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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
NEW YORK BAGEL ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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NEW YORK BAGEL ENTERPRISES, INC.
300 I.M.A. PLAZA
250 NORTH WATER STREET
WICHITA, KANSAS 67202-1213
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1997
------------------------
To the Stockholders of
New York Bagel Enterprises, Inc.
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of New
York Bagel Enterprises, Inc. (the "Company") will be held at the Wichita Art
Museum, 619 Stackman Drive, Wichita, Kansas 67203-3296, on the 21st day of May,
1997, at 1:00 p.m. (local time) for the following purposes:
1. To elect two (2) directors to hold office until the 2000 Annual Meeting
of Stockholders of the Company or until their respective successors shall
have been duly elected and shall have qualified;
2. To ratify the amendment of the New York Bagel Enterprises, Inc. 1996
Incentive Plan (the "Incentive Plan") by allocating 100,000 additional
Common Shares to be potentially issued pursuant to the terms of the
Incentive Plan;
3. To ratify the appointment of KPMG Peat Marwick LLP, certified public
accountants, as independent auditors for the Company for the fiscal year
ending December 28, 1997; and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only common stockholders of record at the close of business on April 18,
1997, are entitled to notice of and to vote at the annual meeting.
All stockholders are cordially invited to attend the meeting in person.
However, if you are unable to attend in person and wish to have your shares
voted, PLEASE FILL IN, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. Your proxy may be revoked by
appropriate notice to the Secretary of New York Bagel Enterprises, Inc. at any
time prior to the voting thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ JON H. CRAMER,
CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER
Wichita, Kansas
March 31, 1997
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.
300 I.M.A. PLAZA
250 NORTH WATER STREET
WICHITA, KANSAS 67202-1213
(316) 267-7373
March 31, 1997
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
------------------------
This Proxy Statement and the accompanying Proxy and Notice of Annual Meeting
of Stockholders are furnished to holders of common shares, par value $0.01 per
share (the "Common Shares"), of New York Bagel Enterprises, Inc. (the "Company")
in connection with the solicitation by its Board of Directors (the "Board") of
proxies to be used at the 1997 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held on May 21, 1997, at 1:00 p.m. at the Wichita
Art Museum, 619 Stackman Drive, Wichita, Kansas 67203-3296, and at any
postponements or adjournments thereof. Only those stockholders of record at the
close of business on April 18, 1997, will be entitled to receive notice of, and
to vote at, the Annual Meeting. Copies of this Proxy Statement and the
accompanying Proxy and Notice of Annual Meeting of Stockholders are first being
mailed to stockholders on or about April 21, 1997.
All Common Shares represented by each properly executed Proxy received by
the Board pursuant to this solicitation will be voted in accordance with the
stockholder's directions specified on the Proxy. If no directions have been
specified on a Proxy, the Common Shares represented by that Proxy will be voted
as follows:
"FOR" the election of directors of the nominees named on the accompanying
proxy;
"FOR" the ratification of the amendment of the New York Bagel Enterprises,
Inc. 1996 Incentive Plan (the "Incentive Plan") by allocating 100,000
additional shares of Common Shares to be potentially issued pursuant to the
terms of the Incentive Plan; and
"FOR" the ratification of the selection of KPMG Peat Marwick LLP as
independent certified public accountants, for the Company for fiscal year
1997.
Management knows of no other matters that may properly be brought, or which
are likely to be brought, before the Annual Meeting. However, if any other
matters are properly brought before the Annual Meeting, the persons named as
proxies in the accompanying Proxy or their substitutes will vote in accordance
with their best judgment on such matters.
Without affecting any vote previously taken, a stockholder signing and
returning a Proxy has the power to revoke it at any time prior to its exercise
by giving notice to the Company in writing mailed to Jon H. Cramer, Secretary of
the Company, at the Company's executive offices at 300 I.M.A. Plaza, 250 North
Water Street, Wichita, Kansas 67202-1213, by executing a subsequent Proxy, or by
attending the Annual Meeting and declaring to the Company such stockholder's
intent to vote in person. Attendance at the Annual Meeting will not, in and of
itself, constitute revocation of a Proxy.
The presence, in person or by proxy, of the holders of a majority of the
Common Shares issued and outstanding on April 18, 1997, is necessary to
constitute a quorum at the Annual Meeting. As of March 1, 1997, the Company had
4,667,500 Common Shares issued and outstanding.
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Under Kansas law and the Company's Restated and Amended Bylaws, each
stockholder is entitled to one vote for each Common Share held. Common Shares
represented in person or by proxy but not voted with respect to a proposal are
counted as present. In votes other than for the election of directors, the
effect of abstention or a non-vote is the same as a "no" vote. In the election
of directors, Common Shares as to which the authority to vote is withheld and
the Common Shares represented in person or by proxy but not voted with respect
to the election of directors are not counted toward the election of directors or
toward the election of the individual nominees specified on the proxy.
All costs of solicitation of the proxies will be borne by the Company.
Solicitation will be made by mail. Proxies may be further solicited at no
additional compensation by officers, directors, or employees of the Company by
telephone, written communication or in person. Upon request, the Company will
reimburse banks, brokerage firms, and other custodians, nominees and fiduciaries
for expenses reasonably incurred by them in sending proxy materials to the
beneficial owners of Common Shares of the Company. No solicitation will be made
by specially engaged employees or other paid solicitors.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
NUMBER AND TERM OF DIRECTORS
The Company's Articles of Incorporation divide the Board into three classes
of as equal size as possible, with the terms of each class expiring in
consecutive years so that only one class is elected in any given year.
Successors to directors whose terms have expired are required to be elected by
stockholder vote. Vacancies in unexpired terms and any additional positions
created by Board action are filled by action of the existing Board. The terms of
Messrs. Atherton and Walsh will expire at the 1997 annual meeting of
stockholders of the Company; the terms of Messrs. Sorrentino and Murfin will
expire at the 1998 annual meeting of stockholders; and the terms of Messrs.
Geresi, Hoover and Clark will expire at the 1999 annual meeting of stockholders.
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The names of the directors, executive officers and key employees of the
Company, their respective ages, positions and director's terms are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- ------------------------------------------------
<S> <C> <C>
Robert J. Geresi(1)................... 34 Chairman of the Board, Chief Executive Officer
and President
Paul T. Sorrentino(2)................. 34 Vice President--New Store Development and
Director
Paul R. Hoover(1)..................... 36 Vice President--Strategic Planning and Director
Jon H. Cramer......................... 31 Chief Financial Officer, Secretary and Treasurer
Vincent J. Vrana...................... 34 Vice President--Training
Markus K. Scholler.................... 42 Director of Franchise Operations
William S. Atherton(3)(4)(5).......... 64 Director
Stanley K. Clark(1)(4)................ 44 Director
David L. Murfin(2)(4)(5).............. 47 Director
William J. Walsh, Jr.(3)(5)........... 48 Director
</TABLE>
- ------------------------
(1) Class III Director (term expiring 1999).
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(2) Class II Director (term expiring 1998).
(3) Class I Director (Nominee Director-term expiring at Annual Meeting).
(4) Member of the Audit Committee.
(5) Member of the Compensation Committee.
ROBERT J. GERESI has served as Chairman of the Board, Chief Executive
Officer and President of the Company since December 1995. Mr. Geresi served as
an executive officer of each Prior Entity, as defined herein, since their
respective inceptions beginning in 1986. From 1984 through 1986, Mr. Geresi
served as a Senior Financial Analyst of Grumman Aerospace Corp., Bethpage, New
York. Since 1995, Mr. Geresi has served as a director of Cowboy Land
Development, Inc., a real estate subsidiary of Karsten Creek Golf Course,
Oklahoma State University Foundation. Mr. Geresi received a Bachelor of Arts
degree in economics from Binghamton University, Binghamton, New York in 1984.
PAUL T. SORRENTINO has served as Vice President--New Store Development and
as a Director of the Company since December 1995. Mr. Sorrentino served as an
executive officer of each Prior Entity since their respective inceptions
beginning in 1986. From 1985 to 1986, Mr. Sorrentino was a telecommunications
consultant for Cameron Communications, Oklahoma City, Oklahoma. Mr. Sorrentino
received a Bachelor of Arts degree in advertising from Oklahoma State
University, Stillwater, Oklahoma in 1985.
PAUL R. HOOVER has served as Vice President--Strategic Planning and as a
Director of the Company since December 1995. From June 1994 until December 1995,
Mr. Hoover served as Vice President and as a Director of New York Bagel
Enterprises, Inc., the franchisor entity of the Prior Entities. Since 1984, Mr.
Hoover has been a Director and stockholder of West-Kan Foods, Inc., a Wendy's
restaurant franchisee. From 1986 to 1990, Mr. Hoover was President of Midco
Foods, Inc., a multi-concept restaurant franchisee. Mr. Hoover is the owner of
and has served as the President of Paul R. Hoover Real Estate Company since
1990. Mr. Hoover received a Bachelor of Arts degree in geology from Wichita
State University, Wichita, Kansas in 1983.
JON H. CRAMER has served as Chief Financial Officer, Secretary and Treasurer
of the Company since December 1996. From July 1988 to December 1996, Mr. Cramer
was with KPMG Peat Marwick LLP, certified public accountants, most recently as a
Senior Audit Manager. Mr. Cramer is a member of the American Institute of
Certified Public Accountants, the Kansas Society of Certified Public Accountants
and the Emporia State University Accounting Advisory Council. Mr. Cramer
received a Bachelor of Science degree in accounting from Emporia State
University, Emporia, Kansas in 1988. Mr. Cramer is a Certified Public
Accountant.
VINCENT J. VRANA has served as Vice President--Training of the Company since
December 1995. Mr. Vrana served as an executive officer of each Prior Entity
since their respective inceptions beginning in 1986. Mr. Vrana received a
Bachelor of Science degree in business administration from Oklahoma State
University, Stillwater, Oklahoma in 1986.
MARKUS K. SCHOLLER has served as Director of Franchise Operations of the
Company since October 1994. From 1990 to 1994, Mr. Scholler was Training General
Manager for J.S. Ventures, Inc., a multi-unit Applebee's Neighborhood Grill &
Bar franchisee. From 1986 to 1990, Mr. Scholler was General Manager of Midco
Foods, Inc., a multi-concept restaurant franchisee. Mr. Scholler is a Director
of the Kansas Restaurant and Hospitality Association.
WILLIAM S. ATHERTON has served as a Director of the Company since January
1996 and is a nominee to the Board for the Annual Meeting. Mr. Atherton is a
partner of Atherton & Murphy Investment Company, an investment partnership, and
serves as Chairman of the Board of Atherton Restaurant Services, Inc. Mr.
Atherton also serves as a Director of Wall Street Deli, Inc., a publicly-traded
restaurant company, Chimis, Inc., a full-service casual dining concept, Oklahoma
State University Foundation Board of
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Governors and the National Cowboy Hall of Fame. From 1964 until 1986, Mr.
Atherton served as Chairman of the Board and Chief Executive Officer of A & M
Food Service, Inc., a Pizza Hut franchisee. He received a Bachelor of Science
degree in petroleum engineering from Oklahoma State University, Stillwater,
Oklahoma in 1956.
STANLEY K. CLARK has served as a Director of the Company since December
1996. Mr. Clark is the owner of Stan Clark Cos., which owns and operates Eskimo
Joe's restaurant, two additional restaurants and Joe's Clothes, a retail clothes
operation. Mr. Clark serves as a Director of the Oklahoma Restaurant Association
and serves on the Oklahoma Tourism and Recreation Commission. He received a
Bachelor of Science degree in business administration from Oklahoma State
University, Stillwater, Oklahoma in 1975.
DAVID L. MURFIN has served as a Director of the Company since December 1995.
From June 1994 until December 1995, Mr. Murfin served as a Director of New York
Bagel Enterprises, Inc., the franchisor entity of the Prior Entities. Since
1978, Mr. Murfin has served in various capacities with, and since 1992 as
President of, Murfin Drilling Company, an oil and gas production, exploration
and drilling company. From 1975 to 1978, Mr. Murfin was a Production and
Reservoir Engineer with Amoco Production Company. Mr. Murfin also serves as
National Chairman of the Liaison Committee of Cooperating Oil and Gas
Associations, President of the Kansas Independent Oil and Gas Association, a
Director of the International Association of Drilling Contractors, Director of
the Quivira Council of the Boy Scouts of America, a member of the Economic
Analysis Panel of the Wichita Chamber of Commerce, and a Director of
Heartspring. Mr. Murfin received Bachelor of Science degrees in business
administration and in mechanical engineering from the University of Kansas,
Lawrence, Kansas in 1975.
WILLIAM J. WALSH, JR. has served as a Director of the Company since December
1996 and is a nominee to the Board for the Annual Meeting. Since 1978, Mr. Walsh
has served as President and Chief Operating Officer of Daland Corporation, a
multi-unit, multi-state Pizza Hut franchisee. Mr. Walsh is a stockholder in Krop
Foods, Inc., a Red Hot & Blue casual dining barbeque restaurant franchisee. From
1966 through 1978, Mr. Walsh was with Pizza Hut, Inc., most recently as Vice
President of Franchising. During 1996, Mr. Walsh served as Chairman and is
currently a member of the Board of Directors of the International Pizza Hut
Franchise Holders' Association. Mr. Walsh is a member of the Young Presidents'
Organization. He received a Bachelor of Science degree in business
administration from Wichita State University, Wichita, Kansas in 1971.
There are no family relationships among any of the executive officers or
directors of the Company. Executive officers of the Company are elected or
appointed by the Board and hold office until their successors are elected or
until the earliest of their death, resignation or removal.
BOARD MEETINGS
The Board held six meetings during the fiscal year ended December 29, 1996.
All directors attended all of the meetings of the Board.
BOARD COMMITTEES
The Company's Board has two standing committees: the Audit Committee and the
Compensation Committee. The functions of the Audit Committee, of which Messrs.
Atherton, Clark and Murfin are members, are to make recommendations to the Board
regarding the engagement of the Company's independent accountants and to review
with management and the independent accountants the Company's financial
statements, basic accounting and financial policies and practices, audit scope
and competency of accounting personnel. The Audit Committee held one meeting
during fiscal 1996. All members of the Audit Committee attended the meeting. The
functions of the Compensation Committee, of which Messrs. Atherton, Murfin and
Walsh are members, are to review and recommend to the Board the compensation,
stock options and employment benefits of all officers of the Company, to
administer the Incentive Plan, as defined herein, to fix the terms of certain
other employee benefit arrangements and to
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make awards under such arrangements. The Compensation Committee held five
meetings during fiscal 1996. All of the members of the Compensation Committee
attended all the meetings. None of the individuals serving on the Compensation
Committee has ever been an officer or employee of the Company. Members of the
committees are appointed annually by the Board and serve at the discretion of
the Board until their successors are appointed or their earlier resignation or
removal. The Board does not have a Nominating Committee.
COMPENSATION OF DIRECTORS
Directors who are not also employees of the Company ("Nonemployee
Directors") receive $250 per Board meeting attended and $125 per Board committee
meeting attended and are reimbursed for out-of-pocket expenses incurred for
attendance at meetings. The Company granted on June 4, 1996, nonqualified stock
options under the Incentive Plan to purchase 17,500 Common Shares to each of
Messrs. Murfin and Atherton, who are Nonemployee Directors, at an exercise price
equal to 110% and 100%, respectively, of the price to public of the Company's
initial public offering. The Company also granted on December 20, 1996,
nonqualified stock options outside of the Incentive Plan to purchase 17,500
Common Shares to each of Messrs. Clark and Walsh, who are Nonemployee Directors,
at an exercise price equal to $6.125 per Common Share which was 100% of the then
close price of the Common Shares. The nonqualified stock options vest over a
period of four years with the initial 20% becoming exercisable on the six-month
anniversary of the grant date and an additional 20% becoming exercisable on each
of the first four anniversaries of the grant date. While the Company does not
have a formal policy concerning the granting of nonqualified stock options to
Nonemployee Directors, the Company may grant such options to Nonemployee
Directors in the future. See "Executive Compensation--Non-Plan Options."
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires each director and officer of the Company, and each
person who owns more than 10% of a registered class of the Company's equity
securities to file by specific dates with the United States Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Shares and other equity securities of the
Company. Officers, directors and 10% stockholders are required by SEC regulation
to furnish the Company with copies of all Section 16(a) forms they file. The
Company is required to report in this Proxy Statement any failure of its
directors and officers and beneficial owners of more than 10% of the Company's
Common Shares to file by the relevant due date any of these reports during the
Company's fiscal year.
To the Company's knowledge, all of the Company's officers, directors and 10%
stockholders complied with applicable Section 16(a) filing requirements during
fiscal 1996.
STOCKHOLDERS' AGREEMENTS
In June 1994, Mr. Geresi, the Company's Chairman of the Board, Chief
Executive Officer and President, Mr. Sorrentino, a Director and Vice
President--New Store Development, Mr. Vrana, Vice President--Training, Mr.
Hoover, a Director and Vice President--Strategic Planning, and Mr. Murfin, a
Director of the Company, entered into a Contract for Sale of Stock which
contained agreements among such stockholders pertaining to the approval of
certain actions, management of NYBE-OK, as defined herein, election of
directors, restrictions on the transfer of stock and preemptive rights. During
January 1996, this agreement was terminated and the Stockholders' Agreement, as
defined herein, became effective.
The stockholders prior to the Company's initial public offering and the
Company are parties to a certain stockholders' agreement which sets forth
certain agreements regarding the management of the Company (the "Stockholders'
Agreement"). The Stockholders' Agreement provides that Messrs. Geresi,
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Vrana, Sorrentino and Rodney Joe Trizza and certain other stockholders shall
designate three persons to stand for election as directors of the Company and
that Ms. Nancy Murfin Moxley, Ms. Barbara Murfin Murphy and Messrs. Hoover,
Murfin, Mark A. Moxley, V. Richard Hoover and Philip Faubert and certain other
stockholders shall designate three persons to stand for election as directors of
the Company. All stockholders who are parties to the Stockholders' Agreement
have agreed to vote their shares in favor of the election of such designees. The
Stockholders' Agreement will automatically terminate during August 1999. As of
March 1, 1997, the stockholders prior to the Company's initial public offering
have voting control over 55.6% of the outstanding Common Shares. Accordingly,
such stockholders will be able to elect the entire Board and otherwise direct
the affairs of the Company.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Messrs. Atherton and Walsh are the Board's nominees for election as
directors, to serve as Category I directors until the 2000 annual meeting of
stockholders or until their successors are elected and qualified. Information
concerning the nominees is set forth above. Both nominees have been previously
appointed to the Board by the Board.
If, for any reason, either of the nominees shall become unavailable for
election, the individuals named in the enclosed Proxy may exercise their
discretion to vote for any substitutes proposed by the Board, unless the Board
should decide to reduce the number of directors to be elected at the Annual
Meeting. The affirmative vote of a majority of the votes cast is required for
the election of each nominee for director.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES
LISTED HEREIN.
EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE EXCHANGE ACT THAT MIGHT INCORPORATE FUTURE FILINGS BY REFERENCE, INCLUDING
THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILING.
REPORT OF THE COMPENSATION COMMITTEE
HISTORY
The Company commenced combined operations in January 1996 as a private
company. At that time the Board formed the Compensation Committee which
established the officers' salaries and other compensation. Salaries were based
upon cash flow, the financial condition of the Company and the perceived levels
of compensation deemed necessary to recruit and retain current employees.
The Company adopted the New York Bagel Enterprises, Inc. 1996 Incentive Plan
(the "Incentive Plan") in January 1996. The Incentive Plan authorizes the
Company to award incentive stock options and nonqualified stock options to
purchase Common Shares and restricted stock to officers, employees and directors
of, and consultants and advisors to, the Company. The purpose of the Incentive
Plan is to attract, retain and motivate such persons.
The Incentive Plan authorizes the award of 400,000 Common Shares to be used
for incentive stock options, nonqualified stock options or restricted stock
grants, of which options to purchase 296,000 Common Shares were granted during
fiscal 1996, none of which have been exercised, and 34,500 of which have
terminated. Messrs. Geresi, Sorrentino, Hoover, Cramer and Vrana each received
options to
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purchase 20,000 Common Shares. As of March 1, 1997, options to purchase 311,500
Common Shares have been granted, none of which have been exercised, and 35,500
of which have terminated.
THE COMPENSATION COMMITTEE
The Board established the Compensation Committee in January 1996. The
Compensation Committee's stated purpose is to review and recommend to the Board
the compensation, stock options and employment benefits of all officers of the
Company, administer the Incentive Plan, fix the terms of other employee benefit
arrangements and make awards under such arrangements. The Compensation Committee
is composed of directors who have never served as officers of the Company. The
following is a summary of certain policies of the Compensation Committee that
affect the compensation paid to officers, as reflected in the tables and text
set forth elsewhere in this Proxy Statement.
GENERAL COMPENSATION POLICY. The Compensation Committee's overall policies
with respect to officers is to offer competitive compensation opportunities for
such persons based upon their personal performance, the financial performance of
the Company and their contribution to that performance. Each officer's
compensation package is comprised of two elements: (i) base salary that reflects
individual performance and (ii) stock-based incentive awards designed to
strengthen the mutuality of interests between the officers and the Company's
stockholders.
FACTORS. Several important factors considered in establishing the
components of each officer's compensation package for the 1996 fiscal year are
summarized below. Additional factors were taken into account to a lesser degree.
The Compensation Committee may, in its sole discretion, apply entirely different
factors, such as different measures of financial performance, for future fiscal
years. However, it is presently contemplated that all compensation decisions
will be designed to further the overall compensation policy described above.
BASE SALARY. The base salary for each officer is set on the basis of
personal performance and internal comparability considerations. The Compensation
Committee believes that the Company's most direct competitors for executive
talent are not limited to the companies that the Company would use in a
comparison for stockholder returns. Therefore, the compensation comparison group
is not the same as the industry group index used in the "Performance Graph"
section below.
STOCK-BASED INCENTIVE COMPENSATION. The Company adopted the Incentive Plan
in January 1996. The Incentive Plan authorizes the Company to award incentive
stock options and nonqualified stock options to purchase Common Shares and
restricted stock to officers, employees and directors of and consultants and
advisors to the Company. The purpose of the Incentive Plan is to attract, retain
and motivate officers, employees, directors, consultants and advisors. The
Incentive Plan authorizes the award of 400,000 Common Shares to be used for
incentive stock options, nonqualified options or restricted stock. The Incentive
Plan is proposed to be amended by the stockholders (see "Proposal to Ratify the
Amendment of the Company's Incentive Plan by Allocating 100,000 Additional
Common Shares"). Under the Incentive Plan and at the discretion of the Board as
recommended by the Compensation Committee, awards may be granted to officers,
employees and directors of and consultants and advisors to the Company in the
form of incentive stock options, nonqualified stock options and restricted
stock. Stock options may be exercised at a purchase price as recommended by the
Compensation Committee and determined by the Board, provided that the exercise
price per share under the Incentive Plan shall be an amount not less than 100%
of the fair market value on the date the option is granted or 110% of fair
market value for beneficial owners of 10% or more of the Company's outstanding
Common Shares. Thus, the optionee receives a return only if the market price of
the shares appreciates over the option term. The grants are designed to align
the interests of the optionees with those of the stockholders and provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business, even though
certain officers of the Company are already significant stockholders of the
Company (see "Security Ownership of Certain Beneficial Owners and Management").
Moreover, the long-term
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vesting schedules encourage a long-term commitment to the Company by its
officers and other optionees. The size of the option grant to each optionee is
set at a level that the Compensation Committee deems appropriate in order to
create a meaningful opportunity for stock ownership based upon the individual's
current position with the Company, but also takes into account the individual's
potential for future responsibility and promotion over the option vesting
period, and the individual's performance in recent periods. The Compensation
Committee periodically reviews the number of shares owned by, or subject to
options held by, each officer, and additional awards are considered upon past
performance of the officer.
CHIEF EXECUTIVE OFFICER
In fiscal 1996, Mr. Robert J. Geresi, Chairman, Chief Executive Officer and
President of the Company, received total cash payments of $58,250 in salary. In
fiscal 1996, Mr. Geresi was also granted options under the Incentive Plan to
purchase 20,000 Common Shares. These options are exercisable at a price of $9.90
per share (110% of the initial public offering price), and vest over a four year
period. The Compensation Committee notes that the Company under the strong
leadership of Mr. Geresi produced significant growth in sales and earnings
during the period. The Compensation Committee considers this level of
compensation appropriate in light of Mr. Geresi's leadership of a newly public,
growth oriented restaurant company which has been involved in significant
development and acquisition activities during fiscal 1996 and has experienced
significant increases in fiscal 1996 revenues and net earnings of 56.8% and
18.0%, respectively, as compared to fiscal 1995, in spite of the performance of
the Company's stock price. Mr. Geresi does not have an employment agreement with
the Company.
LIMITATIONS ON DEDUCTIBILITY
The Compensation Committee has reviewed the Company's informal compensation
policies in light of amendments to the Internal Revenue Code enacted during 1993
that generally limit deductions for compensation paid to certain executive
officers to $1,000,000 per annum (certain performance based compensation is not
subject to that limit). At present levels of compensation, these amendments do
not limit the deductions to which the Company is entitled and the Compensation
Committee has therefore concluded that no changes in the Company's compensation
policies as a result of these amendments are appropriate.
SUMMARY
The Compensation Committee believes that the compensation programs of the
Company and the administration of those programs well serve the interests of the
Company's stockholders. These programs allow the Company to attract, retain and
motivate exceptional management talent and to compensate officers in a manner
that reflects their contribution to both the short-term and long-term
performance of the Company. The Compensation Committee intends to continue to
emphasize programs that it believes positively affect stockholder value.
NEW YORK BAGEL ENTERPRISES, INC., COMPENSATION COMMITTEE
William S. Atherton, David L. Murfin and William J. Walsh, Jr.
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company is composed entirely of the three
Nonemployee Directors named as signatories to the above Report of the
Compensation Committee. During fiscal 1996, no member of the Compensation
Committee (nor any of their respective family members) was a party to any
transaction with the Company exceeding $60,000.
SUMMARY COMPENSATION TABLE
The following table sets forth the salary and other annual compensation paid
during the fiscal year ended December 29, 1996, to the Company's Chief Executive
Officer (the "Named Executive Officer"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -------------------
------------------------------ SECURITIES
FISCAL YEAR OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION ENDED SALARY COMPENSATION(1) OPTIONS(#)
- ------------------------------------------------ ------------- ------------ ---------------- -------------------
<S> <C> <C> <C> <C>
Robert J. Geresi................................ 1996 $ 65,000(2) $ 34,909 20,000
Chief Executive Officer and President
</TABLE>
- ------------------------
(1) Consists of amount reimbursed for payment of 1996 taxes while the Company
operated as an S corporation. Mr. Geresi receives personal benefits in
addition to salary; however, the Company has concluded that the aggregate
amounts of such personal benefits did not exceed the lesser of $50,000 or
10% of annual salary reported for Mr. Geresi and, therefore, such benefits
have not been included herein.
(2) During April 1996, Mr. Geresi's salary was increased to $65,000 from
$48,000.
STOCK OPTION GRANT TABLE
The following table sets forth certain information concerning options
granted to the Named Executive Officer during the Company's fiscal year ended
December 29, 1996:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANT POTENTIAL REALIZABLE
----------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATE OF STOCK
SECURITIES % TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN FISCAL PRICE EXPIRATION --------------------
NAME GRANTED(#)(1) 1996 ($/SHARE) DATE 5%($) 10%($)
- ---------------------------------- ------------- ------------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Geresi.................. 20,000 7.7% $ 9.90 6/4/2001 $ 31,800 $ 91,800
</TABLE>
- ------------------------
(1) The shares granted to Mr. Geresi are exercisable at an exercise price equal
to 110% of the initial public offering price. All of these options are
exercisable over a period of four years with the initial 20% becoming
exercisable on the six-month anniversary of the grant date and an additional
20% becoming exercisable on each of the first four anniversaries of the
grant date.
(2) As required by the rules of the SEC, potential values are based on the
assumption that the Company's Common Shares will appreciate in value from
the grant date to the end of the option term (five years from the grant
date) at annualized rates of five percent and ten percent (total
appreciation of approximately 27.7% and 61.0%, respectively, and, therefore,
are not intended to forecast possible future appreciation, if any, in the
price of the Common Shares.
9
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
TABLE
The following table sets forth information concerning shares acquired on
exercise of stock options during fiscal 1996 and the value of stock options held
at the end of fiscal 1996 by the Named Executive Officer:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR END(#) AT FISCAL YEAR END($)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------------- --------------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Geresi.......... 0 0 4,000 16,000 0 0
</TABLE>
EMPLOYMENT ARRANGEMENTS
The Company has entered into a standard form of employment agreement with
four restaurant management employees (the "Employment Agreements") concerning
the acquisition of its Austin, Texas franchisee. Each of the Employment
Agreements expires on August 31, 1998. The Company may terminate the employee if
such termination is for "cause" as defined therein. The Company does not have an
employment agreement with Mr. Geresi, the Named Executive Officer.
INCENTIVE PLAN
SCOPE. The Board and stockholders of the Company have approved the New York
Bagel Enterprises, Inc. 1996 Incentive Plan (the "Incentive Plan"). The
Incentive Plan authorizes the Company to award incentive stock options and
nonqualified stock options to purchase Common Shares and restricted stock to
officers, employees and directors of, and consultants and advisors to, the
Company. The purpose of the Incentive Plan is to attract, retain and motivate
such persons.
The Incentive Plan authorizes the award of 400,000 Common Shares to be used
for incentive stock options, nonqualified stock options or restricted stock
grants, of which options to purchase 296,000 Common Shares were granted during
fiscal 1996, none of which have been exercised, and 34,500 of which have
terminated. If an award made under the Incentive Plan expires, is canceled or is
otherwise terminated, those shares will be available for future awards under the
Incentive Plan. The Incentive Plan will terminate during January 2006.
ADMINISTRATION. The Incentive Plan is administered by the Company's
Compensation Committee which is comprised of directors who are disinterested
within the meaning of Rule 16b-3 promulgated under Section 16(b) of the Exchange
Act. Subject to the provisions of the Incentive Plan, the Compensation Committee
has authority to select those officers, employees, advisors and consultants of
the Company to receive awards, to determine the time or times of receipt, to
determine the types of awards and the number of shares covered by the awards,
and to establish the terms, conditions and provisions of such awards. In making
such award determinations, the Compensation Committee may take into account the
nature of services rendered by the recipient, his or her present and potential
contribution to the Company's growth and success, and such other factors as the
Compensation Committee deems relevant. The Compensation Committee is authorized
to interpret the Incentive Plan, to establish, amend, and revoke any rules and
regulations relating to the Incentive Plan, to determine the terms and
provisions of any agreements made pursuant to the Incentive Plan, and to make
all other determinations that may be necessary or advisable for the
administration of the Incentive Plan.
STOCK OPTIONS. Both incentive stock options and nonqualified stock options
(collectively referred to as "Stock Options") may be granted pursuant to the
Incentive Plan. All Stock Options granted under the Incentive Plan will have an
exercise price per share to be determined by the Compensation Committee;
provided that the exercise price per share under each Stock Option shall not be
less than the fair market
10
<PAGE>
value of a share of Common Shares at the time the Stock Option is granted (110%
of such fair market value in the case of incentive stock options granted to a
stockholder who owns 10% or more of the Company's Common Shares). The maximum
term for all Stock Options granted under the Incentive Plan is ten years (five
years in the case of an incentive stock option granted to a stockholder who owns
10% or more of the Company's Common Shares). Moreover, no Stock Options may be
granted under the Incentive Plan more than ten years after the date of its
adoption. All Stock Options are non-transferable other than by will or the laws
of descent and distribution or a qualified domestic relations order, and during
an optionee's lifetime may be exercised only by the optionee or the optionee's
guardian or legal representative. Stock Options are exercisable at such time and
in such installments as the Compensation Committee may provide at the time the
Stock Option is granted. The Compensation Committee may accelerate the
exercisability of any Stock Option at any time. The purchase price for shares
acquired pursuant to the exercise of a Stock Option must be paid in the manner
determined by the Compensation Committee. The terms and conditions of Stock
Options relating to their treatment upon termination of the optionee's
employment or association with the Company will be determined at the time the
Stock Options are granted. An optionee is not deemed to be the owner of any
Common Shares subject to any Stock Option until the Stock Option has been
exercised, the Company has issued and delivered the shares to the optionee and
the optionee's name has been entered as a stockholder of record on the books of
the Company. The Stock Options vest over a period of four years with the initial
20% becoming exercisable on the six-month anniversary of the grant date and an
additional 20% becoming exercisable on each of the first four anniversaries of
the grant date. In the event of a change in control of the Company, as defined,
awards under the Incentive Plan become exercisable within 60 days of the change
in control.
RESTRICTED STOCK. Restricted stock awards are grants of Common Shares made
to officers and employees, subject to conditions established by the Compensation
Committee. The terms of a restricted stock award, including the restrictions
placed on such shares and the time or times at which such restrictions will
lapse, shall be determined by the Compensation Committee at the time the award
is made. Unless the Compensation Committee determines otherwise, holders of
restricted stock shall have the right to vote the shares of restricted stock and
to receive all dividends thereon. The Compensation Committee may determine at
the time of an award of restricted stock that dividends paid on such shares may
be paid to the grantee or deferred. Deferred dividends (together with any
interest accrued thereon) will be paid upon the lapsing of the restrictions on
the shares of restricted stock or forfeited upon the forfeiture of the shares of
restricted stock. The agreements evidencing awards of restricted stock shall set
forth the terms and conditions of such awards and the effect of a grantee's
termination of employment.
ADJUSTMENTS. In the event of any change in the outstanding Common Shares by
reason of any reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or rights or
debentures, stock dividend, stock split or reverse stock split, cash dividend,
property dividend or similar change in the corporate structure, the aggregate
number of Common Shares with respect to which awards may be made under the
Incentive Plan, and the terms and the number of shares of restricted stock, or
the number of Common Shares underlying any outstanding Stock Options may be
equitably adjusted by the Compensation Committee in its sole discretion.
TERMINATION AND AMENDMENT. The Incentive Plan may be terminated or amended
by the Board, provided that, in the absence of stockholder approval, no
amendment of the Incentive Plan may materially increase the total number of
Common Shares with respect to which awards may be made under the Incentive Plan
(except as discussed in "--Adjustments" above), change the exercise price of a
Stock Option, materially modify the requirements as to eligibility for
participation in the Incentive Plan or materially increase the benefits accruing
to participants under the Incentive Plan. No amendment of the Incentive Plan may
adversely alter or impair any Stock Option or share of restricted stock awarded
under the Incentive Plan prior to such amendment without the consent of the
holder thereof.
11
<PAGE>
NON-PLAN OPTIONS
In addition to Stock Options granted pursuant to the Incentive Plan, the
Company granted in December 1996, nonqualified options outside of the Incentive
Plan to purchase 17,500 Common Shares (the "Non-Plan Options") to each of
Messrs. Clark and Walsh. The Non-Plan Options were granted at an exercise price
of $6.125 per share, 100% of the close price of the Common Shares on the grant
date. The nonqualified options vest over a period of four years with the initial
20% becoming exercisable on the six-month anniversary of the grant date and an
additional 20% becoming exercisable on each of the first four anniversaries of
the grant date.
12
<PAGE>
PERFORMANCE GRAPH
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OR THE EXCHANGE ACT THAT MIGHT
INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART,
THIS SECTION ENTITLED "PERFORMANCE GRAPH" SHALL NOT BE INCORPORATED BY
REFERENCED INTO ANY FILINGS OR INTO ANY FUTURE FILINGS AND SHALL NOT BE DEEMED
SOLICITING MATERIAL OR FILED UNDER THE SECURITIES ACT OR THE EXCHANGE ACT.
The following graph compares the cumulative total stockholder return on the
Company's Common Shares from August 27, 1996 (the date the Company became a
public company) through December 29, 1996, with the cumulative total return of
the Nasdaq Stock Market Total Return Index and the Peer Group Index, as defined
below. The graph assumes the investment of $100 in the Company's Common Shares
on August 27, 1996 and reinvestment of all dividends. The initial public
offering price of the Company's Common Shares was $9.00 per share.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AUGUST 27, 1996 TO DECEMBER 29, 1996
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NEW YORK BAGEL NASDAQ STOCK MARKET PEER GROUP
<S> <C> <C> <C>
Enterprises,
Inc. Total Return Index Index
8/27/96 100.00 100.00 100.00
12/29/96 69.44 112.94 80.72
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN* 12/29/96
- ----------------------------------------------------------------------------------- ---------
<S> <C>
New York Bagel Enterprises, Inc.................................................... $ 69.44
Nasdaq Stock Market Total Return Index............................................. $ 112.94
Peer Group Index**................................................................. $ 80.72
</TABLE>
- ------------------------
* Cumulative Total Return assumes reinvestment of dividends. There were no
dividends paid by the Company during the period presented. Cumulative Total
Return assumes an initial investment of $100 on August 27, 1996.
** Peer Group Index is composed of restaurant companies with similar product
offering and/or market capitalization. These companies are Au Bon Pain Co.,
Inc., BAB Holdings, Inc., Blimpie International, Inc., Einstein/Noah Bagel
Corp., Landry's Seafood Restaurants, Inc., Logan's Roadhouse, Inc.,
Manhattan Bagel Company, Inc., Quality Dining, Inc., Quizno's Corp. and
Schlotzky's, Inc.
13
<PAGE>
PROPOSAL NO. 2
PROPOSAL TO RATIFY THE AMENDMENT OF THE COMPANY'S INCENTIVE PLAN
BY ALLOCATING 100,000 ADDITIONAL COMMON SHARES
The Board, on March 13, 1997, adopted a resolution to amend the New York
Bagel Enterprises, Inc. 1996 Incentive Plan subject to the approval by the
stockholders at the Annual Meeting. The amendment of the Incentive Plan, by
allocating 100,000 additional Common Shares, is being submitted to the
stockholders for approval as a method to compensate certain officers, employees
and directors of, and consultants and advisors to the Company. The Board
determined that such amendment is necessary in order to assist in accomplishing
the Board's goals concerning compensation of such persons.
The affirmative vote of a majority of the votes cast on this proposal will
constitute approval of the amendment of the Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
AMENDMENT OF THE INCENTIVE PLAN.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table presents certain information as of March 1, 1997,
regarding the beneficial ownership of Common Shares by (i) each of the directors
and the Named Executive Officer of the Company individually, (ii) all directors,
the executive officers and the Named Executive Officer of the Company as a
group, and (iii) all persons known by the Company to be beneficial owners of 5%
or more of the Common Shares. Unless otherwise noted, the persons listed below
have sole voting and investment power and record and beneficial ownership with
respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) PERCENTAGE
- ------------------------------------------------------------ -------------------- -------------
<S> <C> <C>
Robert J. Geresi(2)(3)...................................... 553,718 11.85%
Paul T. Sorrentino(2)....................................... 552,918 11.84%
Paul R. Hoover(4)........................................... 67,973 1.46%
William S. Atherton......................................... 3,500 *
Stanley K. Clark............................................ 10,000 *
David L. Murfin(5)(6)....................................... 395,371 8.46%
William J. Walsh, Jr........................................ -- *
Directors and executive officers as a group (eight
persons)(7)............................................... 1,587,480 33.77%
Vincent J. Vrana(2)......................................... 514,939 11.02%
</TABLE>
- ------------------------
* Less than one percent.
(1) The number of Common Shares beneficially owned by Messrs. Geresi,
Sorrentino, Hoover, Atherton, Murfin and Vrana include 4,000, 4,000, 4,000,
3,500, 3,500 and 4,000 shares, respectively, or 23,000 shares in the
aggregate, which such persons have a right to acquire pursuant to stock
options that are vested or vest within 60 days.
(2) The address for Messrs. Geresi, Sorrentino and Vrana is 115 East 8th,
Stillwater, Oklahoma 74074-4601.
(3) Includes 5,000 shares owned by Mr. Geresi's minor children.
(4) Includes 5,000 shares owned by Mr. Hoover's minor children.
(5) The address for Mr. Murfin is 300 I.M.A. Plaza, 250 North Water Street,
Wichita, Kansas 67202-1213.
(6) Includes 45,000 shares owned by Mr. Murfin's minor children.
(7) Includes 4,000 shares which Mr. Cramer has a right to acquire pursuant to
stock options that vest within 60 days.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REORGANIZATION
The Company's business was previously operated through six separate
entities, each of which was owned by one or more stockholders that existed prior
to the Company's initial public offering (collectively, the "Prior Entities").
On December 31, 1995, the Company effected the "Reorganization" whereby, through
a series of transactions, the Company succeeded to the businesses of the Prior
Entities. First, New York Bagel Shop & Delicatessen, Inc., a Kansas corporation,
and VPR, Inc., New York Bagel Shop, Inc., Bagel Boss, Inc. and Bagels of Norman,
Inc., all Oklahoma corporations, were merged into New York Bagel Enterprises,
Inc., an Oklahoma corporation ("NYBE-OK") by issuance of 1,368,704 shares of the
Company's Class B Common Shares. Second, Nashville Bagel Co., Inc., a wholly
owned subsidiary of NYBE-OK, was merged into NYBE-OK. Finally, NYBE-OK was
merged into the Company for the purpose of changing the corporate domicile from
Oklahoma to Kansas by issuance of 1,416,988 shares of the Company's Class A
Common Shares to the pre-reorganization stockholders of NYBE-OK. As a result of
the Reorganization, Messrs. Geresi, Sorrentino, Hoover, Vrana, Murfin and Trizza
received 627,343, 627,343, 141,698, 584,564, 354,246 and 161,951 Common Shares,
respectively. In addition, Mr. Geresi's father, John R. Geresi, received 21,389
shares; Mr. Hoover's father, V. Richard Hoover, received 70,850 shares; Mr.
Murfin's sister, Barbara Murfin Murphy, received 70,850 shares; Mr. Murfin's
sister and brother-in-law, Nancy Murfin Moxley and Mark A. Moxley, received
70,850 shares; and 54,608 shares were issued to others.
LEASES
The Company currently leases space for a Company-owned New York Bagel
restaurant located in Norman, Oklahoma from Bagel Land, Inc. ("Bagel Land"), an
Oklahoma corporation, owned one-third each by Messrs. Geresi, Sorrentino and
Vrana. The Company made aggregate rent payments under such lease of $30,277
during fiscal 1996. The lease is for a term of five years commencing June 1994
at a rent of $2,350 per month for 30 months and $2,500 per month for the
remaining 30 months with an option to renew for five years at $2,650 for the
first 30 months and $2,800 per month for the last 30 months. The Company also
leases space for a Company-owned New York Bagel restaurant located in Tulsa,
Oklahoma from Cherry Street Land, Inc., an Oklahoma corporation, owned
one-fourth each by Messrs. Geresi, Sorrentino, Vrana and Trizza. The Company
made aggregate rent payments under such lease of $29,900 during fiscal 1996. The
lease is for a term of five years beginning January 1995 with an option to renew
for five years and rent for the first 24 months of $2,300 per month, $2,500 per
month for the next 36 months, $2,700 per month for the next 30 months and $2,900
per month for the last 30 months.
The Company subleases space for its corporate offices located in Wichita,
Kansas from Murfin Drilling Company, Inc., a wholly owned subsidiary of Murfin,
Inc. which is owned 7.1% by Mr. Murfin. The Company made aggregate rent payments
under such sublease of $13,144 during fiscal 1996. The current sublease is on a
month to month basis and is terminable on 30 days' notice by the Company.
STOCKHOLDER GUARANTEES
The Company had outstanding aggregate bank borrowings of approximately $4.5
million which were guaranteed in various amounts by and in certain combinations
of Messrs. Geresi, Sorrentino, Vrana, Murfin and Hoover. The Company used
approximately $4.5 million of the net proceeds of its initial public offering of
the Company's Common Shares to repay such indebtedness.
DISTRIBUTIONS
The Company made a $156,000 distribution on March 4, 1997 to the
stockholders that existed prior to the Company's initial public offering in
connection with their estimated federal and state income tax
15
<PAGE>
obligations attributable to the Company's 1996 S corporation earnings. In
connection with such distribution, Messrs. Geresi, Sorrentino, Hoover, Vrana,
Scholler and Murfin received $34,909, $34,937, $3,900, $32,562, $797 and
$19,743, respectively.
FRANCHISEE
During August 1995, the Company entered into a Development Agreement with
Mr. Vrana's brother and his partner concerning the development of three New York
Bagel restaurants in Columbia, South Carolina on terms and conditions comparable
to all other franchisees of the Company. Pursuant thereto, Mr. Vrana's brother
and his partner have developed two restaurants and entered into franchise
agreements with the Company in connection therewith.
REAL ESTATE PURCHASE
During 1996, the Company purchased for $353,216, Bagel Land's cost, land and
a building under construction located in Lubbock, Texas, from Bagel Land. The
Company completed construction of the restaurant and opened it during November
1996.
FUTURE TRANSACTIONS
Although each of the foregoing transactions were among affiliated parties
and necessarily involved conflicts of interest, the Company believes that they
were on terms that were no less favorable than reasonably available from
unaffiliated third parties. It is the Company's policy that all transactions
between the Company and its affiliated entities, executive officers or directors
will be subject to the review and approval of the majority of the Company's
directors that do not have an interest in the transaction and will be on terms
which will be no less favorable to the Company than the Company could obtain
from non-affiliated parties.
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP has served as the Company's independent accountants
since its appointment for fiscal 1994. The Board on the unanimous recommendation
of the Audit Committee, has selected KPMG Peat Marwick LLP as the Company's
independent accountants for the fiscal year ending December 28, 1997, subject to
ratification by the stockholders at the Annual Meeting. Representatives of KPMG
Peat Marwick LLP are expected to be present at the meeting to respond to
questions and will have an opportunity to make a statement if they desire to do
so.
All services provided to the Company by KPMG Peat Marwick LLP were approved
by the Audit Committee, which also considered the possible effect on the
independence of KPMG Peat Marwick LLP by rendering such services. Audit services
of KPMG Peat Marwick LLP for fiscal 1996 included the examination of the
consolidated financial statements and services related to filings with the SEC.
The affirmative vote of a majority of the votes cast on this proposal will
constitute ratification of the appointment of KPMG Peat Marwick LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR
FISCAL YEAR 1997.
16
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, the Board knows of no other business
that will be presented by management for consideration at the Annual Meeting. If
any other business properly comes before the Annual Meeting, the proxy holders
intend to vote the proxies as recommended by the Board.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1998 Annual Meeting of
the stockholders must be received by the Company in writing no later than
January 22, 1998. Proposals must be mailed to New York Bagel Enterprises, Inc.,
300 I.M.A. Plaza, 250 North Water Street, Wichita, Kansas 67202-1213, ATTN: Jon
H. Cramer, Secretary.
ANNUAL REPORT (FORM 10-K)
The Annual Report to Stockholders of the Company for the fiscal year ended
December 29, 1996, which includes financial statements, has been mailed to
stockholders of the Company contemporaneously with the mailing of this Proxy
Statement. The Annual Report does not form any part of the material for the
solicitation of proxies. The Company undertakes, on written request and without
charge, to provide each person from whom the accompanying Proxy is solicited
with a copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 29, 1996, as filed with the SEC, including the financial
statements and schedules. Requests should be addressed to New York Bagel
Enterprises, Inc., 300 I.M.A. Plaza, 250 North Water Street, Wichita, Kansas
67202-1213, ATTN: Jon H. Cramer, Secretary.
By Order of the Board of Directors
/s/ JON H. CRAMER
CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER
March 31, 1997
17
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.
300 I.M.A. Plaza
250 North Water Street
Wichita, Kansas 67202-1213
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Geresi, Paul R. Hoover and Jon
H. Cramer, or any one or more of them, as proxies, each with the power to
appoint his substitute, and hereby authorizes each of them to represent and
to vote, as designated below, all of the shares of common stock of New York
Bagel Enterprises, Inc. (the "Company") held of record by the undersigned on
April 18, 1997 at the Annual Meeting of Stockholders to be held on May 21,
1997, or any adjournments thereof.
<TABLE>
1. ELECTION OF DIRECTORS
<S> <C>
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) / / To vote for all nominees listed below / /
(INSTRUCTIONS TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
William S. Atherton, William J. Walsh, Jr.
</TABLE>
2. Proposal to ratify the amendment of the New York Bagel Enterprises, Inc.
1996 Incentive Plan (the "Incentive Plan") by allocating 100,000
additional Common Shares to be potentially issued pursuant to the terms
of the Incentive Plan.
FOR / / AGAINST / / ABSTAIN / /
3. Proposal to ratify the appointment of KPMG Peat Marwick LLP, certified
public accountants, as the independent auditors for the Company for the
fiscal year ending December 28, 1997.
FOR / / AGAINST / / ABSTAIN / /
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
<PAGE>
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR Proposals 1, 2 and 3.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name by President or authorized
officer. If a partnership, please sign in partnership name by authorized
person.
Dated
----------------------------------
---------------------------------------
Signature
---------------------------------------
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
