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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
Rule14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Commission file number 0-21205
NEW YORK BAGEL ENTERPRISES, INC.
(Name of Registrant as specified in its charter)
NONE
(Name of person(s) filing proxy statement if other than the Registrant)
Payment of filing fee:
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
Title of each class of securities to which transaction applies:
Aggregate number of securities to which transaction applies:
Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: Proposed maximum aggregate value of
transaction:
Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date filed:
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NEW YORK BAGEL ENTERPRISES, INC.
115 East 8th Street
Stillwater, Oklahoma 74074
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1999
To the Stockholders of
New York Bagel Enterprises, Inc.
NOTICE IS HEREBY GIVEN that the 1999 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,
1999, at 10:00 a.m. (local time) for the following purposes:
1. To elect two (2) directors to hold office until the 2002 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 appointment of Allen, Gibbs & Houlik, L.C., certified
public accountants, as independent auditors for the Company for the
fiscal year ending December 29, 1999; and
3. 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
19, 1999, 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/ RICHARD RANDALL WEBB
Richard Randall Webb,
CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER
Stillwater, Oklahoma
March 31, 1999
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NEW YORK BAGEL ENTERPRISES, INC.
115 East 8th Street
Stillwater, Oklahoma 74074
(405) 624-3700
March 31, 1999
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1999
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 1999 Annual Meeting of Stockholders of the
Company (the "Annual Meeting") to be held on May 21, 1999, at 10:00 a.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 19, 1999, 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 20, 1999.
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; and
"FOR" the ratification of the appointment of Allen, Gibbs & Houlik,
L.C., certified public accountants, as independent auditors for the
Company for fiscal year 1999.
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 Richard Randall Webb,
Secretary of the Company, at the Company's executive offices at 115 East 8th
Street, Stillwater, Oklahoma 74074, 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 19, 1999, is necessary to
constitute a quorum at the Annual Meeting. As of March 1, 1999, the Company had
4,657,100 Common Shares issued and outstanding.
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
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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, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS OF THE COMPANY
NUMBER AND TERM OF DIRECTORS
The Company's Articles of Incorporation divide the Board into three
categories of as equal size as possible, with the terms of each category
expiring in consecutive years so that only one category 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. Geresi and Hoover will expire at the 1999 annual meeting of
stockholders of the Company; the term of Mr. Walsh will expire at the 2000
annual meeting of stockholders; and the terms of Messrs. Sorrentino and Murfin
will expire at the 2001 annual meeting of stockholders.
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The names of the directors, executive officers and significant
employees of the Company, their respective ages, positions and director's terms
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------------------ ----- -------------------------------------------------
<S> <C> <C>
William J. Walsh, Jr. (1)(2)(3)............................. 50 Chairman of the Board
Robert J. Geresi (4)........................................ 36 Chief Executive Officer, President and Director
Paul T. Sorrentino (5)...................................... 36 Vice President-New Store Development and Director
Richard Randall Webb........................................ 42 Chief Financial Officer, Secretary and Treasurer
Vincent J. Vrana............................................ 36 Vice President - Training
Paul R. Hoover (4).......................................... 38 Director
David L. Murfin (5)(2)...................................... 49 Director
</TABLE>
-----------
(1) Category I Director (term expiring 2000).
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Category III Director (Nominee Director-term expiring at the
Annual Meeting).
(5) Category II Director (term expiring 2001).
2
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WILLIAM J. WALSH, JR. has served as Chairman of the Board of Directors
since October 1998 and as a Director of the Company since December 1996. 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 has recently served as 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.
ROBERT J. GERESI has served as a Director, Chief Executive Officer and
President of the Company since December 1995 and is a nominee to the Board for
the Annual Meeting. Mr. Geresi served as Chairman of the Board of the Company
from December 1995 through October 1998. Mr. Geresi served as an executive
officer of each of the six separate restaurant operating entities (the "Prior
Entities") since their respective inceptions beginning in 1986, whereby, through
a series of transactions, the Company succeeded to the business of the Prior
Entities. 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 n 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.
RICHARD RANDALL WEBB has served as Chief Financial Officer, Secretary
and Treasurer of the Company since June 1998. From August 1991 to May 1998, Mr.
Webb was with Premier Parks Inc. as Vice President of Finance. From March 1988
to August 1991, Mr. Webb was controller for Remington Park Race Track in
Oklahoma City, Oklahoma, a subsidiary of DeBartole Corporation. Mr. Webb
received a Bachelor of Science degree in accounting from Southern Nazarene
University, Bethany, Oklahoma, in 1978.
VINCENT J. VRANA has served as Vice President n 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.
PAUL R. HOOVER has served as a Director of the Company since December
1995 and is a nominee to the Board for the Annual Meeting. Mr. Hoover served as
Vice President-Strategic Planning of the Company from December 1995 through
April 1998. 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. From 1984 through April 1998, Mr. Hoover has been
a Director and stockholder of West-Kan Foods, Inc., a Wendy's restaurant
franchisee. Since October 1997, Mr. Hoover has been a Vice President, Director
and stockholder of Commercial Equity, Inc., a private real estate company. Mr.
Hoover has served as President of KC Bell, Inc., a multi-unit, multi-state Taco
Bell franchisee, since May 1998. 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.
DAVID L. MURFIN has served as a Director of the Company since December
1994. 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
1991, Mr. Murfin has served as Chairman of the Board of Directors and as a
Director of Murfin, Inc.
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Since 1978, Mr. Murfin has served in various capacities with, and since 1991 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 has recently served
as 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, and Board of Directors member
of Heartspring. Presently, he serves on the Board of Directors of the Wichita
Chamber of Commerce, the Board of Directors of Kansas Energy Education
Foundation and is an Executive Committee member of the Kansas Independent Oil
and Gas Association. Since September 1997, Mr. Murfin has been President, a
Director and a stockholder of Commercial Equity, Inc., a private real estate
company. Mr. Murfin received Bachelor of Science degrees in business
administration and in mechanical engineering from the University of Kansas,
Lawrence, Kansas in 1975.
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.
In January 1999, Stanley K. Clark resigned from the Board. The Board
subsequently decreased the number of directors from six to five.
BOARD MEETINGS
The Board held seven meetings during the fiscal year ended December
27, 1998. All directors attended at least 75% of the meetings of the Board.
Other than Mr. Clark's absence from the sole Audit Committee meeting, all
directors attended at least 75% of the meetings of the Board committees of which
they are members.
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. Hoover, Murfin and Walsh 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 1998. The functions of the Compensation Committee, of which Mr.
Walsh is the sole member, are to review and recommend to the Board the
compensation, stock options and employment benefits of all officers of the
Company, to administer the New York Bagel Enterprises, Inc. 1996 Incentive Plan
(the "Incentive Plan") to fix the terms of certain other employee benefit
arrangements and to make awards under such arrangements. The Compensation
Committee held three meetings during fiscal 1998. Mr. Walsh has never been an
officer or employee of the Company. No executive officer of the Company has
served as a member of the board of directors or the compensation committee of
any company one of whose executive officers include a member of the Board or the
Compensation Committee of the Company, other than Mr. Hoover. Mr. Hoover is Vice
President, director and stockholder of Commercial Equity, Inc., a privately held
real estate company, and was an executive officer of the Company during 1998.
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. During fiscal 1998 total Nonemployee Directors' fees of
$6,125 were paid in cash. Management directors received no fees for their
services as a director on the Board. Mr. Walsh, a Nonemployee Director, was
granted nonqualified stock options outside of the Incentive Plan, which vested
immediately, to purchase 100,000 Common Shares at an exercise price equal to
$0.750 per share on October 9, 1998. On January 28, 1999, the
4
<PAGE>
Company granted Mr. Hoover, a Nonemployee Director, nonqualified stock options
outside of the Incentive Plan to purchase 17,500 Common Shares at an exercise
price equal to $1.00 per Common Share. Except as otherwise stated, 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."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires each director and officer of the Company, each person
who beneficially owns more than 10% of a registered class of the Company's
equity securities and any other person subject to Section 16 of the Exchange Act
with respect to the Company 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, beneficial owners of more than 10% of the Company's
Common Shares and any other person subject to Section 16 of the Exchange Act
with respect to the Company 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 1998, other than a Form 4 evidencing the termination of Mr.
Hoover's incentive stock options when he resigned as an officer which form was
due on May 10, 1998, and filed during February 1999 and a Form 5 due July 10,
1998, to evidence the termination of Jon H. Cramer's incentive stock options
upon his resignation as Chief Financial Officer, Secretary and Treasurer during
June 1998.
STOCKHOLDERS' AGREEMENT
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, Vrana and
Sorrentino and certain other stockholders shall designate three persons to stand
for election as directors of the Company and that Messrs. Hoover and Murfin 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. The Company believes that 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. Geresi and Hoover are the Board's nominees for election as
directors, to serve as Category III directors until the 2002 annual meeting of
stockholders or until their successors are elected and qualified. Information
concerning the nominees is set forth above. Messrs. Geresi and Hoover were
previously elected to the Board by the Company's stockholders before the
Company's initial public offering of its Common Shares.
The Board currently consists of five members. The Board has determined
to nominate two persons for election. The proxies cannot be voted for a greater
number of persons than the number of nominees named.
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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 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS, AND SHALL NOT BE DEEMED SOLICITING MATERIAL AS FILED UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT.
REPORT OF THE COMPENSATION COMMITTEE
THE COMPENSATION COMMITTEE
The Compensation Committee's stated purpose is to review and recommend
to the Board of Directors (the "Board") the compensation, stock options and
employment benefits of all officers of the Company, administer the New York
Bagel Enterprises, Inc. 1996 Incentive Plan (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. Stanley K. Clark served on the Compensation
Committee from January 1998 through January 1999. Mr. Walsh is currently the
sole member of the Compensation Committee. 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 executive 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 1998 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 did not conduct a formal survey of executive officer salaries.
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
6
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and advisors. The Incentive Plan authorizes the award of 500,000 Common Shares
to be used for incentive stock options, nonqualified options or restricted
stock. 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 of incentive stock options 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. Vesting requirements are also recommended
by the Compensation Committee and determined by the Board. Thus, the optionee of
incentive stock options 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
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.
STOCK OPTION REPRICING. During December 1998, the Compensation
Committee recommended to the Board the repricing and replacement of all of the
outstanding incentive stock option grants due to the fact that the exercise
prices were in excess of the current fair market value of the Company's Common
Shares. The Compensation Committee determined that the objectives of the
Incentive Plan and the objectives of the Compensation Committee are to promote
the interests of the Company by providing employees an incentive to acquire a
proprietary interest in the Company and to render or continue to render services
to the Company. The Compensation Committee determined that the stock options
outstanding at the time with exercise prices above the current fair market value
of the Company's Common Shares did not provide sufficient equity incentive to
the optionees. The Compensation Committee concluded that such option grants
failed to further the objectives of the Incentive Plan. In the opinion of the
Compensation Committee, the long-term interests of the Company and all of its
stockholders are clearly served by the retention and motivation of the optionees
who remain with the Company. The Compensation Committee recommended to the
Board, and the Board so approved, that the option grants from the Incentive Plan
be repriced by canceling and reissuing on a one-for-one basis at an exercise
price of $1.00 per share which was greater than 100% of the market price of the
Common Shares of the Company, such options vested as originally granted such
that the new vesting periods were modified to give credit for the prior holding
periods and the vesting periods did not start over. The Named Executive Officer
of the Company which had stock options repriced included the following:
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICINGS
Length of
Number of Market Price Original
Securities of Stock at Exercise Price Option Term
Underlying Time of at Time of Remaining
Options Repricing or Repricing or New at Date of
Repriced or Amendment Amendment Exercise Repricing or
Name Date Amended (#) ($) ($) Price ($) Amendment
---- ---- ----------- ------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Geresi 12/1/98 20,000 $0.34 $6.05 $1.00 46 months
12/1/98 20,000 $0.34 $4.06 $1.00 46 months
</TABLE>
7
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CHIEF EXECUTIVE OFFICER
In fiscal 1998, Mr. Robert J. Geresi, Chief Executive Officer and
President of the Company, received total cash payments of $78,688 in salary. In
fiscal 1998, the Company repriced the options originally granted to Mr. Geresi
during 1996 and 1997, 40,000 options in total, exercisable at a price of $1.00
per share (at least 110% of the fair market value at the date of grant) and vest
as originally granted. The Compensation Committee notes that the Company under
the strong leadership of Mr. Geresi has shifted its strategy from that of
aggressive growth to that of limited growth with an enhanced focus on operations
and closure of underperforming restaurants. The Compensation Committee considers
this level of compensation appropriate in light of Mr. Geresi's leadership of
the Company, 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. It is anticipated that 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
1999 Member
William J. Walsh, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the Compensation Committee of the Company was composed
entirely of the two Nonemployee Directors. As of January 1999, Mr. Walsh is the
sole member of the Compensation Committee and is named as signatory to the above
Report of the Compensation Committee. During fiscal 1998, 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.
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the salary and other annual compensation
paid during the fiscal years ended December 27, 1998, December 28, 1997, and
December 29, 1996, to the Company's Chief Executive Officer (the "Named
Executive Officer"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- ----------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION FISCAL YEAR ENDED SALARY COMPENSATION(1) OPTIONS(#)(2)
- --------------------------- ----------------- ------- --------------- ---------------------
<S> <C> <C> <C> <C>
Robert J. Geresi, Chief Executive 1998 $78,688 $ -0- 20,000
Officer and President 1997 $65,000 $ -0- 20,000(5)
1996 $65,000(3) $34,909 20,000(4)(5)
</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) The outstanding options granted pursuant to the Company's Incentive Plan.
(3) During April 1996, Mr. Geresi's salary was increased to $65,000 from
$48,000.
(4) All 1996 options were originally granted on June 4, 1996, for the number of
shares indicated. All such options were canceled and repriced on October 6,
1997. The options are exercisable according to the original vesting
schedule in five increments of 20% each.
(5) All outstanding options were canceled and repriced on December 1, 1998. The
options are exercisable according to the original vesting schedule in five
increments of 20% each.
STOCK OPTION GRANT TABLE
The following table sets forth certain information concerning options
granted to the Named Executive Officer during the Company's fiscal year ended
December 27, 1998:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grant(1)
------------------------------------------------------------------------
Number of
Securities % Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration
Name Granted (#)(2) Fiscal 1998 ($/Share) Date
---- ---------------- ---------------- ----------- -----------
<S> <C> <C> <C> <C>
Robert J. Geresi 20,000 9.7% $1.00 10/6/2002
20,000 9.7% $1.00 10/6/2002
</TABLE>
(1) During 1998, the Company canceled and reissued certain options originally
granted to Mr. Geresi during 1996 and 1997 as further discussed in Note 5
to the Summary Compensation Table.
(2) The shares granted to Mr. Geresi are exercisable at an exercise price equal
to greater than 110% of the quoted market value as of the date of grant.
All of these options are exercisable as such options were vested as of the
date of grant.
9
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES TABLE
The following table sets forth information concerning shares acquired
on exercise of stock options during fiscal 1998, any value realized thereon, the
number of unexercised options at the end of fiscal 1998 (exercisable and
unexercisable) and the value of stock options held at the end of fiscal 1998 by
the Named Executive Officer:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)
ACQUIRED VALUE ------------------------------ ------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Geresi 0 0 32,000 8,000 0 0
</TABLE>
EMPLOYMENT ARRANGEMENTS
The Company does not have an employment agreement with Mr. Geresi, the
Named Executive Officer, or any other employee.
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, as amended, authorizes the award of 500,000 Common
Shares to be used for incentive stock options, nonqualified stock options or
restricted stock grants, of which options to purchase 10,000 Common Shares were
granted during fiscal 1998, none of which have been exercised, and none of which
have terminated. Additionally, in December 1998, the Company canceled and
reissued 197,000 incentive stock options that were originally granted in 1997.
The reissuance consisted of reducing the original exercise price of such options
which ranged from $3.69 to $6.125, to $1.00 for 197,000 options. Vesting periods
were not modified and are calculated from the original grant date. The exercise
prices for such options were greater than the market price of the Common Shares
on the modification date. As of December 27, 1998, 207,000 options were
outstanding, net of terminated options. Certain nonqualified options originally
granted under the Incentive Plan were canceled, repriced and reissued as
nonqualified options outside of the Incentive Plan. 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 currently comprised of a director who is
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 and employees of,
and advisors and consultants to 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, the recipient's 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.
10
<PAGE>
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 incentive stock option
shall not be less than the fair market value of a share of Common Shares at the
time the incentive 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 generally 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,
except for certain options to purchase 90,000 Common Shares originally granted
in 1997 (and repriced in December 1998) which vested as of the date of grant. 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 to Mr. 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 Company canceled and reissued
all Non-Plan Options out of the Incentive Plan during 1997, including 17,500
nonqualified options granted to Mr. Murfin. The repricing reissuance consisted
of reducing the original per Common Share exercise price of such options which
originally ranged from $6.13 to $9.90, to $5.50 per Common Share. The vesting
periods of the reissued options retained the original vesting period.
Subsequently, during October 1998, the Company granted Mr. Walsh Non-Plan
Options to purchase 100,000 Common Shares at an exercise price of $0.750 per
share which vested immediately. The Company granted Mr. Hoover Non-Plan Options
to purchase 17,500 Common Shares at an exercise price of $1.00 per share which
vest according to the standard nonqualified option vesting schedule. The
nonqualified options originally vested 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. The above options granted to Messrs. Murfin,
Hoover and Walsh are referred as to the "Non-Plan Options." As of March 1, 1999,
152,500 Non-Plan Options were outstanding.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table presents certain information as of March 1, 1999,
regarding the beneficial ownership of Common Shares by (i) all persons known by
the Company to be beneficial owners of 5% of more of the Common Shares, (ii)
each of the directors and the Named Executive Officer of the Company
individually, and (iii) all directors, the executive officers and the Named
Executive Officer of the Company as a group. Except as indicated in the
footnotes to this table and pursuant to applicable community property laws, the
Company believes that the persons listed below have sole voting and investment
power and record and beneficial ownership with respect to such shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNER NUMBER(1) PERCENTAGE
- ------------------------ --------- ---------
<S> <C> <C>
William J. Walsh, Jr. (2) 110,500 2.32%
Robert J. Geresi (3)(4) 586,718 12.50%
Paul T. Sorrentino (3) 570,918 12.20%
Paul R. Hoover (5)(6) 63,973 1.37%
David L. Murfin (6)(7) 402,371 8.60%
Directors and executive officers as a
group (six persons)(8) 1,736,480 36.9%
Vincent J. Vrana(3) 537,939 11.5%
</TABLE>
- ----------
(1) The number of Common Shares beneficially owned by Messrs. Walsh, Geresi,
Sorrentino, Murfin and Vrana include 110,500, 32,000, 22,000, 10,500, and
22,000 shares, respectively, or 197,000 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 Mr. Walsh is 2414 North Woodlawn, Suite 201, Wichita,
Kansas 67220.
(3) The address for Messrs. Geresi, Sorrentino and Vrana is 115 East 8th,
Stillwater, Oklahoma 74074-4601.
(4) Includes 5,000 shares owned by Mr. Geresi's minor children.
(5) Includes 5,000 shares owned by Mr. Hoover's minor children.
(6) The address for Messrs. Murfin and Hoover is 300 I.M.A. Plaza, 250 North
Water Street, Wichita, Kansas 67202-1213.
(7) Includes 45,000 shares owned by Mr. Murfin's minor children.
(8) Includes 2,000 shares which Mr. Webb has a right to acquire pursuant to
stock options that are vested.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASES
The Company currently leases space for a Company-owned New York Bagel
restaurant located in Norman, Oklahoma from Bagel Land, Inc., an Oklahoma
corporation, owned one-third each by Messrs. Geresi, Sorrentino and Vrana. The
Company made aggregate rent payments under such lease of $28,200 during fiscal
1998 and $28,200 during fiscal 1997. 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.
Through January 1999 the Company leased 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 an employee of the Company. The Company made aggregate rent payments
under such lease of $4,300 during fiscal 1999, $42,085 during fiscal 1998 and
$27,600 during fiscal 1997. The Company assigned the lease to AB of Tulsa-I,
L.L.C. as part of the Company's participation in the joint venture to convert
select New York Bagel restaurants to Atomic Burrito restaurants. The lease term
with the joint venture entity is for a term of five years beginning February
1999 at a rent of $4,600 per month with an option to renew for two five year
periods with rent for the first renewal period of $5,100 per month, and $5,700
per month for the second renewal period.
The Company leases space for a Company-owned New York Bagel restaurant
located in Oklahoma City, Oklahoma from L.P.V. Properties, L.L.C. which is owned
one-third each by Messrs. Sorrentino, Vrana and an unrelated party. The Company
made aggregate rent payments under such lease of $36,033 during fiscal 1998. The
lease is for a term of ten years commencing March 1998 at a rent of $3,615 per
month for 36 months, $3,775 per month for 36 months, $3,943 per month for 36
months and $4,118 per month for 12 months. The lease contains an option to renew
by the Company for ten years with monthly rent payments at $4,303 for 24 months,
$4,497 for 36 months, $4,700 for 36 months and $4,911 for 24 months.
During 1998 and through March 1999, the Company subleased space for its
corporate offices located in Wichita, Kansas from Murfin Drilling Company, Inc.,
a wholly owned subsidiary of Murfin, Inc., which is owned 21.2% by Mr. Murfin.
The Company made aggregate rent payments under such sublease of $22,434 during
fiscal 1998 and $29,863 during fiscal 1997. The current sublease was on a month
to month basis and was terminated by the Company during March 1999.
SALE-LEASEBACK TRANSACTIONS
In October 1997, February 1998, July 1998 and January 1999, the Company
entered into agreements to sell and lease back eight restaurant sites with an
entity owned by Messrs. Hoover and Murfin. The sale-leaseback transactions
included eight owned restaurant locations (one was a building only) in which the
Company sold such properties to such entity for approximately $3.0 million and
leased them back for a 15-year period. Minimum lease commitments pursuant to
these eight leases are as follows: years 1 through 5 - $2,019,000; years 6
through 10 - $2,219,100; and years 11 through 15 - $2,416,770. In addition, each
of the eight leases contain an option to renew for another ten years. Minimum
lease commitments pursuant to these eight leases, assuming all renewal options
are exercised, are as follows: years 16 through 20 - $2,667,987, and years 21
through 25 - $2,939,088. The Company's original cost of the eight restaurant
locations was approximately $4.2 million. Independent appraisals related to the
locations as well as current market lease rates were utilized in determining the
Company's sale price. The sale price for all of the locations were reviewed and
approved by the Company's Board. The Company believes that the terms and
conditions of both the real estate sale and the related lease back were fair and
reasonable and were on terms at least as favorable as would be available from
non-affiliated parties. The Company utilized the proceeds to reduce borrowings
under the Company's credit facility and to fund operations.
13
<PAGE>
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 obligations
attributable to the Company's 1996 S corporation earnings. In connection with
such distribution, Messrs. Geresi, Sorrentino, Hoover, Vrana and Murfin received
$34,909, $34,937, $3,900, $32,562 and $19,743, respectively.
STOCKHOLDER LOANS
During January 1999, the Company borrowed $200,000 in total from
Messrs. Geresi, Murfin, Sorrentino (all Directors) and Vrana (a significant
stockholder). Each note is in the principal amount of $50,000 and bears interest
at 12.75% per annum which is paid quarterly beginning March 31, 1999. The notes
are due on December 31, 1999 with accrued interest. The notes are not secured.
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.
SALE OF PROPERTY AND EQUIPMENT
During May 1998, the Company sold certain equipment and leasehold
improvements of a leased restaurant location to Il Vicino International, L.L.C.
("Il Vicino"), a company in which Messrs. Hoover and Murfin have an ownership
interest of up to fifty percent. Il Vicino paid $115,000 and assumed the related
real property lease liability. The Company's sale price was based on the
Company's original purchase price of approximately $85,000 and the estimated
fair value of the assets as determined by the Company. The transaction was
approved by the Company's Board.
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. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
KPMG LLP served as the Company's independent accountants from fiscal
1994 through fiscal 1998. The Board, on the unanimous recommendation of the
Audit Committee, has selected Allen, Gibbs & Houlik, L.C., as the Company's
independent accountants for the fiscal year ending December 29, 1999, subject to
ratification by the stockholders at the Annual Meeting. Representatives of
Allen, Gibbs & Houlik, L.C., are expected to be present at the meeting to
respond to appropriate questions and will have an opportunity to make a
statement if they desire to do so.
14
<PAGE>
All services provided to the Company during 1998 by KPMG LLP were
approved by the Audit Committee, which also considered the possible effect on
the independence of KPMG LLP by rendering such services. Audit services of KPMG
LLP for fiscal 1998 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 Allen, Gibbs & Houlik, L.C.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF ALLEN, GIBBS & HOULIK, L.C., AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR FISCAL YEAR 1999.
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 2000 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2000 Annual
Meeting of the stockholders must be received by the Company in writing no later
than December 22, 1999. Proposals must be mailed to New York Bagel Enterprises,
Inc., 115 East 8th Street, Stillwater, Oklahoma 74074, ATTN: Richard Randall
Webb, Secretary, and must not exceed 500 words. Proposals received after March
6, 2000 shall be considered untimely.
ANNUAL REPORT (FORM 10-KSB)
The Company undertakes, on written or oral request and without charge,
to provide by first class mail or other equally prompt means within one business
day of receipt of such request each person from whom the accompanying Proxy is
solicited with a copy of the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 27, 1998, as filed with the SEC, including the
financial statements. Requests should be addressed to New York Bagel
Enterprises, Inc., 115 East 8th Street, Stillwater, Oklahoma 74074, ATTN:
Richard Randall Webb, Secretary.
By Order of the Board of Directors
/s/ RICHARD RANDALL WEBB
Richard Randall Webb
CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER
March 31, 1999
15
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.
115 EAST 8TH STREET
STILLWATER, OKLAHOMA 74074
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Geresi as Proxy, with the
power to appoint his substitute, and hereby authorizes him to represent and to
vote, as designated on the reverse side, all of the shares of common stock of
New York Bagel Enterprises, Inc. (the "Company") held of record by the
undersigned on April 19, 1999, at the Annual Meeting of Stockholders to be held
on May 21, 1999 or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
<PAGE>
A /X/ Please mark your
votes as in this
example using
dark ink only.
FOR all nominees WITHHOLD
listed at right AUTHORITY to
(except as marked to vote all nominees
the contrary below) listed at right
1. Election of
Directors / / / /
NOMINEES: Robert J. Geresi
Paul R. Hoover
(Instructions: to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list at right).
- --------------------------------------------------------
2. Proposal to ratify the appointment of Allen, Gibbs Houlik, L.C., certified
public accountants, as the independent auditors for the Company for the
fiscal year ending December 29, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Signature___________________________________________
Dated:__________________
Signature___________________________________________
SIGNATURE IF HELD JOINTLY
Note: Please sign exactly as name appears hereon. 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 in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
