇▇.▇▇. 2601 et seq.; and/or the
regulations adopted and publications promulgated pursuant thereto.
5.17 Funding. MBC has sufficient assets to meet the requirements of 11
U.S.C. ss.1129(a)(13).
5.18 Administrative Claims. The (i) administrative claims allowable under
11 U.S.C. ss.507 and (ii) amounts necessary to cure defaults under unexpired
leases or executory contracts to be assumed hereunder or under the plan pursuant
to 11 U.S.C. ss.365 now known by MBC are set forth on the Disclosure Schedule,
and MBC has or will on the Effective Date (without giving effect to the
transactions herein) have sufficient cash to pay in full such cure amounts and
such administrative claims associated with leases or executory contracts to be
assumed as provided herein or designated to be assumed by NWCB no later than 15
days prior to the hearing on confirmation of the Plan (other than those
representing postpetition ordinary trade payables which are to be paid as and
when due by Reorganized MBC).
5.19 No False Statement. No representations or warranties made by MBC in
this Agreement or in any Schedule or Exhibit attached hereto, nor in any
documents delivered to NWCB pursuant hereto, contains any untrue statement of a
material fact, or omits to state a fact necessary to make the statements or
facts contained herein not misleading in any material respect. MBC has herein,
or in other documents delivered in connection herewith, advised NWCB, to the
best of MBC's knowledge, of all material adverse information concerning MBC and
its business.
▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇ represents and warrants to MBC as follows:
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6.1 Organization and Standing. NWCB is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to carry on its business as and where
conducted, and to own or lease, and operate, its properties at and where owned
or leased and operated by it.
6.2 Due Execution. The Agreement has been duly authorized and approved by
the Board of Directors of NWCB, have been executed and delivered by duly
empowered officers of NWCB, and is binding and enforceable against NWCB in
accordance with its terms.
6.3 No Violation. The execution of this Agreement by NWCB and the
consummation of the transactions contemplated thereby do not violate any
indenture, mortgage, deed of trust or other agreement to which NWCB is a party,
or any order or judgment of any court to which NWCB is subject.
6.4 Common Stock. Upon issuance, the Shares will be duly authorized and
validly issued, fully paid and non-assessable.
6.5 Debt Commitment. NWCB has received a financing commitment ("Financing
Commitment") from Dominion Income Management Corp. ("Dominion") a true and
complete copy of which has been previously provided to MBC, in an amount not
less than $8,000,000 which is in full force and effect including payment of all
commitment fees then due and payable. NWCB has investigated Dominion and
believes that Dominion has the ability to perform under the Financing
Commitment.
6.6 Equity Commitment. NWCB has received an equity financing commitment
("Equity Financing Commitment") a copy of which has been previously provided to
MBC, in an amount not less than $2,000,000 which is in full force and effect
including payment of all commitment fees then due and payable.
SECTION 7
NO BROKERS
NWCB, on the one hand, and MBC, on the other hand, represents to the other
that it has not engaged or dealt with any person as a broker in connection with
the transaction contemplated hereby and will indemnify and hold the other party
harmless from and against all costs and expenses related to a breach of this
representation.
SECTION 8
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COVENANTS OF MBC
The covenants and agreements set forth in this section are material
inducements upon which NWCB has relied in executing and delivering this
Agreement. On or before seven (7) days after execution of this Agreement, MBC
shall file with the Bankruptcy Court a motion seeking entry of an order (the
"Approval Order") authorizing and approving sections 8.1, 8.2, 8.3, 8.4, and 8.5
hereof.
8.1 Ordinary Course. From the date hereof through the Effective Date, MBC
(i) shall conduct its operations according to its ordinary and usual course of
business, (ii) shall use its best efforts to maintain and to preserve its
business organization, employees and relationships with suppliers, customers and
others and to promote sales of its products, and (iii) shall fully comply with
all applicable laws, including the Bankruptcy Code.
8.2 Preservation of Business and Financial Condition. From the date hereof
through the Effective Date, except (i) pursuant to existing contracts and
arrangements which have been expressly disclosed to, NWCB, or (ii) with the
prior written consent of NWCB, or (iii) in the ordinary course of business, MBC
shall not:
(a) Incur any obligation or liability, direct or indirect, absolute or
contingent, other than postpetition liabilities incurred in the ordinary course
of business or take any action that has the effect of increasing any secured
claim other than accrual, if any, of amounts allowable under 11 U.S.C. ss.506(b)
and in accordance with Annex A hereto.
(b) Incur any indebtedness for borrowed money; assume, guarantee, endorse
(other than for collection or deposit in the ordinary course of business) or
otherwise as an accommodation become responsible for the obligations of any
other individual, firm, partnership, corporation or other entity, or make any
loans or advances to any individual, firm, partnership, corporation or other
entity.
(c) Mortgage, pledge or otherwise encumber any of its properties or assets.
(d) Sell or transfer any of its properties or assets except in the ordinary
and usual course of its business.
(e) Enter into or terminate any contract or agreement, or make any change
in any of its existing agreements.
(f) Increase the compensation of any of its employees except
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for regularly scheduled pay increases to non-insiders limited to no more than
five (5%) percent (except for increases already required under union or
employment contracts and except for a one-year employment contract with ▇▇▇▇▇
▇'▇▇▇▇▇▇ substantially in accordance with the terms of the proposed ▇'▇▇▇▇▇▇
Agreement delivered to NWCB this date, pay or agree to pay any pension or
retirement allowance not required by any existing plan or agreement to any such
employees, or commit itself to any employment or union contracts, pension,
profit-sharing, bonus or retirement plans or other similar arrangements with or
for the benefit of any employees or other persons.
(g) Take any action or fail to take any action which shall cause any of its
representations set forth herein to not be true and correct on, and as of, the
Effective Date.
(h) Take any action requiring approval of the Bankruptcy Court involving
the sum of $50,000 or more.
(i) Notwithstanding the foregoing, MBC may (i) settle with FUNB in
accordance with the term sheet annexed hereto, (ii) settle with mechanics lien
claimants in accordance with Exhibit 6.7, and (iii) after written notice to NWCB
make adjustments to its books in accordance with generally accepted accounting
principles and auditing standards, including reserves against or write offs of
assets.
8.3 Other Offers. From the date hereof through the Effective Date, MBC
shall not directly or indirectly, solicit, initiate or encourage submission of
proposals or offers from any person relating to any acquisition or purchase of
all or a material portion of its assets, business or equity. MBC shall promptly
notify NWCB if any such proposal or offer, or any inquiry or contact with any
person with respect thereto, is made.
8.4 Break-up Fee; Expenses. If prior to termination by either MBC or NWCB,
one of the following conditions occurs (i) another offer for all or
substantially all of the assets or stock of MBC is accepted by MBC or Bankruptcy
Court approval thereof is sought by MBC, (ii) a plan of reorganization (or
liquidation) other than the Plan or amendments thereto is proposed by MBC, (iii)
another offer for all or substantially all of the assets or stock of MBC is
closed, or (iv) a plan of reorganization (or liquidation) other than the Plan is
proposed by a person other than MBC, and confirmed, then NWCB, at its election,
may terminate this Agreement and receive, as an allowed administrative claim, a
"break-up" fee in the amount of $500,000 together with its actual
"out-of-pocket" expenses expended in connection with the transactions
contemplated hereby (up to a cap of $250,000), in accordance with section 14.3
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hereof, which shall be paid to NWCB from property other than cash collateral of
secured parties without the need for further Bankruptcy Court order on the first
business day after receipt of written notice of termination issued by NWCB;
provided, that, any funds actually paid to NWCB under this section 8.4 shall be
refunded on the date that NWCB closes a transaction pursuant to which it
acquires or purchases all or substantially all assets or stock of MBC.
8.5 Best Efforts to Close. MBC shall use its best efforts to obtain the
satisfaction of the conditions to closing that it must satisfy under this
Agreement.
8.6 Tax Returns. Subsequent to the date hereof, MBC shall cause true and
correct Federal, state and local income, sales and other required tax returns
relating to the business of MBC, which are required to be filed for all periods,
to be timely filed with the appropriate governmental agencies, accompanied by
payment of all of the taxes due and payable.
8.7 Contracts. Pursuant to the Plan (i) MBC shall assume all franchise
agreements currently in force and in operation, all of which franchise
agreements shall be guaranteed by NWCB and all associated leases of
nonresidential real property, (ii) MBC shall use its best efforts to assign all
such leases to the associated franchisees, and (iii) MBC shall reject, assume or
assume and assign such other executory contracts, leases and master franchise
agreements as designated by NWCB at by the date of approval of the Disclosure
Statement associated with the Plan.
8.8 Inspection. From the date hereof through the Effective Date,
representatives of NWCB, including without limitation its auditors and legal
counsel, shall have the right to visit and inspect all the premises and
properties of MBC during normal business hours, and upon prior notice, to
examine the facilities, books of account, records, reports, leases, contracts
and other documents of MBC and to confer with employees, counsel, accountants
and other professionals. All information obtained by or for NWCB shall be kept
strictly confidential until after the Effective Date. If this Agreement is
terminated as set forth herein, such information shall be returned or kept
confidential for a period of three (3) years from the date of such termination.
Nothing contained in this paragraph shall be construed to require MBC or its
agents to perform any services for NWCB.
8.9 Warrant. On the date hereof, MBC shall execute and deliver a true and
correct copy of a warrant in form and substance acceptable to NWCB and MBC
permitting NWCB to purchase up to 4,000,000 shares of MBC common stock at an
exercise price of $0.01
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per warrant share. NWCB shall not exercise the warrant except upon seven (7)
business days prior notice to the Unsecured Creditors Committee at the address
set forth in section 15.3.
SECTION 9
COVENANT OF NWCB
9.1 Maintain Financing Commitment. NWCB covenants to use its reasonable
best efforts to maintain the Financing Commitment and Equity Financing
Commitment in full force and effect, and to satisfy the lender's requirements
for the funding thereunder.
9.2 Best Efforts to Close. NWCB shall use its best efforts to obtain the
satisfaction of the conditions to closing that it must satisfy under this
Agreement.
SECTION 10
CONDITIONS TO OBLIGATIONS OF NWCB
The obligations of NWCB hereunder are subject to the following conditions,
which may be waived in writing signed by NWCB, in its sole discretion, except
for paragraph 10.2 which may not be waived:
10.1 Approval Order. The Approval Order shall have been entered and shall
have become final and no longer subject to appeal or reconsideration.
10.2 Confirmation Order. The confirmation order shall have been entered.
10.3 Compliance. MBC shall have complied with each of its agreements
contained herein in all material respects, and each of MBC's representations and
warranties contained herein shall be true in all respects on and as of the date
hereof and the Effective Date, and NWCB shall have received a certificate of
MBC, dated the Effective Date, to such effect.
10.4 ▇▇▇▇▇▇ Consulting Agreement. ▇▇▇▇ ▇▇▇▇▇▇ shall have executed and
delivered an consulting agreement (the "▇▇▇▇▇▇ Consulting Agreement") with NWCB
and the other agreements in the form of Exhibit A attached hereto.
10.5 ▇. ▇▇▇▇▇▇▇ Employment Agreement. ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed and
delivered an employment agreement (the "▇. ▇▇▇▇▇▇▇ Employment Agreement") with
NWCB and the other agreements in the form of Exhibit B attached hereto.
10.6 ▇. ▇▇▇▇▇▇▇ Employment. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have
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executed and delivered an employment agreement (the "▇. ▇▇▇▇▇▇▇ Employment
Agreement") with NWCB and the other agreements in the form of Exhibit C attached
hereto.
10.7 Approvals. All consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation or any agreement or
otherwise which must be obtained or satisfied by MBC and which are necessary for
the consummation of the transactions contemplated by this Agreement have been
obtained and satisfied.
10.8 No Adverse Change. There shall have been no material adverse change,
from the date hereof to the Effective Date, in the business, assets, customers,
suppliers, distributors, prospects, or financial condition of MBC.
10.9 Force and Effect. MBC's existing leases, franchise agreements and
other material contracts shall be in force and effect when assumed.
SECTION 11
CONDITIONS TO OBLIGATIONS OF MBC
The obligations of MBC hereunder, other than those set forth in sections
8.1, 8.2, 8.3, 8.4, and 8.5 are subject to the following conditions:
11.1 Confirmation Order. The confirmation order shall have been entered.
11.2 Compliance. NWCB shall have complied with each of its agreements
contained herein in all material respects and each of its representations and
warranties contained herein shall be true in all material respects on and as of
the Effective Date; and MBC shall have received a certificate of NWCB, dated the
Effective Date, to each such effect.
11.3 Other Agreements. NWCB shall have executed and delivered the ▇▇▇▇▇▇
Consulting Agreement, the ▇. ▇▇▇▇▇▇▇ Employment Agreement, and the ▇. ▇▇▇▇▇▇▇
Employment Agreement.
SECTION 12
INDEMNIFICATION
12.1 Indemnification. For the purposed hereof, the term "Indemnified
Persons" shall include ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇
▇▇▇▇▇▇▇.
12.2 Subject Claims. For the purposes hereof, the term "Subject Claims"
shall include claims made against the Indemnified
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Persons pursuant to the following:
(a) The consolidated class action entitled "▇▇▇▇▇ ▇▇▇▇▇▇▇, et al v. ▇▇▇▇
▇▇▇▇▇▇, et al." filed in the United States District Court, District of New
Jersey, File No. 96-CV-3351.
(b) Claims made for alleged violation of the securities laws, rules and
regulations promulgated under the law of the United States or the laws of any
state, (collectively "Securities Laws") based on acts or omissions of the
Indemnified Persons alleged to have occurred on or prior to the date of the
filing of the bankruptcy petition by MBC.
12.3 Liability Insurance. If a Subject Claim is covered by
officers/directors liability insurance of MBC, a requisite claim shall timely be
made by MBC and the Indemnified Person who is entitled to make such a claim in
respect of the Subject Claim (the result being referred to as "Liability
Insurance Indemnification").
12.4 Indemnification. Subject to the provisions hereof (specifically
including the limitation set forth in section 12.7 hereof) NWCB (the
"Indemnifying Person") shall indemnify and hold harmless the Indemnified Persons
from (i) all liabilities, costs, and expenses in regard to the Subject Claims
described in section 12.2(a) hereof, (ii) all defense costs associated with the
Subject Claims described in section 12.2(b) hereof.
12.5 Claims for Indemnification. Whenever a Subject Claim shall be made,
the Indemnified Person shall promptly notify the Indemnifying Person of the
Subject Claim and, when known, the facts constituting the basis for the Subject
Claim, and the amount or an estimate of the amount of the liability arising
therefrom. The Indemnified Person shall not settle or compromise any Subject
Claim for which he is entitled to indemnification hereunder without the prior
written consent of the Indemnifying Person.
12.6 Defense of Claims. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any Subject Claim or legal
proceeding, the Indemnifying Person at its sole cost and expense may, upon
written notice to the Indemnified Person, assume the defense of such Subject
Claim or legal proceeding. The Indemnified Person shall participate in (but not
control) the defense of any such action, with his counsel and at his own
expense. The Indemnified Person shall promptly and timely cooperate in all
respects with the Indemnifying Person and provide all documents, information and
assistance as may be reasonably requested by the Indemnifying Person.
Notwithstanding anything to the contrary herein, to be entitled to
indemnification hereunder, the Indemnified Person shall use its best efforts to
defend against
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any Subject Claim.
12.7 Limitation. Anything herein to the contrary notwithstanding, NWCB
shall not be required to expend in excess of $1.25 million in the aggregate in
indemnifying Subject Claims identified in Section 12.2(a) hereof or $250,000 in
indemnifying Subject Claims identified in Section 12.2(b) hereof.
12.8 Claim. Each Indemnified Person represents to NWCB that he has made a
claim against MBC for all indemnification rights of such Indemnified Person.
Such claims shall be assigned to, and shall be enforceable by, the Indemnifying
Person which claims shall be expunged on the Effective Date.
12.9 Representation. Each of the Indemnified Persons represents and
warrants that he knows of no claims of the type described in Section 12.2(b) and
knows of no basis on which such claims could reasonably be made.
SECTION 13
PUBLIC ANNOUNCEMENTS
The parties agree that, except as otherwise required by law, any and all
public announcements or other public communications concerning this Agreement
made prior to the Effective Date shall be made by NWCB subject to the reasonable
approval of MBC.
SECTION 14
TERMINATION
14.1 Termination for Cause. This Agreement may be terminated by NWCB if at
any time prior to the Effective Date there shall occur a material breach of any
of the representations, warranties or covenants of MBC or MBC shall fail to
perform any condition or obligation hereunder, and may be terminated by MBC, if
at any time prior to the Effective Date there shall occur a material breach of
any of the representations, warranties or covenants of NWCB or NWCB shall fail
to perform any condition or obligation hereunder, provided that in either case,
the non-defaulting party has given the defaulting party ten (10) days' notice of
such default, and such default has not been cured or the cure thereof has not
commenced within such ten-day period.
14.2 Certain Events. NWCB may terminate this Agreement (i) if the
Disclosure Schedule is not delivered to NWCB and the motion for entry of the
Approval Order is not filed with the Bankruptcy Court on or before seven (7)
days after execution of this Agreement, (ii) the Approval Order has been denied
or has not been entered and become final and not subject to appeal or
reconsideration by
-▇▇-
▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) if the Plan and the associated disclosure statement
has not been filed with the Bankruptcy Court by September 4, 1998, (iv) if the
Plan has been denied or has not been confirmed by order of the Bankruptcy Court
by November 30, 1998, or (v) if any of MBC's chapter 11 cases have been
dismissed or converted to chapter 7 cases. In each of the foregoing events time
is of the essence. MBC may terminate this Agreement (x) if confirmation of the
Plan is denied because of NWCB's noncompliance with 11 U.S.C. ss.1129(a)(11),
(y) if the Plan has not been confirmed by November 30, 1998 because NWCB is
unable to demonstrate compliance with 11 U.S.C. ss.1129(a)(11), or (z) if the
Effective Date has not occurred by the sixtieth (60th) day after entry of the
order confirming the Plan because NWCB is unable to meet its payment obligations
under Section 3 hereof.
14.3 Effect of Termination. If this Agreement terminates because of the
failure to achieve any of the events set forth by the dates specified in
subsections (i), (ii), (iii), (x), (y) or (z) of section 14.2, such termination
notice must be delivered within ten days after the failure of such event to
timely occur, and NWCB will not be entitled to reimbursement of expenses under
this section 14.3. If the Agreement is terminated other than upon a default by
NWCB, NWCB shall receive the Escrow Amount and shall receive, as an allowed
administrative claim, repayment of its out of pocket expenses and employee time
expended in connection with the transactions contemplated hereby (up to a cap of
$250,000). If the Agreement is terminated upon a default by NWCB, MBC shall be
entitled to recover its actual damages, if any, and upon judgment therefor, to
apply the Escrow Amount in payment thereof. Upon such application, all remaining
Escrow Amount, if any, shall be paid to NWCB.
SECTION 15
MISCELLANEOUS
15.1 Expenses. All legal and other costs and expenses incurred in
connection with the negotiation and execution of this Agreement, and the
consummation of the transactions contemplated hereby, shall be paid by the party
incurring such expenses, except as otherwise expressly set forth herein.
15.2 No Assignment. This Agreement shall be binding upon the parties, their
successors and legal representatives. This Agreement shall not be assigned by
any party without the prior written consent of the other party.
15.3 Notices. All notices and other communications hereunder shall be given
in writing and shall be deemed given when delivered personally, when received by
facsimile transmission or on the first
-18-
attempted date of delivery after being mailed by certified or registered mail,
return receipt requested, to the parties at the addresses set forth below or at
such other address for a party as shall be specified by like notice:
If to NWCB, to:
New World Coffee & Bagels, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: President
With a copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Kasowitz, Benson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to MBC, to:
Manhattan Bagel Company, Inc., Debtor in Possession
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chairman
With a copy to:
▇▇▇▇▇▇▇, Del Deo, Dolan, Griffinger & ▇▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
All notices to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
15.4 Counterparts. This Agreement may be executed in two or more
counterparts for the convenience of the parties hereto, each of which executed
counterparts shall be deemed an original but all of such executed counterparts
shall be considered one and the same
-19-
Agreement.
15.5 Merger. This Agreement and the Schedules and Exhibits hereto supersede
all prior agreements between the parties, whether written or oral, are intended
as a complete and exclusive statement of the terms of the agreements between the
parties and may not be changed or terminated orally but only in a writing signed
by the parties. The headings and captions contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Nothing in this Agreement, whether express or
implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement. This Agreement has been entered into and
is to be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MANHATTAN BAGEL COMPANY
Debtor in Possession
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇▇▇▇, Chairman
NEW WORLD COFFEE & BAGELS, INC.
By /s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
R. ▇▇▇▇▇ ▇▇▇▇▇▇, President
SECTION 12 AGREED TO:
/s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
SECTION 2 AGREED TO:
▇▇▇▇▇▇▇ Del Deo, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------
A Member of the Firm
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CONSENTED TO OTHER THAN AS TO SECTION 8.9:
The Official Committee of Unsecured Creditors
of Manhattan Bagel Company, Inc.
By: /s/
---------------------
Its:
------------------
By: /s/
---------------------
Its:
------------------
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EXHIBITS
EXHIBITS
A ▇▇▇▇▇▇ Employment Agreement, Stock Purchase and Restrictive
Covenant Agreement, and Stock Option Agreement.
B ▇. ▇▇▇▇▇▇▇ Employment Agreement, Stock Purchase and Restrictive
Covenant Agreement, and Stock Option Agreement.
C ▇. ▇▇▇▇▇▇▇ Employment Agreement, Stock Purchase and Restrictive
Covenant Agreement, and Stock Option Agreement.
6.7 To be supplied.
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EXHIBIT A
CONSULTING AGREEMENT
AGREEMENT effective as of the ____ day of ____________, 1998, by and
between NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation (hereinafter
referred to as the "Company"), having a place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, residing at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter referred to as the "Consultant").
RECITALS
The Company desires to retain the services of the Consultant, and the
Consultant desires to provide his services, on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties herein, the parties hereto agree as follows:
1. Services of Consultant. The Consultant is hereby engaged as general
advisor and consultant to the Company on all matters pertaining to the business
of the Company and its subsidiaries, and will provide such advice and
consultation as the Company may reasonably request, in each case consistent with
the Consultant's experience and expertise. The Consultant shall not be required
to travel more than 100 miles from the Company's Eatontown, New Jersey facility
without his consent and may consult in person or via telephone or written
report. Consulting under this Agreement shall not materially interfere with
Consultant's other business activities and shall not exceed an amount of time
which is reasonably required for the performance of the Consultant's duties. The
Consultant shall perform his services under this Agreement solely as an
independent contractor and not as an agent or employee of the Company or any
subsidiary of the Company. The Company shall not be responsible for the payment
of any withholding taxes, FICA, workers' compensation, insurance, disability
benefits or any fringe benefits and the Consultant is not entitled to any of the
same. The only compensation and benefits to which the Consultant shall be
entitled hereunder are as set forth in Section 3 and 4 hereof. The Company shall
not be responsible for any injury, loss or damage suffered by Consultant arising
out of the performance of his duties hereunder. In connection with his duties
hereunder, the Consultant shall have no right to bind the Company or any of its
subsidiaries.
2. Term. The term (the "Term") for the services described in Section 1
hereof, except if earlier terminated pursuant to Section 5 hereof, shall be for
a period of two (2) years from the Effective Date as defined in the Acquisition
Agreement between the Company and Manhattan Bagel Co., Inc. dated as of July 28,
1998.
3. Compensation.
(a) The compensation for the services to be rendered by the Consultant, and
the other agreements of the Consultant hereunder, including without limitation
those set forth in Sections 6, shall be the sum of $100,000.00 per annum
("Annual Fee"), payable in equal monthly installments in advance.
(b) In addition, the Consultant shall be entitled to a performance bonus of
up to fifty (50%) of the Annual Fee as determined by the Board of Directors. The
performance bonus shall be payable at its customary time following the end of
each fiscal year of the Company during the term hereof (pro-rated if services
are rendered during only a part of such fiscal year). The performance bonus
shall be paid if the annual operating budget of the Company, for such fiscal
year has been achieved. The annual operating budget shall be formulated by
management of the Company, subject to approval of the Board of Directors.
(c) It is anticipated that the Consultant shall, during the 18 months from
the date hereof, continue his existing medical insurance under a COBRA election.
The Company shall pay the medical insurance premiums for the Consultant during
such period, and shall reimburse the Consultant thereafter and during the Term
on a monthly basis for medical insurance paid for by the Consultant, up to the
cost of insurance per month under the the COBRA election, unless the Consultant
is then obtaining medical insurance from another person as part of his
employment or consulting activities.
(d) During the Term, the Company shall pay the Consultant an automobile
allowance equal to the Consultant's present automobile rental and insurance cost
4. Expenses. The Consultant shall be entitled to reimbursement for expenses
reasonably incurred by him in the course of his duties hereunder upon his
accounting therefor, provided that no expenses shall be incurred by the
Consultant without the prior approval of the Company.
5. Termination.
(a) The term of this Agreement may be ended prior to the date specified in
Section 2, under the following conditions:
(i) Upon the death of the Consultant;
-2-
(ii) Upon notice to the Consultant, if the Consultant has committed
any act of fraud, embezzlement or misappropriation, which notice shall be
accompanied by the written evidence, or a summary of the other evidence, on
which the Company relied in giving such notice;
(iii) Thirty (30) days after notice to the Consultant of his breach of
his duties hereunder (other than as set forth in (ii) above), unless such
breach is fully remedied before the end of such thirty (30) day period or,
if such breach cannot be remedied within thirty (30) days, unless the
Consultant continues to use his best efforts until such breach is remedied.
(iv) If the Consultant shall be both unavailable for a period of at
least 90 days continuously or a total of 90 days within any 180 day period,
and shall be so mentally or physically incapacitated or disabled as to be
unable to perform his duties hereunder during such period and at the time
of termination.
(b) Upon any termination of this Agreement under Section 6(a), the Company
shall not be obligated to pay any compensation or expenses or provide other
benefits other than those accrued to the date of termination. The Consultant
shall also deliver to the Company all property of the Company which may then be
in the Consultant's possession.
6. Non-Disclosure of Confidential Information. The Consultant acknowledges
that it is the policy of the Company to maintain as secret and confidential all
information relating to its products, services and operations and the identity
of suppliers, franchisees and customers (the "Confidential Information"), and
the Consultant further acknowledges that the Confidential Information is of
substantial value to the Company. Accordingly, the Consultant agrees that he
will not, during or after the termination of this Agreement, disclose or use any
Confidential Information other than in connection with the business of the
Company.
7. Indemnification.
(a) The Consultant covenants and agrees to perform his services in
compliance in all material respects with all applicable laws, rules and
regulations of governmental agencies and in a manner which does not violate the
rights of any third person, and to timely pay all taxes relating to all payments
hereunder. The Consultant shall indemnify and hold harmless the Company from and
against all costs and expenses which the Company may incur, including by way of
example and not limitation, reasonable counsel fees and disbursements, as a
result of the violation by the Consultant
-3-
of his covenants and agreements set forth in this Agreement.
(b) Provided the Consultant has complied with his duties hereunder, the
Company shall indemnify and hold harmless the Consultant from and against all
costs and expenses which the Consultant may incur, including by way of example
and not limitation, reasonable counsel fees and disbursements, as a result of
the rendering of services to the Company in accordance with this Agreement,
excluding the matters covered under Section 3 hereof.
8. General.
(a) Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and shall be deemed given when
delivered to a party or on the first attempted date of delivery after the same
is mailed to a party, certified mail, return receipt requested, to the address
set forth herein or such other address of which notice is given in accordance
herewith.
(b) Representation.
(i) The Consultant represents that he is not bound by any agreement,
court order or other obligation which may relate, directly or indirectly,
to his obligations hereunder.
(ii) The Company represents that the execution, delivery and
performance by the Company of this Agreement has been duly authorized by
all requisite corporate action by the Company and that this Agreement has
been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable in accordance with its
terms.
(c) Modification and Waiver. This Agreement may not be changed or
terminated orally but only in a writing signed by the parties hereto, and no
waiver of a breach of any provision hereof shall be effective unless in writing
signed by the party against whom enforcement is sought. No such waiver shall
operate or be construed as a waiver of any subsequent breach of such provisions.
(d) Applicable Law. This Agreement shall be subject to and governed by the
laws of the State of New York.
(e) Controversies. The parties agree that any legal proceedings hereunder
shall be brought only in the courts of the State of New York or the United
-4-
States of America, sitting in the City, County and State of New York.
(f) Captions. The underlined captions set forth herein are descriptive
only, and shall not be deemed to be a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ [illegible]
--------------------------------
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇, Individually
-5-
STOCK PURCHASE
AND
RESTRICTIVE COVENANT
AGREEMENT
July 28, 1998
To the Investor named on the
Investor Signature Page attached hereto
Dear Sir:
The undersigned, NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation
(the "Company"), hereby agrees with the person named on an Investor Signature
Page attached hereto (the "Investor") as follows:
SECTION 1. Issuance of the Subject Shares. Subject to the terms and
conditions hereof, the Company has authorized the issuance and sale at the
Closing (as hereinafter defined) of the number of shares of Common Stock, par
value $.001 per share (the "Subject Shares") set forth on the Investor Signature
Page, for sale at a price of $0.01 per share. Such sale is also expressly in
consideration of the covenants of the Investor set forth in Section 10 and
Section 11 of this Agreement. The Investor acknowledges that there is
substantial consideration for such covenants, and that the performance of the
same is material to this Agreement.
SECTION 2. Agreement to Sell and Purchase the Subject Shares. At the
Closing, the Company shall sell to the Investor, and the Investor shall purchase
from the Company, upon the terms and conditions hereinafter set forth, the
Subject Shares subscribed for by the Investor. Payment shall be made in cash at
such time.
SECTION 3. Delivery of the Subject Shares The closing (the "Closing")
hereunder with respect to the Subject Shares shall take place at the offices of
the Company, simultaneously with the commencement of the employment or
consultancy of the Investor by the Company. At the Closing the Company shall
issue to the Investor a certificate for the Subject Shares subscribed for by the
Investor. The certificate shall bear a restrictive legend in accordance with
applicable law and a stop transfer order in accordance with such legend shall be
placed against transfer of the Subject Shares
1
represented thereby.
SECTION 4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor as follows:
4.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and as proposed to be conducted and
to carry out the transactions contemplated hereby.
4.2 Compliance. The Company (a) has complied, and in carrying out its
contemplated business will be in compliance, in all material respects, with all
Federal, state, local and foreign laws, ordinances, regulations and orders
applicable to it, its business or the ownership of its assets, and (b) will
obtain all Federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business.
4.3 Authorization of this Agreement. The execution, delivery and
performance by the Company of this Agreement, and the issuance and delivery of
the Subject Shares being subscribed for have been duly authorized by all
requisite corporate action by the Company; and this Agreement been duly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement and the issuance, sale and delivery of the
Subject Shares being purchased, and compliance with the provisions hereof by the
Company will not (a) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to the Company or
any of its properties or assets or (b) conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration under), or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company under, the Certificate of Incorporation or By-laws of the Company
(in each case as amended to the date hereof), or any note, indenture, mortgage,
lease agreement or other contract, agreement or instrument to which the Company
is a party or by which it or any of its property is bound or affected.
4.4 Use of Proceeds. The net proceeds received by the Company from the sale
of the Subject Shares shall be used by the Company for general working capital
purposes.
4.5 No Governmental Consent or Approval Required. Except for any filings
2
under Regulation D of the General Rules and Regulations under the Securities Act
of 1933 (the "Securities Act") and the filing of any notice subsequent to the
Closing that may be required under applicable Federal and/or state securities
laws, no consent, approval or authorization of, or declaration to, or of or
filing with, any governmental or regulatory authority is required for the valid
authorization, execution and delivery by the Company of this Agreement or for
the valid authorization, issuance, sale and delivery of the Subject Shares, or,
if so required, has been duly and effectively obtained or made.
4.6 Brokers. The Company has not, nor have any of its officers, directors
or employees, employed any broker or finder in connection with the transactions
contemplated by this Agreement.
SECTION 5. Representations and Warranties of the Investors.
5.1 Investment. The Investor, represents and warrants to the Company that
the Investor is acquiring the Subject Shares, for his own account, for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act.
5.2 No Registration. The Investor understands that the Subject Shares have
not been registered under the Securities Act by reason of their issuance by the
Company in a transaction exempt from the registration requirements of the
Securities Act; and that the Subject Shares must be held by the Investor
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
5.3 Rule 144. The Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to the
Investors) issued under the Securities Act depends on the satisfaction of
various conditions and that, if applicable, Rule 144 affords the basis for sales
only in limited amounts.
5.4 [Omitted]
5.5 Due Authorization. The Investor represents and warrants to the Company
that this Agreement has been duly executed and delivered by the Investor and
constitutes the valid and binding obligations of the Investor, enforceable in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity).
5.6 No Transfer. The Investor represents and warrants to the Company that
it or he will not transfer any of the Subject Shares except in compliance with
the provisions of this Agreement.
3
5.7 Accredited Investor. The Investor is an Accredited Investor as such
term is defined in the Rules and Regulations under the Securities Act.
5.8 Information. The Investor acknowledges that the Company has provided
such information has the Investor has requested.
SECTION 6. Conditions Precedent to Closing by the Investors on the Date
Hereof. The obligations of the Investor to purchase and pay for the Subject
Shares are subject to the following conditions precedent, any of which may be
waived by the Investor:
6.1 Corporate Proceedings; Consents, Etc. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be satisfactory in
form and substance to the Investor, who shall have received all such originals
or certified or other copies of such documents as he may reasonably request.
6.2 Accuracy of Representations and Warranties. All representations and
warranties of the Company contained herein shall be true and correct in all
material respects on and as of the date hereof.
SECTION 7. Registration Rights. The Company, at the request of the holders
of at least two thirds of the Subject Shares (the "Group Subject Shares") sold
under this Agreement and two similar agreements of even date herewith, made on
or after one year from the date of sale of the Subject Shares, shall file a
registration statement including the Group Subject Shares on one(l) occasion
only. The Company shall pay all expenses in connection with the registration
statements, except that the Investor shall pay his own selling commissions and
discounts. The Company shall, at the time of such registration(s), enter into a
customary registration rights agreement with the Investor relating to, among
other matters, indemnity and payment of expenses, etc.
SECTION 8. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender to the Company of certificates representing the Subject Shares, the
Company at its expense will issue in exchange therefor, and deliver to the
holder thereof, a new certificate or certificates, in such denomination or
denominations as may be requested by such holder. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
or any certificate representing any Subject Shares and in case of any such loss,
theft or destruction, upon delivery of an indemnity agreement satisfactory to
the Company, or in case of any such mutilation, upon surrender and cancellation
of such certificate, the Company at its expense will issue and deliver to the
4
holder thereof a new certificate of like tenor, in lieu of such lost, stolen,
destroyed or mutilated instrument.
SECTION 9. Survival of Representations, Warranties and Agreements; etc. All
representations and warranties hereunder shall survive the Closing until the
third anniversary of the date hereof All statements contained in any certificate
or other instrument delivered by the Company pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement either at or
prior to the Closing, shall constitute representations and warranties by the
Company under this Agreement. All agreements contained herein shall survive
indefinitely until, by their respective terms they are no longer operative.
SECTION 10. Non-Solicitation. The Investor agrees that for a period of two
(2) years after termination of his employment or consultancy with the Company,
for any reason, he will not (a) solicit a business relationship with persons who
are franchisees or customers of the Company on the date of termination which is
directly or indirectly competitive with the business relationship of the Company
with such persons (i.e.; a business which features coffee and/or bagels), and
(b) solicit the services of persons who are employees of the Company on the date
of termination, or who were employed by the Company at any time within the
period of 180 days prior to such termination, except for employees of the
Company who were terminated by the Company.
SECTION 11. Non-Competition. The Investor agrees that for a period of two
(2) years after the termination of the Investor's employment or consultancy with
the Company, for any reason, he will not, directly or indirectly, within 50
miles of any location operated by the Company or a franchisee, conduct or have
an interest in, or consult for or have any other relationship with any business
competitive with the business engaged in by the Company or such franchisee
(i.e.; a business which features coffee and/or bagels). The parties hereto agree
that the duration and geographic scope of the non-competition provision set
forth in this Section 11 are reasonable. In the event that any court determines
that the duration or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the parties hereto agree that
the provision shall remain in full force and effect for the greatest time period
and in the greatest area that would not render it unenforceable. The parties
intend that this non-competition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. The parties agree that damages are an inadequate
remedy for any breach of Sections 10 and 11 and that the Company shall, whether
or not it is pursuing any potential remedies at law, be entitled to equitable
relief in the form of preliminary and permanent injunctions without bond or
other security upon
5
any actual or threatened breach of such provisions.
SECTION 12. Resale of Stock. In the event that the Investor voluntarily
resigns his employment or consultancy with the Company, as distinct from his
death or disability (a "resignation"), during the periods described below, he
shall be required to resell certain Subject Shares to the Company at his cost
therefor, as set forth herein, and the Company shall repurchase the same on such
terms, and a legend shall be placed on the certificates representing the Subject
Shares to the following effect: The shares represented hereby are subject, in
whole or in part, to sale to and repurchase by the Company, pursuant to the
terms of a Stock Purchase and Restrictive Covenant Agreement dated [the date
thereof. If the Resignation occurs within twelve (12) months from the date of
the sale of the Subject Shares, all of the Subject Shares shall be sold and
repurchased as set forth above, and if the Resignation occurs after twelve (12)
months and before the end of eighteen (18) months from the date of the sale of
the Subject Shares, one half (1/2) of the Subject Shares shall be sold and
repurchased as set forth above.
SECTION 13 Successors and Assigns. This Agreement shall be binding upon the
parties, their successors, legal representatives and assigns.
SECTION 14. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto or in connection with the
transactions contemplated hereby which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 15. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor listing all parties:
(i) If to the Company, to:
New World Coffee & Bagels, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
6
(ii) If to the Investor, to his address set forth as the Investor
Signature Page attached hereto.
All such notices, advices and communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery and
(b) in the case of mailing, on the third business day following the date of such
mailing.
SECTION 16. This Agreement may be executed in counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one Agreement.
SECTION 17. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 18. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 19. Governing Law. This Agreement shall be governed by and
construed in accordance with, (a) the laws of the State of New York applicable
to contracts made and to be performed wholly therein, and (b) the laws of the
State of Delaware applicable to corporations organized under the laws of such
State.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first written above.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ [ILLEGIBLE]
---------------------------------
Authorized Signature
7
INVESTOR SIGNATURE PAGE
NAME/ADDRESS/EIN
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Name
Address
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▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
EIN/SS
###-##-####
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇
NUMBER OF SUBJECT SHARES
PURCHASED 240,000
PURCHASE PRICE $2,400.00
8
NEW WORLD COFFEE & BAGELS, INC.
STOCK OPTION AGREEMENT
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
I. NOTICE OF OPTION GRANT
▇▇▇▇ ▇▇▇▇▇▇ ("Optionee") has been granted an option ("Option") to purchase
common stock of the Company, subject to the terms and conditions of this Option
Agreement, as follows:
Vesting Commencement Date Effective Date
Exercise Price per Share 1.656
Number of Shares Granted 250,000
Term Expiration Date: Five Years after the Effective Date
Vesting Schedule:
This Option may be exercised, in whole or in part, following the Vesting
Commencement Date.
II. DEFINITIONS
As used in this Option Agreement, the following definitions shall apply:
(a) "Administrator" means the Board of Directors or any if its Committees
appointed to administer this Option Agreement, which shall be done in
accordance with Rule 16b-3 of the Securities Exchange Act of 1934.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee designated by the Board to administer
the Option Agreement, which Committee shall be constituted in
accordance with Rule 16b-3, and continue to serve its designated
capacity until otherwise directed by the Board.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means New World Coffee & Bagels, Inc., a Delaware
corporation.
(g) "Consultant" means any person, including an advisor, who is engaged by
the Company or any Parent or Subsidiary to render services and is
compensated for such services.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case
of: (i) any leave of absence approved by the Company, including sick
leave, military leave, or (ii) transfers between locations of the
Company or between the Company, its Parent, it Subsidiaries or its
successor.
(i) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "Effective Date" means the date as defined in the Acquisition
Agreement between the Company and Manhattan Bagel Company, Inc.
(k) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Optionee" means an Employee or Consultant who received an Option.
(n) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(0 of the Code.
III. AGREEMENT
1. Grant of Option. New World Coffee & Bagels, Inc., a Delaware corporation
(the "Company"), hereby grants to the Optionee the Option to purchase a total
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
"Exercise Price") subject to the terms, definitions and provisions set forth
herein. This Option Agreement shall become effective upon the Effective Date.
2. Exercise of Option. This Option shall be exercisable during its term in
accordance with the Exercise Schedule set out in the Notice of Grant as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a share.
-2-
(b) In no event may this Option be exercised after the date of
expiration of the term of this option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election
to exercise the Option, the number of Shares in respect of which the option
is being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of this
Agreement.
Such written notice shall be signed by the Optionee and shall be delivered
in person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option shall
be deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his Investment Representation Statement in
the form attached hereto as Exhibit B.
4 Method of Payment. Payment of the Exercise Price shall be by any of the
following or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of Common Stock options of the Company which have a
fair market value on the date of surrender equal to the Exercise Price of
the Shares as to which the Option is being exercised; or
(iv) surrender of other shares of Common stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a fair market value on the date of
surrender equal to the Exercise Price of the Shares as to which the Option
is being exercised; or
(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect and
-3-
(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect and exercise the Option and delivery to the Company
of the sale proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon which exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates "For Cause", Optionee shall
forfeit, as of the date of such termination (the "Termination Date"), all rights
under this Option Agreement, including any rights to exercise any and all
Options whether vested or not. "For Cause" shall mean termination by the Company
of Optionee's employment by the Company by reason of Optionee's fraud,
embezzlement, or misappropriation, notice of which shall be accompanied by the
written evidence, or a summary of the other evidence, on which the Company
relied in giving such notice.
7. Non-transferability of Option. This Option may not be transferred in any
manner otherwise than by will or trust or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option. Death of Optionee shall not vitiate
terms of this Agreement
9. Increase in Total Number of Shares Granted. The period from the date
hereof to the third anniversary of such date is referred to as the Subject
Period. Unless, during the Subject Period, the Market Price, as defined below,
of the Common Stock, as presently constituted, closes in excess of $9.656 per
share of Common Stock for a minimum of five days, an additional Number Of Shares
Granted, not to exceed 125,000 additional shares, shall, on one occasion only,
be added to the terms of this Agreement as follows:
Additional Option Shares = (A-(B- 1.656))/A multiplied by C, where
A = $8.00 (per share, adjusted for combinations, splits and
reorganizations)
B = The average of the five highest closing prices during the Subject
Period
-4-
C = The number of Option Shares stated in this Agreement
The closing price for a day shall be the last reported sale price or, in case no
such reported sale took place on such day, the average of the last reported bid
and asked prices, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") on such day, or if, on any day in
question, the Common Stock shall not be quoted on the NASDAQ, then such price
shall be equal to the last reported bid and asked prices on such day as reported
by any similar reputable quotation and reporting service.
NEW WORLD COFFEE & BAGELS, INC.
a Delaware corporation
By: /s/ [illegible]
----------------------------
Title:
-------------------------
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN
THE COMPANY'S STOCK OPTION PLAN, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of this Option and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof Optionee has reviewed
this Option in its entirety, has had an opportunity to obtain the advise of
counsel prior to executing this Option and fully understands all provisions of
the Option.
Dated: 7/28/98 Optionee: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------
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EXHIBIT A
EXERCISE NOTICE
New World Coffee & Bagels, Inc.
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, _____________ ,l9__ the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_______________ shares of the Common Stock (the "Shares") of New World Coffee &
Bagels, Inc., (the "Company") under and pursuant to the Optionee's Stock Option
Agreement ("Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and agrees to abide by and be
bound by its terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the optioned Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised.
4. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS
ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer
on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
5. Successors and Assigns. The Company will assign its rights, but shall
remain liable hereunder, under this Agreement to single or multiple assignees,
and this Agreement shall inure to the benefit of the successors and assigns of
the Company, in connection with the sale of all or substantially all of its
assets. Subject to the restrictions on transfer hereunder set forth, this
Agreement shall be binding upon optionee and his or her heirs, executors,
administrators, successors and assigns.
6. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
7. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
8. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement
9. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
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10. Entire Agreement. The Notice of Grant/Option Agreement is incorporated
herein by reference. This Agreement, the Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof and is governed by state
law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
New World Coffee & Bagels Inc.
By:
---------------------------------
Title:
---------------------------------- ------------------------------
Address: Address:
---------------------------------- ------------------------------------
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: NEW WORLD COFFEE & BAGELS, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for Investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection Optionee understands
that in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statues, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee understands that the certificate evidencing
the securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act; which, in substance permit limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited broker's transactions or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(c), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than one year, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, Optionee shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period following the effective date of a registration statement of
the Company filed under the 1933 Act; provided, however, that such restriction
shall only apply to the first registration statement of the Company to become
effective under the 1933 Act which include securities to be sold on behalf of
the Company to the public in an underwritten public offering under the 1933 Act.
The Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
rules 144 or 701 will
-2-
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk, Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
-----------------------------------
Date:
------------------------------
-3-
EXHIBIT B
EMPLOYMENT AGREEMENT
AGREEMENT made as of the ____ day of ____________, 1998, by and between NEW
WORLD COFFEE & BAGELS, INC., a Delaware corporation (hereinafter referred to as
the "Company"), having a place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇, residing at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(hereinafter referred to as the "Employee").
WITNESSETH:
In consideration of the mutual covenants herein contained, the parties
hereto agree as follows.
1. Employment. The Company hereby agrees to employ the Employee, and the
Employee hereby agrees to accept such employment, subject to the terms and
conditions hereinafter set forth. The Employee shall be elected a Vice-President
of the Company.
2. Term. The term of the Employee's employment hereunder, except if earlier
terminated pursuant to Paragraph 6 hereof, shall be for a period of two (2)
years from the Effective Date as defined in the Acquisition Agreement between
the Company and Manhattan Bagel Co., Inc. dated as of July 28, 1998. The term
shall then continue from year to year thereafter unless either party gives
notice to the contrary to the other party not less than 90 days prior to the
commencement of any such one year extension period.
3. Duties.
(a) During the continuance of this Agreement, the Employee agrees to
devote his attention, full time and best efforts to the rendition of his
services hereunder, which shall include such executive responsibilities as
may be assigned to him from time to time by the President of the Company.
Subject to the control of the Board of Directors, the Employee shall
perform such executive duties as are assigned by the President of the
Company. The Employee will be based at the Company's Eatontown, New Jersey
facility.
(b) The Employee shall be entitled to make personal investments,
provided that none of the same are directly or indirectly competitive with
the business of the Company and further provided that any such activities
do not detract from the services due from the Employee hereunder. Purchases
of up to 2% of the stock of publicly traded companies shall not be
restricted.
4. Compensation. In consideration of all of the services to be rendered by
the Employee hereunder, the Employee shall be paid, and he agrees to accept
compensation as follows:
(a) Compensation at an annual rate of One Hundred Thirty Two Thousand
Five Hundred Dollars ($132,500.00), payable bi-weekly less applicable
withholding taxes, subject to such increases, if any, as may be approved by
the Board of Directors of the Company (the rate per annum which is in
effect from time to time being referred to herein as the "Base Salary" of
the Employee). The Base Salary shall be increased, on each anniversary of
the term, by multiplying the Base Salary by a fraction, the numerator of
which is the consumer price index, all items, New York metropolitan area,
or a successor index (the "Index"), published by the United States
Department of Commerce for the month prior to such anniversary, and the
denominator of which is the Index published for the month preceding the
commencement of the term.
(b) With respect to each fiscal year of the Company, (i) a performance
bonus of up to twenty five (25%) percent of the Employee's Base Salary, as
determined by the Board of Directors, if the annual operating budget of the
Company for such fiscal year have been achieved; and (ii) a performance
bonus of up to twenty five (25%) percent of the Employee's Base Salary, as
determined by the Board of Directors, if the budget for operation for which
the Employee is responsible for such fiscal year have been achieved. Each
performance bonus shall be payable at its customary time following the end
of each fiscal year of the Company during the term hereof (pro-rated if
services are rendered during only a part of such fiscal year). The annual
operating budget and operations budget shall be formulated by management of
the Company, subject to approval of the Board of Directors.
(c) Such stock option grants as are determined by the Compensation
Committee of the Board of Directors.
(d) During the Term, an automobile allowance equal to the Employee's
present automobile rental and insurance cost..
(e) Three (3) weeks of paid vacation during each year of the Term.
5. Benefits.
(a) The Employee shall be entitled to such benefits as may be made
available by the Company to its executives, including sick leave, medical
and life insurance.
(b) Except as hereinafter provided in Paragraph 6 hereof, the Company
shall pay the Employee, for any period during which he is unable fully to
perform his duties because of physical or mental disability or incapacity,
an amount equal to the
-2-
compensation due him for such period less the aggregate amount of all
income disability benefits which he may receive or to which he may be
entitled under or by reason of (i) any group health or accident insurance
plan of the Company; (ii) any applicable compulsory State disability law;
(iii) the Federal Social Security Act; and (iv) any applicable workmen's
compensation law or similar law.
(c) The Employee shall be entitled to reimbursement for expenses
reasonably and necessarily incurred by him in the course of his duties,
upon accounting therefor.
(d) The Employee shall be entitled to indemnification as provided by
the By-Laws of the Company and applicable law, and shall also be covered by
existing officer/director liability insurance.
6. Termination.
(a) The term of this Agreement may be ended prior to the date
specified in Paragraph 2, under the following conditions:
(i) Upon the death of the Employee.
(ii) Upon notice to the Employee, if the Employee has committed
any act of fraud, embezzlement or misappropriation.
(iii) Thirty (30) days after notice to the Employee of his breach
of his duties hereunder (other than as set forth in (ii) above),
unless such breach is fully remedied before the end of such thirty
(30) day period or, if such breach cannot be remedied within thirty
(30) days, unless the Employee continues to use his best efforts to
cure the same until such breach is remedied.
(iv) If the Employee shall be both absent for a period of at
least 90 days continuously or a total of 90 days within any 180 day
period, and shall be so mentally or physically incapacitated or
disabled as to be unable to perform his duties hereunder during such
period and at the time of termination.
(b) Upon any termination of this Agreement under Paragraph 6(a), the
Company shall not be obligated to pay any compensation or expenses or
provide other benefits other than those accrued to the date of termination,
and the Employee shall cease
-3-
to hold all positions in the Company, and such termination shall constitute
a voluntary resignation by the Employee of each office and directorship
then held by him, and the Employee shall, if requested and if able, deliver
to the Company confirmatory written resignations. The Employee shall also
deliver to the Company all property of the Company which may then be in the
Employee's possession.
7. Non-Disclosure of Confidential Information. The Employee acknowledges
that it is the policy of the Company to maintain as secret and confidential all
information relating to its products, services and operations and the identity
of suppliers, franchisees and customers (the "Confidential Information"), and
the Employee further acknowledges that the Confidential Information is of
substantial value to the Company. Accordingly, the Employee agrees that he will
not, during or after the termination of this Agreement, disclose or use any
Confidential Information other than in connection with the business of the
Company. There shall be excepted herefrom any information that the Employee had
relating to the business of the Company before he became employed by Manhattan
Bagel Company, Inc., as specifically set forth on Attachment A hereto and signed
by the parties.
8. Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and shall be deemed given when
delivered to a party or five business days after the same is mailed to a party,
certified mail, return receipt requested, to the addresses set forth herein or
such other address of which notice is given in accordance herewith.
9. Modification and Waiver. This Agreement may not be changed or terminated
orally but only in a writing signed by the parties hereto, and no waiver of a
breach of any provision hereof shall be effective unless in writing signed by
the party against whom enforcement is sought. No such waiver shall operate or be
construed as a waiver of any subsequent breach of such provisions.
10. Applicable Law. This Agreement shall be subject to and governed by the
laws of the State of New York.
11. Remedies. The Company, in addition to any other remedy or remedies to
which it may be entitled, shall be entitled to obtain injunctive relief against
any breach or threatened breach by the Employee of the provisions of Section 7
and 8 hereof. In the event of a dispute hereunder, the party prevailing shall be
entitled to recover its reasonable expenses, including counsel fees, from the
party not prevailing.
12. Representation of Employee. The Employee hereby represents and warrants
that the Employee is not bound by any contract, agreement, court order or
decision which
-4-
conflicts in any manner with the duties to be performed by the Employee
hereunder or which would limit, in any respect, the right of the Employee to use
any of the Employee's knowledge or experience in the performance of the
Employee's duties hereunder.
13. Representation of the Company. The execution, delivery and performance
by the Company of this Agreement has been duly authorized by all requisite
corporate action by the Company and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms.
14. Captions. The underlined captions set forth herein are descriptive
only, and shall not be deemed to be a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ ILLEGIBLE
-------------------------------
Authorized Signature
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Individually
-5-
ATTACHMENT A
PRIOR INFORMATION
NEW WORLD COFFEE & BAGELS, INC.
By /s/ ILLEGIBLE
-------------------------------
Authorized Signature
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Individually
-6-
STOCK PURCHASE
AND
RESTRICTIVE COVENANT
AGREEMENT
July 28, 1998
To the Investor named on the
Investor Signature Page attached hereto
Dear Sir:
The undersigned, NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation
(the "Company"), hereby agrees with the person named on an Investor Signature
Page attached hereto (the "Investor") as follows:
SECTION 1. Issuance of the Subject Shares. Subject to the terms and
conditions hereof, the Company has authorized the issuance and sale at the
Closing (as hereinafter defined) of the number of shares of Common Stock, par
value $.001 per share (the "Subject Shares") set forth on the Investor Signature
Page, for sale at a price of $0.01 per share. Such sale is also expressly in
consideration of the covenants of the Investor set forth in Section 10 and
Section 11 of this Agreement. The Investor acknowledges that there is
substantial consideration for such covenants, and that the performance of the
same is material to this Agreement.
SECTION 2. Agreement to Sell and Purchase the Subject Shares. At the
Closing, the Company shall sell to the Investor, and the Investor shall purchase
from the Company, upon the terms and conditions hereinafter set forth, the
Subject Shares subscribed for by the Investor. Payment shall be made in cash at
such time.
SECTION 3. Delivery of the Subject Shares The closing (the "Closing")
hereunder with respect to the Subject Shares shall take place at the offices of
the Company, simultaneously with the commencement of the employment or
consultancy of the Investor by the Company. At the Closing the Company shall
issue to the Investor a certificate for the Subject Shares subscribed for by the
Investor. The certificate shall bear a restrictive legend in accordance with
applicable law and a stop transfer order in accordance with such legend shall be
placed against transfer of the Subject Shares
1
represented thereby.
SECTION 4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor as follows:
4.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and as proposed to be conducted and
to carry out the transactions contemplated hereby.
4.2 Compliance. The Company (a) has complied, and in carrying out its
contemplated business will be in compliance, in all material respects, with all
Federal, state, local and foreign laws, ordinances, regulations and orders
applicable to it, its business or the ownership of its assets, and (b) will
obtain all Federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business.
4.3 Authorization of this Agreement. The execution, delivery and
performance by the Company of this Agreement, and the issuance and delivery of
the Subject Shares being subscribed for have been duly authorized by all
requisite corporate action by the Company; and this Agreement been duly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement and the issuance, sale and delivery of the
Subject Shares being purchased, and compliance with the provisions hereof by the
Company will not (a) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to the Company or
any of its properties or assets or (b) conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration under), or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company under, the Certificate of Incorporation or By-laws of the Company
(in which case as amended to the date hereof), or any note, indenture, mortgage,
lease agreement or other contract, agreement or instrument to which the Company
is a party or by which it or any of its property is bound or affected.
4.4 Use of Proceeds. The net proceeds received by the Company from the sale
of the Subject Shares shall be used by the Company for general working capital
purposes.
4.5 No Governmental Consent or Approval Required. Except for any filings
2
under Regulation D of the General Rules and Regulations under the Securities Act
of 1933 (the "Securities Act") and the filing of any notice subsequent to the
Closing that may be required under applicable Federal and/or state securities
laws, no consent, approval or authorization of, or declaration to, or of or
filing with, any governmental or regulatory authority is required for the valid
authorization, execution and delivery by the Company of this Agreement or for
the valid authorization, issuance, sale and delivery of the Subject Shares, or,
if so required, has been duly and effectively obtained or made.
4.6 Brokers. The Company has not, nor have any of its officers, directors
or employees, employed any broker or finder in connection with the transactions
contemplated by this Agreement.
SECTION 5. Representations and Warranties of the Investors.
5.1 Investment. The Investor, represents and warrants to the Company that
the Investor is acquiring the Subject Shares, for his own account, for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act.
5.2 No Registration. The Investor understands that the Subject Shares have
not been registered under the Securities Act by reason of their issuance by the
Company in a transaction exempt from the registration requirements of the
Securities Act; and that the Subject Shares must be held by the Investor
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
5.3 Rule 144. The Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to the
Investors) issued under the Securities Act depends on the satisfaction of
various conditions and that, if applicable, Rule 144 affords the basis for sales
only in limited amounts.
5.4 [Omitted]
5.5 Due Authorization. The Investor represents and warrants to the Company
that this Agreement has been duly executed and delivered by the Investor and
constitutes the valid and binding obligations of the Investor, enforceable in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity).
5.6 No Transfer. The Investor represents and warrants to the Company that
it or he will not transfer any of the Subject Shares except in compliance with
the provisions of this Agreement.
3
5.7 Accredited Investor. The Investor is an Accredited Investor as such
term is defined in the Rules and Regulations under the Securities Act.
5.8 Information. The Investor acknowledges that the Company has provided
such information has the Investor has requested.
SECTION 6. Conditions Precedent to Closing by the Investors on the Date
Hereof. The obligations of the Investor to purchase and pay for the Subject
Shares are subject to the following conditions precedent, any of which may be
waived by the Investor:
6.1 Corporate Proceedings; Consents. Etc. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be satisfactory in
form and substance to the Investor, who shall have received all such originals
or certified or other copies of such documents as he may reasonably request.
6.2 Accuracy of Representations and Warranties. All representations and
warranties of the Company contained herein shall be true and correct in all
material respects on and as of the date hereof.
SECTION 7. Registration Rights. The Company, at the request of the holders
of at least two thirds of the Subject Shares (the "Group Subject Shares") sold
under this Agreement and two similar agreements of even date herewith, made on
or after one year from the date of sale of the Subject Shares, shall file a
registration statement including the Group Subject Shares on one(l) occasion
only. The Company shall pay all expenses in connection with the registration
statements, except that the Investor shall pay his own selling commissions and
discounts. The Company shall, at the time of such registration(s), enter into a
customary registration rights agreement with the Investor relating to, among
other matters, indemnity and payment of expenses, etc.
SECTION 8. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender to the Company of certificates representing the Subject Shares, the
Company at its expense will issue in exchange therefor, and deliver to the
holder thereof, a new certificate or certificates, in such denomination or
denominations as may be requested by such holder. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
or any certificate representing any Subject Shares and in case of any such loss,
theft or destruction, upon delivery of an indemnity agreement satisfactory to
the Company, or in case of any such mutilation, upon surrender and cancellation
of such certificate, the Company at its expense will issue and deliver to the
4
holder thereof a new certificate of like tenor, in lieu of such lost, stolen,
destroyed or mutilated instrument.
SECTION 9. Survival of Representations, Warranties and Agreements; etc. All
representations and warranties hereunder shall survive the Closing until the
third anniversary of the date hereof. All statements contained in any
certificate or other instrument delivered by the Company pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement
either at or prior to the Closing, shall constitute representations and
warranties by the Company under this Agreement. All agreements contained herein
shall survive indefinitely until, by their respective terms they are no longer
operative.
SECTION 10. Non-Solicitation. The Investor agrees that for a period of two
(2) years after termination of his employment or consultancy with the Company,
for any reason, he will not (a) solicit a business relationship with persons who
are franchisees or customers of the Company on the date of termination which is
directly or indirectly competitive with the business relationship of the Company
with such persons (i.e.; a business which features coffee and/or bagels), and
(b) solicit the services of persons who are employees of the Company on the date
of termination, or who were employed by the Company at any time within the
period of 180 days prior to such termination, except for employees of the
Company who were terminated by the Company.
SECTION 11. Non-Competition. The Investor agrees that for a period of two
(2) years after the termination of the Investor's employment or consultancy with
the Company, for any reason, he will not, directly or indirectly, within 50
miles of any location operated by the Company or a franchisee, conduct or have
an interest in, or consult for or have any other relationship with any business
competitive with the business engaged in by the Company or such franchisee
(i.e.; a business which features coffee and/or bagels). The parties hereto agree
that the duration and geographic scope of the non-competition provision set
forth in this Section 11 are reasonable. In the event that any court determines
that the duration or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the parties hereto agree that
the provision shall remain in full force and effect for the greatest time period
and in the greatest area that would not render it unenforceable. The parties
intend that this non-competition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. The parties agree that damages are an inadequate
remedy for any breach of Sections 10 and 11 and that the Company shall, whether
or not it is pursuing any potential remedies at law, be entitled to equitable
relief in the form of preliminary and permanent injunctions without bond or
other security upon
5
any actual or threatened breach of such provisions.
SECTION 12. Resale of Stock. In the event that the Investor voluntarily
resigns his employment or consultancy with the Company, as distinct from his
death or disability (a "Resignation"), during the periods described below, he
shall be required to resell certain Subject Shares to the Company at his cost
therefor, as set forth herein, and the Company shall repurchase the same on such
terms, and a legend shall be placed on the certificates representing the Subject
Shares to the following effect: The shares represented hereby are subject, in
whole or in part, to sale to and repurchase by the Company, pursuant to the
terms of a Stock Purchase and Restrictive Covenant Agreement dated [the date
thereof]. If the Resignation occurs within twelve (12) months from the date of
the sale of the Subject Shares, all of the Subject Shares shall be sold and
repurchased as set forth above, and if the Resignation occurs after twelve (12)
months and before the end of eighteen (18) months from the date of the sale of
the Subject Shares, one half (1/2) of the Subject Shares shall be sold and
repurchased as set forth above.
SECTION 13. Successors and Assigns. This Agreement shall be binding upon
the parties, their successors, legal representatives and assigns.
SECTION 14. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto or in connection on with the
transactions contemplated hereby which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 15. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor listing all parties:
(i) If to the Company, to:
New World Coffee & Bagels, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
6
(ii) If to the Investor, to his address set forth as the Investor Signature
Page attached hereto.
All such notices, advices and communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery and
(b) in the case of mailing, on the third business day following the date of such
mailing.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one Agreement.
SECTION 17. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 18. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 19. Governing Law. This Agreement shall be governed by and
construed in accordance with, (a) the laws of the State of New York applicable
to contracts made and to be performed wholly therein, and (b) the laws of the
State of Delaware applicable to corporations organized under the laws of such
State.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first written above.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ ILLEGIBLE
--------------------------
Authorized Signature
7
INVESTOR SIGNATURE PAGE
NAME/ADDRESS/EIN
▇▇▇▇▇ ▇▇▇▇▇▇▇
Name
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇
City
###-##-####
EIN/SS
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
NUMBER OF SUBJECT SHARES
PURCHASED 280,000
PURCHASE PRICE $2,800.00
8
NEW WORLD COFFEE & BAGELS, INC.
STOCK OPTION AGREEMENT
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I. NOTICE OF OPTION GRANT
▇▇▇▇▇ ▇▇▇▇▇▇▇ ("Optionee") has been granted an option ("Option") to purchase
common stock of the Company, subject to the terms and conditions of this Option
Agreement, as follows:
Vesting Commencement Date Effective Date
Exercise Price per Share 1.656
Number of Shares Granted 250,000
Term Expiration Date: Five Years after the Effective Date
Vesting Schedule:
This Option may be exercised, in whole or in part, following the Vesting
Commencement Date.
II. DEFINITIONS
As used in this Option Agreement, the following definitions shall apply:
(a) "Administrator" means the Board of Directors or any if its Committees
appointed to administer this Option Agreement, which shall be done in
accordance with Rule 16b-3 of the Securities Exchange Act of 1934.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee designated by the Board to administer
the Option Agreement, which Committee shall be constituted in
accordance with Rule 16b-3, and continue to serve its designated
capacity until otherwise directed by the Board.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means New World Coffee & Bagels. Inc., a Delaware
corporation.
(g) "Consultant" means any person, including an advisor, who is engaged by
the Company or any Parent or Subsidiary to render services and is
compensated for such services.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case
of: (i) any leave of absence approved by the Company, including sick
leave, military leave, or (ii) transfers between locations of the
Company or between the Company, its Parent, it Subsidiaries or its
successor.
(i) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "Effective Date" means the date as defined in the Acquisition
Agreement between the Company and Manhattan Bagel Company, Inc.
(k) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Optionee" means an Employee or Consultant who received an Option.
(n) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
III. AGREEMENT
1. Grant of Option. New World Coffee & Bagels, Inc., a Delaware corporation
(the "Company"), hereby grants to the Optionee the Option to purchase a total
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
"Exercise Price") subject to the terms, definitions and provisions set forth
herein. This Option Agreement shall become effective upon the Effective Date.
2. Exercise of Option. This Option shall be exercisable during its term in
accordance with the Exercise Schedule set out in the Notice of Grant as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a share.
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(b) In no event may this Option be exercised after the date of
expiration of the term of this option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election
to exercise the Option, the number of Shares in respect of which the option
is being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of this
Agreement.
Such written notice shall be signed by the Optionee and shall be delivered
in person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option shall
be deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Method of Payment. Payment of the Exercise Price shall be by any of the
following or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of Common Stock options of the Company which have a
fair market value on the daze of surrender equal to the Exercise Price of
the Shares as to which the Option is being exercised; or
(iv) surrender of other shares of Common stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a fair market value on the date of
surrender equal to the Exercise Price of the Shares as to which the Option
is being exercised; or
(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable
shall require to effect and
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(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect and exercise the Option and delivery to the Company
of the sale proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon which exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates "For Cause", Optionee shall
forfeit, as of the date of such termination (the "Termination Date"), all rights
under this Option Agreement, including any rights to exercise any and all
Options whether vested or not "For Cause" shall mean termination by the Company
of Optionee's employment by the Company by reason of Optionee's fraud,
embezzlement, or misappropriation, notice of which shall be accompanied by the
written evidence, or a summary of the other evidence, on which the Company
relied in giving such notice.
7. Non-transferability of Option. This Option may not be transferred in any
manner otherwise than by will or trust or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option. Death of Optionee shall not vitiate
terms of this Agreement.
9. Increase in Total Number of Shares Granted. The period from the date
hereof to the third anniversary of such date is referred to as the Subject
Period. Unless, during the Subject Period, the Market Price, as defined below,
of the Common Stock, as presently constituted, closes in excess of $9.656 per
share of Common Stock for a minimum of five days, an additional Number Of Shares
Granted, not to exceed 125,000 additional shares, shall, on one occasion only,
be added to the terms of this Agreement as follows:
Additional Option Shares = (A-(B-1.656))/A multiplied by C, where
A = $8.00 (per share, adjusted for combinations, splits and
reorganizations)
B = The average of the five highest closing prices during the Subject
Period
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C = The number of Option Shares stated in this Agreement
The closing price for a day shall be the last reported sale price or, in case no
such reported sale took place on such day, the average of the last reported bid
and asked prices, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") on such day, or if, on any day in
question, the Common Stock shall not be quoted on the NASDAQ, then such price
shall be equal to the last reported bid and asked prices on such day as reported
by any similar reputable quotation and reporting service.
NEW WORLD COFFEE & BAGELS, INC.
a Delaware corporation
By: /s/ [illegible]
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Title: CFO
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OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR [N
THE COMPANY'S STOCK OPTION PLAN, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of this Option and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
this Option in its entirety, has had an opportunity to obtain the advise of
counsel prior to executing this Option and fully understands all provisions of
the Option.
Dated: 7/28/98 Optionee: /s/ [illegible]
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EXHIBIT A
EXERCISE NOTICE
New World Coffee & Bagels, Inc.
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ______________, 19__ the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
________________ shares of the Common Stock (the "Shares") of New World Coffee &
Bagels, Inc., (the "Company") under and pursuant to the Optionee's Stock Option
Agreement ("Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and agrees to abide by and be
bound by its terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the optioned Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised.
4. Restrictive Le2ends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS
ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer
on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
5. Successors and Assigns. The Company will assign its rights, but shall
remain liable hereunder, under this Agreement to single or multiple assignees,
and this Agreement shall inure to the benefit of the successors and assigns of
the Company, in connection with the sale of all or substantially all of its
assets. Subject to the restrictions on transfer hereunder set forth, this
Agreement shall be binding upon optionee and his or her heirs, executors,
administrators, successors and assigns.
6. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the Sate of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
7. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
8. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement
9. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
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10. Entire Agreement. The Notice of Grant/Option Agreement is incorporated
herein by reference. This Agreement, the Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof and is governed by state
law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
New World Coffee & Bagels, Inc.
By:
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Title:
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Address: Address:
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: NEW WORLD COFFEE & BAGELS, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for Investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection Optionee understands
that in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statues, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee understands that the certificate evidencing
the securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act; which, in substance permit limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited broker's transactions or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(c), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than one year, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, Optionee shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period following the effective date of a registration statement of
the Company filed under the 1933 Act; provided, however, that such restriction
shall only apply to the first registration statement of the Company to become
effective under the 1933 Act which include securities to be sold on behalf of
the Company to the public in an underwritten public offering under the 1933 Act.
The Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
rules 144 or 701 will
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have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk, Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
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Date:
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EXHIBIT C
EMPLOYMENT AGREEMENT
AGREEMENT made as of the ____ day of ____________, 1998, by and between NEW
WORLD COFFEE & BAGELS, INC., a Delaware corporation (hereinafter referred to as
the "Company"), having a place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, residing at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(hereinafter referred to as the "Employee").
WITNESSETH:
In consideration of the mutual covenants herein contained, the parties
hereto agree as follows.
1. Employment. The Company hereby agrees to employ the Employee, and the
Employee hereby agrees to accept such employment, subject to the terms and
conditions hereinafter set forth. The Employee shall be elected a Vice-President
of the Company.
2. Term. The term of the Employee's employment hereunder, except if earlier
terminated pursuant to Paragraph 6 hereof, shall be for a period of two (2)
years from the Effective Date as defined in the Acquisition Agreement between
the Company and Manhattan Bagel Co., Inc. dated as of July 28, 1998. The term
shall then continue from year to year thereafter unless either party gives
notice to the contrary to the other party not less than 90 days prior to the
commencement of any such one year extension period.
3. Duties.
(a) During the continuance of this Agreement, the Employee agrees to devote
his attention, full time and best efforts to the rendition of his services
hereunder, which shall include such executive responsibilities as may be
assigned to him from time to time by the President of the Company. Subject to
the control of the Board of Directors, the Employee shall perform such executive
duties as are assigned by the President of the Company. The Employee will be
based at the Company's Eatontown, New Jersey facility.
(b) The Employee shall be entitled to make personal investments, provided
that none of the same are directly or indirectly competitive with the business
of the Company and further provided that any such activities do not detract from
the services due from the Employee hereunder. Purchases of up to 2% of the stock
of publicly traded companies shall not be restricted.
4. Compensation. In consideration of all of the services to be rendered by
the Employee hereunder, the Employee shall be paid, and he agrees to accept
compensation as follows:
(a) Compensation at an annual rate of One Hundred Thirty Two Thousand Five
Hundred Dollars ($132,500.00), payable bi-weekly less applicable withholding
taxes, subject to such increases, if any, as may be approved by the Board of
Directors of the Company (the rate per annum which is in effect from time to
time being referred to herein as the "Base Salary" of the Employee). The Base
Salary shall be increased, on each anniversary of the term, by multiplying the
Base Salary by a fraction, the numerator of which is the consumer price index,
all items, New York metropolitan area, or a successor index (the "Index"),
published by the United States Department of Commerce for the month prior to
such anniversary, and the denominator of which is the Index published for the
month preceding the commencement of the term.
(b) With respect to each fiscal year of the Company, (i) a performance
bonus of up to twenty five (25%) percent of the Employee's Base Salary, as
determined by the Board of Directors, if the annual operating budget of the
Company for such fiscal year have been achieved; and (ii) a performance bonus of
up to twenty five (25%) percent of the Employee's Base Salary, as determined by
the Board of Directors, if the budget for operation for which the Employee is
responsible for such fiscal year have been achieved. Each performance bonus
shall be payable at its customary time following the end of each fiscal year of
the Company during the term hereof (pro-rated if services are rendered during
only a part of such fiscal year). The annual operating budget and operations
budget shall be formulated by management of the Company, subject to approval of
the Board of Directors.
(c) Such stock option grants as are determined by the Compensation
Committee of the Board of Directors.
(d) During the Term, an automobile allowance equal to the Employee's
present automobile rental and insurance cost.
(e) Three (3) weeks of paid vacation during each year of the Term.
5. Benefits.
(a) The Employee shall be entitled to such benefits as may be made
available by the Company to its executives, including sick leave, medical and
life insurance.
(b) Except as hereinafter provided in Paragraph 6 hereof, the Company shall
pay the Employee, for any period during which he is unable fully to perform his
duties because of physical or mental disability or incapacity, an amount equal
to the
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compensation due him for such period less the aggregate amount of all income
disability benefits which he may receive or to which he may be entitled under or
by reason of (i) any group health or accident insurance plan of the Company;
(ii) any applicable compulsory State disability law; (iii) the Federal Social
Security Act; and (iv) any applicable workmen's compensation law or similar law.
(c) The Employee shall be entitled to reimbursement for expenses reasonably
and necessarily incurred by him in the course of his duties, upon accounting
therefor.
(d) The Employee shall be entitled to indemnification as provided by the
By-Laws of the Company and applicable law, and shall also be covered by existing
officer/director liability insurance.
6. Termination.
(a) The term of this Agreement may be ended prior to the date specified in
Paragraph 2, under the following conditions:
(i) Upon the death of the Employee.
(ii) Upon notice to the Employee, if the Employee has committed any
act of fraud, embezzlement or misappropriation.
(iii) Thirty (30) days after notice to the Employee of his breach of
his duties hereunder (other than as set forth in (ii) above), unless such
breach is fully remedied before the end of such thirty (30) day period or,
if such breach cannot be remedied within thirty (30) days, unless the
Employee continues to use his best efforts to cure the same until such
breach is remedied.
(iv) If the Employee shall be both absent for a period of at least 90
days continuously or a total of 90 days within any 180 day period, and
shall be so mentally or physically incapacitated or disabled as to be
unable to perform his duties hereunder during such period and at the time
of termination.
(b) Upon any termination of this Agreement under Paragraph 6(a), the
Company shall not be obligated to pay any compensation or expenses or provide
other benefits other than those accrued to the date of termination, and the
Employee shall cease
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to hold all positions in the Company, and such termination shall constitute a
voluntary resignation by the Employee of each office and directorship then held
by him, and the Employee shall, if requested and if able, deliver to the Company
confirmatory written resignations. The Employee shall also deliver to the
Company all property of the Company which may then be in the Employee's
possession.
7. Non-Disclosure of Confidential Information. The Employee acknowledges
that it is the policy of the Company to maintain as secret and confidential all
information relating to its products, services and operations and the identity
of suppliers, franchisees and customers (the "Confidential Information"), and
the Employee further acknowledges that the Confidential Information is of
substantial value to the Company. Accordingly, the Employee agrees that he will
not, during or after the termination of this Agreement, disclose or use any
Confidential Information other than in connection with the business of the
Company. There shall be excepted herefrom any information that the Employee had
relating to the business of the Company before he became employed by Manhattan
Bagel Company, Inc., as specifically set forth on Attachment A hereto and signed
by the parties.
8. Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and shall be deemed given when
delivered to a party or five business days after the same is mailed to a party,
certified mail, return receipt requested, to the addresses set forth herein or
such other address of which notice is given in accordance herewith.
9. Modification and Waiver. This Agreement may not be changed or terminated
orally but only in a writing signed by the parties hereto, and no waiver of a
breach of any provision hereof shall be effective unless in writing signed by
the party against whom enforcement is sought. No such waiver shall operate or be
construed as a waiver of any subsequent breach of such provisions.
10. Applicable Law. This Agreement shall be subject to and governed by the
laws of the State of New York.
11. Remedies. The Company, in addition to any other remedy or remedies to
which it may be entitled, shall be entitled to obtain injunctive relief against
any breach or threatened breach by the Employee of the provisions of Section 7
and 8 hereof. In the event of a dispute hereunder, the party prevailing shall be
entitled to recover its reasonable expenses, including counsel fees, from the
party not prevailing.
12. Representation of Employee. The Employee hereby represents and warrants
that the Employee is not bound by any contract, agreement, court order or
decision which
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conflicts in any manner with the duties to be performed by the Employee
hereunder or which would limit, in any respect, the right of the Employee to use
any of the Employee's knowledge or experience in the performance of the
Employee's duties hereunder.
13. Representation of the Company. The execution, delivery and performance
by the Company of this Agreement has been duly authorized by all requisite
corporate action by the Company and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms.
14. Captions. The underlined captions set forth herein are descriptive
only, and shall not be deemed to be a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ [illegible]
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Authorized Signature
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Individually
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ATTACHMENT A
PRIOR INFORMATION
NEW WORLD COFFEE & BAGELS, INC.
By
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Authorized Signature
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Individually
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STOCK PURCHASE
AND
RESTRICTIVE COVENANT
AGREEMENT
July 28, 1998
To the Investor named on the
Investor Signature Page attached hereto
Dear Sir:
The undersigned, NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation
(the "Company"), hereby agrees with the person named on an Investor Signature
Page attached hereto (the "Investor") as follows:
SECTION 1. Issuance of the Subject Shares. Subject to the terms and
conditions hereof, the Company has authorized the issuance and sale at the
Closing (as hereinafter defined) of the number of shares of Common Stock, par
value $.001 per share (the "Subject-Shares") set forth on the Investor Signature
Page, for sale at a price of $0.01 per share. Such sale is also expressly in
consideration of the covenants of the Investor set forth in Section 10 and
Section 11 of this Agreement. The Investor acknowledges that there is
substantial consideration for such covenants, and that the performance of the
same is material to this Agreement.
SECTION 2. Agreement to Sell and Purchase the Subject Shares. At the
Closing, the Company shall sell to the Investor, and the Investor shall purchase
from the Company, upon the terms and conditions hereinafter set forth, the
Subject Shares subscribed for by the Investor. Payment shall be made in cash at
such time.
SECTION 3. Delivery of the Subject Shares The closing (the "Closing")
hereunder with respect to the Subject Shares shall take place at the offices of
the Company, simultaneously with the commencement of the employment or
consultancy of the Investor by the Company. At the Closing the Company shall
issue to the Investor a certificate for the Subject Shares subscribed for by the
Investor. The certificate shall bear a restrictive legend in accordance with
applicable law and a stop transfer order in accordance with such legend shall be
placed against transfer of the Subject Shares
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represented thereby.
SECTION 4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor as follows:
4.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and as proposed to be conducted and
to carry out the transactions contemplated hereby.
4.2 Compliance. The Company (a) has complied, and in carrying out its
contemplated business will be in compliance, in all material respects, with all
Federal, state, local and foreign laws, ordinances, regulations and orders
applicable to it, its business or the ownership of its assets, and (b) will
obtain all Federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business.
4.3 Authorization of this Agreement. The execution, delivery and
performance by the Company of this Agreement, and the issuance and delivery of
the Subject Shares being subscribed for have been duly authorized by all
requisite corporate action by the Company; and this Agreement been duly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement and the issuance, sale and delivery of the
Subject Shares being purchased, and compliance with the provisions hereof by the
Company will not (a) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to the Company or
any of its properties or assets or (b) conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration under), or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company under, the Certificate of Incorporation or By-laws of the Company
(in each case as amended to the date hereof), or any note, indenture, mortgage,
lease agreement or other contract, agreement or instrument to which the Company
is a party or by which it or any of its property is bound or affected.
4.4 Use of Proceeds. The net proceeds received by the Company from the sale
of the Subject Shares shall be used by the Company for general working capital
purposes.
4.5 No Governmental Consent or Approval Required. Except for any filings
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under Regulation D of the General Rules and Regulations under the Securities Act
of 1933 (the "Securities Act") and the filing of any notice subsequent to the
Closing that may be required under applicable Federal and/or state securities
laws, no consent, approval or authorization of, or declaration to, or of or
filing with, any governmental or regulatory authority is required for the valid
authorization, execution and delivery by the Company of this Agreement or for
the valid authorization, issuance, sale and delivery of the Subject Shares, or,
if so required, has been duly and effectively obtained or made.
4.6 Brokers. The Company has not, nor have any of its officers, directors
or employees, employed any broker or finder in connection with the transactions
contemplated by this Agreement.
SECTION 5. Representations and Warranties of the Investors.
5.1 Investment. The Investor, represents and warrants to the Company that
the Investor is acquiring the Subject Shares, for his own account, for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act.
5.2 No Registration. The Investor understands that the Subject Shares have
not been registered under the Securities Act by reason of their issuance by the
Company in a transaction exempt from the registration requirements of the
Securities Act; and that the Subject Shares must be held by the Investor
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
5.3 Rule 144. The Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to the
Investors) issued under the Securities Act depends on the satisfaction of
various conditions and that, if applicable, Rule 144 affords the basis for sales
only in limited amounts.
5.4 [Omitted]
5.5 Due Authorization. The Investor represents and warrants to the Company
that this Agreement has been duly executed and delivered by the Investor and
constitutes the valid and binding obligations of the Investor, enforceable in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity).
5.6 No Transfer. The Investor represents and warrants to the Company that
it or he will not transfer any of the Subject Shares except in compliance with
the provisions of this Agreement.
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5.7 Accredited Investor. The Investor is an Accredited Investor as such
term is defined in the Rules and Regulations under the Securities Act.
5.8 Information. The Investor acknowledges that the Company has provided
such information has the Investor has requested.
SECTION 6. Conditions Precedent to Closing by the Investors on the Date
Hereof. The obligations of the Investor to purchase and pay for the Subject
Shares are subject to the following conditions precedent, any of which may be
waived by the Investor:
6.1 Corporate Proceedings; Consents, Etc. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be satisfactory in
form and substance to the Investor, who shall have received all such originals
or certified or other copies of such documents as he may reasonably request.
6.2 Accuracy of Representations and Warranties. All representations and
warranties of the Company contained herein shall be true and correct in all
material respects on and as of the date hereof.
SECTION 7. Registration Rights. The Company, at the request of the holders
of at least two thirds of the Subject Shares (the "Group Subject Shares") sold
under this Agreement and two similar agreements of even date herewith, made on
or after one year from the date of sale of the Subject Shares, shall file a
registration statement including the Group Subject Shares on one( 1) occasion
only. The Company shall pay all expenses in connection with the registration
statements, except that the Investor shall pay his own selling commissions and
discounts. The Company shall, at the rime of such registration(s), enter into a
customary registration rights agreement with the Investor relating to, among
other matters, indemnity and payment of expenses, etc.
SECTION 8. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender to the Company of certificates representing the Subject Shares, the
Company at its expense will issue in exchange therefor, and deliver to the
holder thereof, a new certificate or certificates, in such denomination or
denominations as may be requested by such holder. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
or any certificate representing any Subject Shares and in case of any such loss,
theft or destruction, upon delivery of an indemnity agreement satisfactory to
the Company, or in case of any such mutilation, upon surrender and cancellation
of such certificate, the Company at its expense will issue and deliver to the
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holder thereof a new certificate of like tenor, in lieu of such lost, stolen,
destroyed or mutilated instrument.
SECTION 9. Survival of Representations, Warranties and Agreements; etc. All
representations and warranties hereunder shall survive the Closing until the
third anniversary of the date hereof All statements contained in any certificate
or other instrument delivered by the Company pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement either at or
prior to the Closing, shall constitute representations and warranties by the
Company under this Agreement. All agreements contained herein shall survive
indefinitely until, by their respective terms they are no longer operative.
SECTION 10. Non-Solicitation. The Investor agrees that for a period of two
(2) years after termination of his employment or consultancy with the Company,
for any reason, he will not (a) solicit a business relationship with persons who
are franchisees or customers of the Company on the date of termination which is
directly or indirectly competitive with the business relationship of the Company
with such persons (i.e.; a business which features coffee and/or bagels), and
(b) solicit the services of persons who are employees of the Company on the date
of termination, or who were employed by the Company at any time within the
period of 180 days prior to such termination, except for employees of the
Company who were terminated by the Company.
SECTION 11. Non-Competition. The Investor agrees that for a period of two
(2) years after the termination of the Investor's employment or consultancy with
the Company, for any reason, he will not, directly or indirectly, within 50
miles of any location operated by the Company or a franchisee, conduct or have
an interest in, or consult for or have any other relationship with any business
competitive with the business engaged in by the Company or such franchisee
(i.e.; a business which features coffee and/or bagels). The parties hereto agree
that the duration and geographic scope of the non-competition provision set
forth in this Section 11 are reasonable. In the event that any court determines
that the duration or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the parties hereto agree that
the provision shall remain in full force and effect for the greatest time period
and in the greatest area that would not render it unenforceable. The parties
intend that this non-competition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. The parties agree that damages are an inadequate
remedy for any breach of Sections 10 and 11 and that the Company shall, whether
or not it is pursuing any potential remedies at law, be entitled to equitable
relief in the form of preliminary and permanent injunctions without bond or
other security upon
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any actual or threatened breach of such provisions.
SECTION 12. Resale of Stock. In the event that the Investor voluntarily
resigns his employment or consultancy with the Company, as distinct from his
death or disability (a "Resignation"), during the periods described below, he
shall be required to resell certain Subject Shares to the Company at his cost
therefor, as set forth herein, and the Company shall repurchase the same on such
terms, and a legend shall be placed on the certificates representing the Subject
Shares to the following effect: The shares represented hereby are subject, in
whole or in part, to sale to and repurchase by the Company, pursuant to the
terms of a Stock Purchase and Restrictive Covenant Agreement dated [the date
thereof]. If the Resignation occurs within twelve (12) months from the date of
the sale of the Subject Shares, all of the Subject Shares shall be sold and
repurchased as set forth above.
SECTION 13 Successors and Assigns. This Agreement shall be binding upon the
panics, their successors, legal representatives and assigns.
SECTION 14. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto or in connection with the
transactions contemplated hereby which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 15. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor listing all parties:
(i) If to the Company, to:
New World Coffee & Bagels, Inc.
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 100 12
Attn: President
(ii) If to the Investor, to his address set forth as the Investor Signature
Page
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attached hereto.
All such notices, advices and communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery and
(b) in the case of mailing, on the third business day following the date of such
mailing.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one Agreement.
SECTION 17. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 18. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 19. Governing Law. This Agreement shall be governed by and
construed in accordance with, (a) the laws of the State of New York applicable
to contracts made and to be performed wholly therein, and (b) the laws of the
State of Delaware applicable to corporations organized under the laws of such
State.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first written above.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ [illegible]
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Authorized Signature
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INVESTOR SIGNATURE PAGE
NAME/ADDRESS/EIN
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Name
Address
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EIN/SS
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/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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NUMBER OF SUBJECT SHARES
PURCHASED 280,000
PURCHASE PRICE $2,800.00
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NEW WORLD COFFEE & BAGELS, [NC.
STOCK OPTION AGREEMENT
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I. NOTICE OF OPTION GRANT
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("Optionee") has been granted an option ("Option") to purchase
common stock of the Company, subject to the terms and conditions of this Option
Agreement, as follows:
Vesting Commencement Date Effective Date
Exercise Price per Share 1.656
Number of Shares Granted 250,000
Term Expiration Date: Five Years after the Effective Date
Vesting Schedule:
This Option may be exercised, in whole or in part, following the
Vesting Commencement Date.
II. DEFINITIONS
As used in this Option Agreement, the following definitions shall apply:
(a) "Administrator" means the Board of Directors or any if its Committees
appointed to administer this Option Agreement, which shall be done in
accordance with Rule 16b-3 of the Securities Exchange Act of 1934.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee designated by the Board to administer
the Option Agreement, which Committee shall be constituted in
accordance with Rule 1 6b-3, and continue to serve its designated
capacity until otherwise directed by the Board.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means New World Coffee & Bagels, Inc., a Delaware
corporation.
(g) "Consultant" means any person, including an advisor, who is engaged by
the Company or any Parent or Subsidiary to render services and is
compensated for such services.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case
of: (i) any leave of absence approved by the Company, including sick
leave, military leave, or (ii) transfers between locations of the
Company or between the Company, its Parent, it Subsidiaries or its
successor.
(i) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "Effective Date" means the date as defined in the Acquisition
Agreement between the Company and Manhattan Bagel Company, Inc.
(k) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company.
(1) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Optionee" means an Employee or Consultant who received an Option.
(n) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(0 of the Code.
III. AGREEMENT
1. Grant of Option. New World Coffee & Bagels, Inc., a Delaware corporation
(the "Company"), hereby grants to the Optionee the Option to purchase a total
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
"Exercise Price") subject to the terms, definitions and provisions set forth
herein. This Option Agreement~ shall become effective upon the Effective Date.
2. Exercise of Option. This Option shall be exercisable during its term in
accordance with the Exercise Schedule set out in the Notice of Grant as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a share.
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(b) In no event may this Option be exercised after the date of
expiration of the term of this option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election
to exercise the Option, the number of Shares in respect of which the option
is being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of this
Agreement.
Such written notice shall be signed by the Optionee and shall be delivered
in person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option shall
be deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Method of Payment. Payment of the Exercise Price shall be by any of the
following or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of Common Stock options of the Company which have a
fair market value on the date of surrender equal to the Exercise Price of
the Shares as- to which the Option is being exercised; or
(iv) surrender of other shares of Common stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a fair market value on the date of
surrender equal to the Exercise Price of the Shares as to which the Option
is being exercised; or
(v) delivery of a properly executed exercise notice together' with
such other documentation as the Administrator and the broker, if
applicable, shall require to effect and
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(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect and exercise the Option and delivery to the Company
of the sale proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon which exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates "For Cause", Optionee shall
forfeit, as of the date of such termination (the "Termination Date"), all rights
under this Option Agreement, including any rights to exercise any and all
Options whether vested or not. "For Cause" shall mean termination by the Company
of Optionee's employment by the Company by reason of Optionee's fraud,
embezzlement, or misappropriation, notice of which shall be accompanied by the
written evidence, or a summary of the other evidence, on which the Company
relied in giving such notice.
7. Non-transferability of Option. This Option may not be transferred in any
manner otherwise than by will or trust or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option. Death of Optionee shall not vitiate
terms of this Agreement.
9. Increase in Total Number of Shares Granted. The period from the date
hereof to the third anniversary of such date is referred to as the Subject
Period. Unless, during the Subject Period, the Market Price, as defined below,
of the Common Stock, as presently constituted, closes in excess of $9.656 per
share of Common Stock for a minimum of five days, an additional Number Of Shares
Granted, not to exceed 125,000 additional shares, shall, on one occasion only,
be added to the terms of this Agreement as follows:
Additional Option Shares = (A-(B-1.656))/A multiplied by C, where
A=$8.00 (per share, adjusted for combinations, splits and reorganizations)
B=The average of the five highest closing prices during the Subject Period
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C=The number of Option Shares stated in this Agreement
The closing price for a day shall be the last reported sale price or, in case no
such reported sale took place on such day, the average of the last reported bid
and asked prices, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") on such day, or if, on any day in
question, the Common Stock shall not be quoted on the NASDAQ, then such price
shall be equal to the last reported bid and asked prices on such day as reported
by any similar reputable quotation and reporting service.
NEW WORLD COFFEE & BAGELS, INC.
a Delaware Corporation
By: /s/ [illegible]
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Title:
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OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN
THE COMPANY'S STOCK OPTION PLAN, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of this Option and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof Optionee has reviewed
this Option in its entirety, has had an opportunity to obtain the advise of
counsel prior to executing this Option and fully understands all provisions of
the Option.
Dated: 7/28/98 Optionee: /s/ [illegible]
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EXHIBIT A
EXERCISE NOTICE
New World Coffee & Bagels, Inc.
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ______________ , 19__ the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
________________ shares of the Common Stock (the "Shares") of New World Coffee &
Bagels, Inc., (the "Company") under and pursuant to the Optionee's Stock Option
Agreement ("Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and agrees to abide by and be
bound by its terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the optioned Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised.
4. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS
ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer
on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
5. Successors and Assigns. The Company will assign its rights, but shall
remain liable hereunder, under this Agreement to single or multiple assignees,
and this Agreement shall inure to the benefit of the successors and assigns of
the Company, in connection with the sale of all or substantially all of its
assets. Subject to the restrictions on transfer hereunder set forth, this
Agreement shall be binding upon optionee and his or her heirs, executors,
administrators, successors and assigns.
6. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
7. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
8. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement
9. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
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10. Entire Agreement. The Notice of Grant/Option Agreement is incorporated
herein by reference. This Agreement, the Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof and is governed by state
law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
New World Coffee & Bagels, Inc.
By:
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Title:
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Address: Address:
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: NEW WORLD COFFEE & BAGELS, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for Investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection Optionee understands
that in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statues, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee understands that the certificate evidencing
the securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance permit limited public
resale of restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited broker's transactions or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(c), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than one year, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, Optionee shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period following the effective date of a registration statement of
the Company filed under the 1933 Act; provided, however, that such restriction
shall only apply to the first registration statement of the Company to become
effective under the 1933 Act which include securities to be sold on behalf of
the Company to the public in an underwritten public offering under the 1933 Act.
The Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
rules 144 or 701 will
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have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk, Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
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Date:
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