UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 20, 1997
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
(Exact name of registrant as specified in its charter)
Commission File Number: 0-8513
DELAWARE 22-2058515
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
62 Broadway
Point Pleasant Beach, New Jersey 08742
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (908) 295-0350
<PAGE>
CHEFS INTERNATIONAL, INC.
Item 2. Disposition of Assets
On February 20, 1997 (as of January 26, 1997), the registrant, Chefs
International, Inc. ("Chefs") sold 95% of the outstanding capital stock of its
wholly-owned Mister Cookie Face, Inc.
subsidiary ("MCF") to a director, Frank "Doc" Koenemund.
At the closing, Chefs received a $500,000 payment which amount was paid
to Chefs' lending bank, First Union National Bank (the "Bank") to extinguish
Chefs' outstanding indebtedness under its revolving line of credit with the
Bank. Borrowings under the line had been utilized to fund the operations of MCF,
a Lakewood, New Jersey manufacturer and distributor of ice cream sandwiches. In
addition, at the closing, Chefs received three MCF promissory notes in the
aggregate principal amount of $1,100,000. The first note (Note A) in the
principal amount of $100,000 is payable on or before March 24, 1997 together
with interest at an annual rate of 8 1/4% and is secured by a first lien on all
of MCF's assets.
The second note (Note B) in the principal amount of $500,000 is payable
in the following principal installments:
Principal Payment Due Date Principal Payment Amount
March 1, 1998, March 1, 1999, March 1, 2000 $16,667 each
April 1, 1998, April 1, 1999, April 1, 2000 $16,667 each
May 1, 1998, May 1, 1999, May 1, 2000 $16,667 each
June 1, 1998, June 1, 1999, June 1, 2000 $16,667 each
October 1, 1998, October 1, 1999 $16,667 each
November 1, 1998, November 1, 1999 $16,667 each
July l, 1998, July 1, 1999 $33,333 each
August 1, 1998, August 1, 1999 $33,333 each
September 1, 1998, September 1, 1999 $33,333 each
July 1, 2000 (Balance) $33,330
together with interest on the unpaid principal balance at the rate of 9 1/4% per
annum payable monthly commencing March 1, 1997. Note B, although secured by a
first lien on all of MCF's assets, is subordinated to any liens granted in the
future by MCF to its senior lending bank or institutional lender but solely with
respect to a maximum aggregate $1,750,000 of indebtedness.
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The third note (Note C) in the principal amount of $500,000 is payable
together with interest at an annual rate of 8 1/4% on or before February 20,
2004 but is mandatorily prepayable on a quarterly basis from 30% of MCF's "cash
flow" on a consolidated basis, commencing with the quarter ending April 30,
1997. Note C is also secured by a first lien on all of MCF's assets and is also
subordinated to any liens granted in the future by MCF to its senior lending
bank or institutional lender but solely with respect to a maximum $1,750,000 of
indebtedness.
Notes B and C are also required to be prepaid in full upon consummation
of a public offering of MCF's securities or of a private sale or sales of MCF's
securities for gross proceeds aggregating at least $100,000 (excluding loans
from MCF's senior bank or institutional lender). As part of the transaction,
Chefs cancelled all prior indebtedness owed to it prior to the closing
(excluding the indebtedness paid or agreed to be paid by MCF to Chefs or for its
account pursuant to the Stock Purchase/Sale Agreement between the parties).
MCF also agreed to pay Chefs certain monthly amounts equal to the
monthly rental payments being paid by Chefs to the Bank under two Master Lease
Finance Schedules with respect to ice cream manufacturing and packaging
equipment installed at MCF's Lakewood, New Jersey plant. The payments are as
follows:
Schedule #1 - $6,214 monthly commencing February 24, 1997 through March
24, 1999 with a final payment of $ 6,215 on April 30, 1999.
Schedule #2 - $1,403 monthly commencing February 15, 1997 through April
15, 1999 with a final payment of $1,404 on May 30, 1999.
MCF had been acquired by Chefs in July 1993 (as of June 30, 1993) from
Mr. Koenemund. In the last three fiscal years (1995, 1996, 1997), MCF's sales
had declined from approximately $15,873,000 to $14,711,000 to $11,262,000. Chefs
had advanced substantial sums to fund MCF's operations and at the closing, was
indebted to the Bank under a revolving line of credit, all of the proceeds of
which had been advanced to or on behalf of MCF, in the approximate amount of
$500,000.
In view of the substantial advances made to MCF, the fact that MCF's
loss in fiscal 1997 is approximately $600,000, the decline in MCF's sales and
other factors, Chefs management concluded that it was in Chefs' best interest to
sell MCF. Chefs management examined a number of alternatives and the Board of
Directors (with Mr. Koenemund abstaining) concluded that the transaction
proposed by Mr. Koenemund afforded Chefs with the best chance to recoup all or a
significant portion of its substantial investment in MCF. The board noted that
Chefs also was retaining a 5% equity interest in MCF, protected by a pre-emptive
right until all of the Notes were paid.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information
(c) Exhibits
10 (97-1) Stock Purchase/Sale Agreement as of January 26, 1997 between
Chefs and Frank Koenemund concerning the sale of 95% of MCF.
10 (97-2) MCF 8 1/4% Promissory Note A dated as of January 26, 1997 in
the principal amount of $100,000 payable to Chefs.
10 (97-3) MCF 9 1/4% Subordinated Promissory Note B dated as of January
26, 1997 in the principal amount of $500,000 payable to Chefs.
10 (97-4) MCF 8 1/4% Subordinated Promissory Note C dated as of January
26, 1997 in the principal amount of $500,000 payable to Chefs.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CHEFS INTERNATIONAL, INC.
(Registrant)
Dated: March 7, 1997
By
Anthony Papalia, President
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Item 7(b). Pro Forma Financial Information
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
[UNAUDITED]
- ------------------------------------------------------------------------------
The following pro forma combined balance sheet as of October 27, 1996, and the
combined statements of operations for the nine months then ended and the year
ended January 28, 1996, give effect to the sale by the Company of 95% of the
common stock of its wholly-owned subsidiary, Mister Cookie Face ["MCF"] to a
director for cash and notes totaling $1,600,000. The effective date of the sale
is January 26, 1997.
The pro forma information is based on the historical financial statements of the
Company and MCF, giving effect to the assumptions and adjustments in the
accompanying notes to the pro forma financial statements.
The pro forma combined balance sheet assumes the sale of assets was consummated
on October 27, 1996. The pro forma combined statements of operations give effect
to this transaction, as if it had occurred at the beginning of the earliest
period presented. The pro forma combined statements have been prepared by the
Company's management based upon the historical financial statements of the
Company, and MCF. These pro forma combined financial statements may not be
indicative of the results that actually would have occurred if the sale of
assets had taken place on the dates indicated.
P-1
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CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
[UNAUDITED]
- ------------------------------------------------------------------------------
[1] To reflect the sale of 95% of the common stock of Mister Cookie Face, Inc.
to a director for an aggregate purchase price of $1,600,000, consisting of
cash of $500,000 and notes of $1,100,000 and to reflect the book value of
the notes at $498,950, based on the estimated present value of the
payments, and the payment of a note payable to Chefs' bank lender of
$500,000 consisting of the cash portion of the proceeds.
To reflect an amount due from the purchaser of $207,618, representing the
balance due on two capital leases which the Company will continue to pay.
The equipment subject to the lease was transferred to MCF as part of the
sale.
To reflect the value of the retained 5% of the capital stock of MCF at
$35,000.
[2] To remove the operations of MCF.
[3] To record a reduction in interest expense on notes payable satisfied with
the proceeds from the down payment of $500,000 and the payment of the first
note of $100,000 sixty days after the sale, and to record interest income
on the notes receivable from the sale.
. . . . . . . . .
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CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
PRO FORMA COMBINED BALANCE SHEET AS OF OCTOBER 27, 1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
Historical
October 27, Pro Forma Pro Forma
1 9 9 6 Adjustments [1] Combined
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,060,079 $ (117,331) $ 942,748
Investments 100,000 -- 100,000
Accounts Receivable 419,715 (419,715) --
Miscellaneous Receivables 393,613 (140,379) 253,234
Due from Purchaser -- 177,591 177,591
Inventories 1,943,927 (963,241) 980,686
Prepaid Expenses 138,537 (70,993) 67,544
------------ ---------- ----------
Total Current Assets 4,055,871 (1,534,068) 2,521,803
------------ ---------- ----------
Property,Plant and Equipment-Net 12,636,047 (975,019) 11,661,028
------------ ---------- ----------
Other Assets:
Investments 656,000 35,000 691,000
Goodwill - Net 1,147,846 (583,633) 564,213
Liquor Licenses - Net 733,834 -- 733,834
Due from Employees 3,470 -- 3,470
Due from Related Parties 7,217 -- 7,217
Due from Purchaser -- 528,977 528,977
Deposits and Other Assets 77,927 (16,934) 60,993
------------ ---------- ----------
Total Other Assets 2,626,294 (36,590) 2,589,704
------------ ---------- ----------
Total Assets $ 19,318,212 $(2,545,677) $16,772,535
============ =========== ===========
See Notes to Pro Forma Combined Financial Statements.
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<PAGE>
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
PRO FORMA COMBINED BALANCE SHEET AS OF OCTOBER 27, 1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
Historical
October 27, Pro Forma Pro Forma
1 9 9 6 Adjustments [1] Combined
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 1,033,447 $ (381,762) $ 651,685
Accrued Expenses 833,171 (257,522) 575,649
Notes and Mortgages Payable to Banks 1,008,500 (500,000) 508,500
Capital Lease Obligations - Current 77,591 -- 77,591
Other Liabilities 123,875 -- 123,875
------------ ---------- ----------
Total Current Liabilities 3,076,584 (1,139,284) 1,937,300
------------ ---------- ----------
Long-Term Debt:
Due to Related Party 70,333 (70,333) --
Notes and Mortgages Payable to Banks 842,416 -- 842,416
Capital Lease Obligations
- Long-Term 130,027 -- 130,027
------------ ---------- ----------
Total Long-Term Debt 1,042,776 (70,333) 972,443
------------ ---------- ----------
Other Liabilities 82,396 -- 82,396
------------ ---------- ----------
Commitments and Contingencies -- -- --
----------- ---------- ----------
Stockholders' Equity:
Capital Stock - Common 44,888 -- 44,888
Additional Paid-in Capital 32,304,481 -- 32,304,481
Accumulated [Deficit] (17,232,913) (1,336,060) (18,568,973)
------------ ---------- -----------
Total Stockholders' Equity 15,116,456 (1,336,060) 13,780,396
------------ ---------- ----------
Total Liabilities and
Stockholders Equity $ 19,318,212 $(2,545,677) $16,772,535
See Notes to Pro Forma Combined Financial Statements.
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CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 27,
1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
Historical
October 27, Pro Forma Pro Forma
1 9 9 6 Adjustments Combined
Sales $ 23,881,985 $(9,821,818)[2] $14,060,167
Cost of Goods Sold 10,853,489 (6,253,687)[2] 4,599,802
------------ ---------- ----------
Gross Profit [Loss] 13,028,496 (3,568,131) 9,460,365
------------ ---------- ----------
Operating Expenses:
Payroll and Related Expenses 4,127,254 -- 4,127,254
Other Operating Expenses 5,827,127 (2,845,773)[2] 2,981,354
Depreciation and Amortization 945,124 (220,384)[2] 724,740
General and Administrative Expenses 2,031,564 (723,005)[2] 1,308,559
------------ ---------- ----------
Total Operating Expenses 12,931,069 (3,789,162) 9,141,907
------------ ---------- ----------
Income from Operations 97,427 221,031 318,458
------------ ---------- ----------
Other [Expense] Income:
Interest Expense (130,570) 14,290[2] (83,309)
32,971[3]
Interest Income 65,855 28,847[3] 94,702
------------ ---------- ----------
Total Other [Expense] Income - Net (64,715) 76,108 11,393
------------ ---------- ----------
Income Before Income Taxes 32,712 297,139 329,851
Provision for Taxes -- -- --
------------ ---------- ----------
Net Income from Continuing Operations$ 32,712 $ 297,139 $ 329,851
============ ========== ==========
Net Income from Continuing Operations
Per Share $ .01 $ .07
============ ==========
Weighted Average Shares 4,488,773 4,488,773
============ ==========
See Notes to Pro Forma Combined Financial Statements.
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CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
JANUARY 28, 1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
Historical
January 28, Pro Forma Pro Forma
1 9 9 6 Adjustments Combined
Sales $ 31,282,707 $(14,711,350)[2] $16,571,357
Cost of Goods Sold 15,014,719 (9,503,624)[2] 5,511,095
------------ ----------- ----------
Gross Profit [Loss] 16,267,988 (5,207,726) 11,060,262
------------ ----------- ----------
Operating Expenses:
Payroll and Related Expenses 5,134,832 (97,317)[2] 5,037,515
Other Operating Expenses 7,077,456 (3,483,636)[2] 3,593,820
Depreciation and Amortization 1,372,826 (381,959)[2] 990,867
General and Administrative Expenses 2,504,577 (890,933)[2] 1,613,644
Loss on Closing and Sale of Restaurants 54,355 -- 54,355
Impairment Loss of Long-Lived Assets 2,195,750 (2,024,884)[2] 170,866
------------ ----------- ----------
Total Operating Expenses 18,339,796 (6,878,729) 11,461,067
------------ ----------- ----------
[Loss] Income from Operations (2,071,808) 1,671,003 (400,805)
------------ ----------- ----------
Other [Expense] Income:
Interest Expense (205,301) 19,053[2] (141,824)
44,424[3]
Interest Income 92,960 37,417[3] 130,377
------------ ----------- ----------
Total Other [Expense] Income - Net (112,341) 100,894 (11,447)
------------ ----------- ----------
[Loss] Income Before Income Taxes (2,184,149) 1,771,897 (412,252)
Provision for Taxes -- -- --
------------ ----------- ----------
Net [Loss] Income from Continuing
Operations $ (2,184,149) $ 1,771,897 $ (412,252)
============ =========== ==========
Net [Loss] Income from Continuing
Operations Per Share $ (.48) $ (.09)
============ ==========
Weighted Average Shares 4,487,783 4,487,783
============ ==========
See Notes to Pro Forma Combined Financial Statements.
P-6
<PAGE>
Item 7(c). Exhibits
STOCK PURCHASE/SALE AGREEMENT
AGREEMENT made as of the 26th day of January, 1997 concerning the sale by
Chefs International, Inc., a Delaware corporation with a principal place of
business at 62 Broadway, Point Pleasant Beach, New Jersey 08742 ("Chefs") of 95%
of the outstanding capital stock of Mister Cookie Face, Inc., a New Jersey
corporation with a principal place of business at 170 North Oberlin Avenue,
Lakewood, New Jersey 08701 ("MCF") to Frank "Doc" Koenemund who resides at 9
Monroe Drive, Marlboro, New Jersey 07746 ("Doc").
W I T N E S S E T H :
WHEREAS, MCF is engaged in the production in Lakewood, New Jersey and in
the distribution throughout the United States of ice cream products; and
WHEREAS, as of June 30, 1993, Chefs purchased an aggregate 1,000 shares of
capital stock, no par value, being all of the outstanding capital stock of MCF
from Doc and since said date, Doc has served as President and Chief Executive
Officer of MCF pursuant to an employment agreement with MCF (the "Employment
Agreement"); and
WHEREAS, Chefs desires to sell 950 shares of MCF capital stock (the
"Shares") constituting 95% of the outstanding capital stock of MCF to Doc and
Doc desires to purchase the Shares from Chefs, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree as follows:
1. Sale and Purchase of the Shares
Based upon the representations and warranties herein contained and subject
to the terms and conditions herein set forth, Chefs shall sell and deliver to
Doc, and Doc shall purchase from Chefs, all of the Shares for;
(i) a cash payment equal to $500,000;
(ii) MCF's $100,000 principal amount promissory note ("Note A")
payable to Chefs no later than thirty (30) days after the Closing (hereinafter
defined) and containing the provisions set forth in Exhibit A hereto;
(iii) MCF's $500,000 principal amount subordinated note
("Subordinated Note B") payable to Chefs in fixed principal installments
commencing one year after the Closing (hereinafter defined) and containing the
provisions set forth in Exhibit B hereto; and
<PAGE>
(iv) MCF's $500,000 principal amount subordinated note
("Subordinated Note C") payable to Chefs within seven (7) years after the
Closing and containing the provisions set forth in Exhibit C hereto.
2. Closing
(a) The closing of the sale and purchase of the Shares (the "Closing")
shall take place effective as of the close of business on Sunday, January 26,
1997. The actual Closing shall take place at the offices of Doc's attorneys,
Sonnenblick, Parker & Selvers, P.C., 440 Route 9 South, Freehold, New Jersey
07728 at 10:00 o'clock, A.M. (EST) on Thursday, February 20, 1997, or at such
date and time as the parties hereto shall mutually agree, in a writing executed
by each of the parties hereto.
(b) At the Closing, Chefs will deliver to Doc, free and clear of all liens
and encumbrances, a certificate for the Shares duly registered in his name.
(c) At the Closing, Doc will deliver to Chefs in payment for the Shares
and as collateral to secure such payment;
(i) a bank or certified check payable to the order of Chefs' lending
bank, First Union National Bank (the "Bank") in the amount of $500,000, such
check to be delivered by Chefs at the Closing to Doc's attorneys, Sonnenblick,
Parker & Selvers, P.C., for delivery to the Bank in order to terminate the
Bank's liens on MCF's assets in the manner described in Section 3(a) herein;
(ii) duly executed Note A payable to Chefs's order in the principal
amount of $100,000;
(iii) duly executed Subordinated Note B, payable to Chefs' order in
the principal amount of $500,000;
(iv) duly executed Subordinated Note C, payable to Chefs' order in
the principal amount of $500,000; and
(v) duplicate duly executed Form UCC-1 Financing Statements in form
suitable for filing with the New Jersey Secretary of State and the Ocean County
(N.J.) Clerk, granting Chefs a lien on all of MCF's assets.
The parties acknowledge that Chefs has advanced in excess of $1,100,000 in
funding to MCF constituting good and valuable consideration for Note A,
Subordinated Note B and Subordinated Note C issued to Chefs hereunder by MCF.
Chefs hereby agrees that all indebtedness owed to it at
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the date hereof by MCF excluding the indebtedness specifically paid or agreed to
be paid by MCF pursuant to this Agreement and the exhibits hereto, is hereby
cancelled.
(d) At the Closing, Doc will deliver to Chefs, a release duly executed by
M&M Services, Inc. ("M&M") and Jack Mariucci releasing Chefs from any and all
payment obligations with respect to any periods after the Closing pursuant to
the Consulting Agreement made and entered into effective as of October 2, 1995
by Chefs with M&M and consented to by Mr. Mariucci. Chefs agrees that provided
that Mr. Mariucci continues to devote at least 10% of his monthly working time
in providing Promotion Services as therein defined, to Chefs, without
compensation therefor, his outstanding options exercisable to purchase 54,167
shares of Chefs' common stock at $3.75 per share and to purchase 50,000 shares
of Chefs' common stock at $3.00 per share shall remain in full force and effect
until their respective termination dates.
(e) At the Closing, MCF will execute and deliver an agreement to pay Chefs
an amount equal to the monthly rental payments under two Master Lease Finance
Schedules with respect to certain ice cream manufacturing and packaging
equipment provided by Taylor Products, Inc., Doboy Packaging Machinery Inc. and
Industrial Packaging Supply (the "Leased Equipment") and currently installed at
MCF's Lakewood, New Jersey facility. Chefs has executed a Master Lease Finance
Agreement (No. 07016) and two schedules thereunder with respect thereto, a copy
of which is attached as Exhibit D hereto, with a predecessor of the Bank which
will continue to hold a security interest in said equipment. The payments to be
made by MCF to Chefs are as follows:
Schedule #1 - $6,214 monthly commencing February 24, 1997 through March
24, 1999 with a final payment of $6,215 on April 30, 1999.
Schedule #2 - $1,403 monthly commencing February 15, 1997 through April
15, 1999 with a final payment of $1,404 on May 30, 1999. In addition to
reimbursing Chefs for said rental payments, MCF will agree to pay all of Chefs'
direct costs with respect to said two Master Lease Finance Schedules. Provided
MCF makes all of said payments to Chefs on a timely basis, at the termination of
the two Master Lease Finance Schedules, Chefs will assign all of its rights to
the equipment thereunder to MCF. MCF hereby agrees that it will promptly after
the Closing, use its best efforts to obtain equipment lease financing from an
institutional or banking source to finance the remaining balance under the
Master Lease Finance
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Agreement. In such event, Chefs will assign all rights with respect to the
Leased Equipment to MCF, but only provided the outstanding balances under the
Master Lease Finance Agreement are paid in full to the Bank so that Chefs has no
further obligation with respect thereto.
(f) At the Closing, Doc will execute and deliver to Chefs his duly
executed release, releasing Chefs from any and all contractual and other
liabilities to him (other than liabilities under this Agreement and for
indemnification with respect to his service as a director of Chefs and an
officer and director of MCF), and waiving all rights he may have to purchase
Chefs common stock pursuant to any option agreements.
(g) At the Closing, a special meeting of the board of directors of MCF
shall be held at which all of the transactions contemplated hereby involving
MCF shall be unanimously approved after which Anthony Papalia and Martin
Fletcher shall submit their written and executed resignations as directors and
officers of MCF effective at such time.
3. Doc's Post-Closing Obligation
(a) Doc shall cause his attorneys, Sonnenblick, Parker & Selvers, P.C.
within two (2) business days after the Closing, to deliver the $500,000 bank or
certified check referred to in Section 2(c)(i) herein to the Bank in payment of
the outstanding balance under Chefs' revolving line of credit from the Bank
against delivery by the Bank to said attorneys of duly executed UCC Termination
Statements to terminate any liens of record held by the Bank on MCF assets
(excluding the assets in Chefs' name under the Master Lease Finance Agreement)
and a duly executed release of any MCF guaranty of Chefs' indebtedness to the
Bank.
4. Chefs' Post-Closing Obligations
(a) During the period from the Closing through May 3, 1997, Chefs will
provide administrative support services to MCF of the nature it is now
providing, and will be paid a reasonable rate of reimbursement therefor.
(b) During the time that any indebtedness of principal and/or interest is
outstanding under Note A, B and/or C and assuming MCF and Doc are in full
compliance with the terms and conditions of and have not breached any of their
representations and warranties under this Agreement, if MCF shall obtain
institutional and/or bank financing (the "New Financings"), Chefs shall execute
and
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deliver all such instruments to MCF as may be required to subordinate its first
lien on MCF's assets but only to an aggregate $1,750,000 of such New Financings.
(c) Upon payment in full of all indebtedness of principal and/or interest
under Note A, B and/or C and assuming MCF and Doc are in full compliance with
the terms and conditions of and have not breached any of their representations
and warranties under this Agreement, Chefs shall execute and deliver all such
instruments to MCF as may be required to remove all liens of record held by
Chefs on MCF's assets.
5. Chefs' Representations and Warranties
Chefs covenants, agrees, warrants and represents as follows:
(a) That it is the record and beneficial owner, free and clear of any and
all claims, security interests, liens, encumbrances, restrictions, agreements,
voting trusts, rights of third parties, and burdens of any nature, of the
Shares; that its title to said Shares is good, valid and indefeasible; that it
has the right and power to enter into and perform this Agreement and to transfer
all of said Shares to Doc in accordance with the terms herewith.
(b) That attached hereto as Exhibit E is a balance sheet of MCF as of
December 29, 1996. Said balance sheet is materially true, complete and correct
and since said date, there has been no increase in MCF's debts, obligations and
liabilities except for increases in vendor payables incurred in the ordinary
course of business.
(c) The MCF stock certificate to be delivered to Doc at the Closing
pursuant to Section 2(c)(v) herein will represent ninety five (95%) percent of
the outstanding capital stock of MCF on a fully diluted basis.
6. MCF's and Doc's Representations and Warranties
MCF and Doc, jointly and severally, covenant, agree, warrant and represent
as follows:
(a) Until payment by MCF to Chefs in full of Note A,Subordinated
Note B and Subordinated Note C, they will provide Chefs with twenty (20)
days prior notice of any proposed sale or issuance by MCF of capital stock
or of options, warrants or rights to purchase capital stock or of securities
convertible into capital stock and will afford Chefs a pre-emptive right to
preserve its proportional ownership in MCF by purchasing a proportional amount
of the securities to be sold. Such pre-emptive right shall not be applicable
with respect to a public or private sale of MCF's securities if all
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three Notes are paid in full prior to or simultaneously with the consummation of
such sale. A failure by Chefs to assert its pre-emptive right at any time or
times shall not constitute a waiver of its pre-emptive rights with respect to
subsequent sales or issuances.
(b) Upon termination of the Bank lien and filing by Chefs of the Financing
Statements referred to in Section 2(c)(v) herein, Chefs will have a first lien
upon all of MCF's assets until subordination or termination thereof by Chefs in
accordance with this Agreement.
(c) By virtue of Doc's service as president and chief executive officer
of MCF since its inception, he is fully familiar with MCF's financial condition,
business and operations through the date hereof.
7. Conditions to Chefs's Obligation to Close
The obligations of Chefs to consummate this Agreement shall be subject to
each of the following conditions:
(a) Each of the representations and warranties made by MCF and Doc
contained in this Agreement shall be true and accurate as of the date when made
and shall be deemed to be made again at and as of the time of the Closing
hereunder and shall then be true and accurate in all respects.
(b) Each and every covenant, agreement and condition required by this
Agreement to be performed or complied with by MCF and Doc shall have been
performed or complied with at or prior to the Closing hereunder.
(c) MCF and Doc shall have delivered to Chefs all of the payments, Notes,
instruments, certificates and other documents referred to hereinabove at or
prior to the Closing.
(d) Each and every one of the transactions required herein to occur at the
Closing shall have been completed at such time.
8. Conditions to Doc's Obligation to Close
The obligation of Doc to consummate this Agreement shall be subject to
each of the following conditions:
(a) Chefs shall have delivered to Doc the Shares as described in
Section 2(b) hereof.
(b) Each and every one of the transactions required herein to occur at
the Closing shall have been completed at such time.
6
<PAGE>
(c) Each of the representations and warranties of Chefs contained in
this Agreement shall be true and accurate as of the date when made and shall be
deemed to be made again at and as the time of the Closing hereunder and shall
then be true and accurate in all respects.
(d) There shall have been no material adverse change in MCF's assets or
liabilities from December 29, 1996 through the Closing except for changes in
the ordinary course of business.
9. Survival of Representations and Warranties
Each statement of fact contained herein or in any statement, certificate,
schedule or other document delivered by or on behalf of MCF, Doc or by Chefs
pursuant to this Agreement or in connection with the transactions contemplated
hereby, shall be deemed a representation and warranty of MCF, Doc or Chefs
hereunder, as the case may be. All covenants, agreements, representations and
warranties made by MCF, Doc or by Chefs under or in connection with this
Agreement shall survive the Closing and remain effective regardless of any
investigation at any time by or on behalf of MCF, Doc or Chefs or of any
information MCF, Doc or Chefs may have with respect thereto. 10. Miscellaneous
(a) Each party hereto represents and warrants to the other party hereto
that he or it has not incurred any obligation or liability contingent or
otherwise, for brokerage or finder's fees or agent's commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby, and each party agrees to indemnify and hold the other party hereto
harmless against and in respect of any such obligation or liability based in any
way on agreements, arrangements or understandings claimed to have been made by
such party with any third party.
(b) This Agreement including the exhibits hereto and the Notes, Agreements
and Releases referred to herein and delivered hereunder constitutes the entire
agreement between the parties hereto and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof. No representation, promise, inducement or statement of
fact has been made by MCF, Doc or by Chefs which is not embodied in this
Agreement or a written statement, certificate, schedule, exhibit or other
document delivered pursuant hereto or making express reference hereto, and
neither MCF, Doc nor Chefs shall be bound or liable for any alleged
representation, promise, inducement or statement of fact not so set forth.
7
<PAGE>
(c) This Agreement shall inure to the benefit of and be binding upon MCF,
Doc and Chefs and their respective heirs, executors, administrators, successors
and assigns.
(d) All notices, requests, demands and other communications which are
required or may be given under or in connection with this Agreement shall be in
writing and shall be deemed to have been duly given if mailed, certified or
registered mail, postage prepaid:
(i) if to MCF or Doc, addressed to Doc at 9 Monroe Drive, Marlboro,
New Jersey 07746.
(ii) if to Chefs, addressed to Anthony Papalia, President,
Chefs International, Inc., 62 Broadway, Point Pleasant Beach, New Jersey
08742.
Such notices, requests, demands and other communications shall be deemed
given three (3) days after date of deposit thereof with the United States
mail in a postage prepaid envelope by certified or registered mail.
(e) This Agreement shall be interpreted in accordance with the laws of
New Jersey.
(f) The parties agree to take all such additional actions and to execute
and deliver all such additional documents as shall be necessary in order to
effectuate all of the foregoing.
(g) This Agreement shall not be amended, modified or rescinded except by a
written document duly executed by all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement effective the date first hereinabove set forth.
CHEFS INTERNATIONAL, INC.
("Chefs")
ATTEST: By
Anthony Papalia, President
Martin Fletcher, Secretary
Mister Cookie Face, Inc.
("MCF")
WITNESS:
Frank "Doc" Koenemund, President
WITNESS:
Frank "Doc" Koenemund
Individually
8
<PAGE>
Item 7(c). Exhibits
8 1/4% PROMISSORY NOTE
(NOTE A)
As of
$100,000 January 26, 1997
- -------- ----------------
Principal Amount Issue Date
FOR VALUE RECEIVED, MISTER COOKIE FACE, INC., a New Jersey corporation
(the "Payor") promises to pay to
CHEFS INTERNATIONAL, INC., a Delaware corporation, or its registered
assigns (the "Payee")
the Principal Amount of ONE HUNDRED THOUSAND DOLLARS ($100,000) on or before the
close of business on Monday, March 24, 1997 (the "Maturity Date"), time being of
the essence, together with interest thereon commencing January 27, 1997 at an
annual rate of 8 1/4% on the unpaid principal balance, until the principal
amount hereof shall be paid in full.
Payments of principal and interest are to be made to Chefs International,
Inc., at 62 Broadway, Point Pleasant Beach, New Jersey 08742, or its registered
assigns, as the case may be, or at such other place as the Payee shall designate
to the Payor in writing, in lawful money of the United States of America.
A. Prepayment Provision. This Note is prepayable in whole or in part without
penalty at any time prior to the Maturity Date. Any prepayment shall first be
applied to outstanding interest before being applied to principal.
B. Security Interest. The Payor has provided the Payee with a lien on all of
its assets to secure repayment of this Note, and represents that same will
constitute a first lien upon removal of First Union National Bank's lien
thereon.
C. Events of Default. The following shall constitute "Events of Default"
under this Note.
(i) failure to pay the outstanding principal and/or interest on this Note
on the Maturity Date;
(ii) dissolution, liquidation, bankruptcy or insolvency of the Payor or
the making by the Payor of an assignment for the benefit of creditors;
(iii) institution of bankruptcy, reorganization, dissolution, liquidation
or similar proceedings by the Payor;
(iv) institution of bankruptcy, reorganization, dissolution, liquidation
or similar proceedings against the Payor which proceedings remain undismissed
for sixty (60) days;
(v) sale by the Payor of substantially all of its assets;
<PAGE>
(vi) the Payor ceasing to conduct its ice cream manufacturing and
distribution business;
(vii) failure of the security interest provided to the Payor referred to
above to constitute a first lien on all of Payor's assets upon removal of First
Union National Bank's lien thereon; and
(viii) the occurrence of an "Event of Default" as therein defined under
the Payor's Subordinated Note B and/or the Payor's Subordinated Note C, each in
the Principal Amount of $500,000 payable to the Payee or its registered assigns
and issued as of January 26, 1997.
Upon the occurrence of an Event of Default, the above described Principal
Amount or so much thereof as shall remain unpaid, with all arrearages of
interest thereon, shall, without notice or demand, at the option of the Payee,
become due and payable immediately thereafter to the Payee. The Payor agrees
that this Note is a full recourse note as against the Payor.
D. Waiver of Notice. The Payor hereby waives any requirement, express or
implied, of prior notice of presentment or dishonor and agrees that should the
indebtedness represented by this Note or any part thereof be placed in the hands
of attorneys for collection after a default in payment, the Payor shall pay in
addition to the unpaid principal and interest due and payable thereon, all costs
of collection including reasonable attorneys' fees and expenses.
E. Governing Law. New Jersey law shall govern and be applicable to this
Note.
IN WITNESS WHEREOF and intending to be legally bound hereunder, the Payor
has caused this Note to be duly executed and delivered as of the date first
above written.
MISTER COOKIE FACE, INC.
By:
[SEAL] Name: Frank Koenemund
Title: President
2
<PAGE>
Item 7(c). Exhibits
9 1/4% PROMISSORY NOTE
(Subordinated Note B)
As of
$500,000 January 26, 1997
- -------- ----------------
Principal Amount Issue Date
FOR VALUE RECEIVED, MISTER COOKIE FACE, INC., a New Jersey corporation
(the "Payor") promises to pay to
CHEFS INTERNATIONAL, INC., a Delaware corporation, or its registered
assigns (the "Payee")
the Principal Amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000) on or before
the close of business on Tuesday, July 1, 2000 (the "Maturity Date"),
in installments as herein set forth, together with interest thereon
commencing January 27, 1997 at an annual rate of 9 1/4% on the unpaid
principal balance, until the principal amount hereof shall be paid in full.
Interest shall accrue and not compound.
Principal Payments shall be made in installments as follows:
Principal Payment Due Date Principal Payment Amount
March 1, 1998, March 1, 1999, March 1, 2000 $16,667 each
April 1, 1998, April 1, 1999, April 1, 2000 $16,667 each
May 1, 1998, May 1, 1999, May 1, 2000 $16,667 each
June 1, 1998, June 1, 1999, June 1, 2000 $16,667 each
October 1, 1998, October 1, 1999 $16,667 each
November 1, 1998, November 1, 1999 $16,667 each
July 1, 1998, July 1, 1999 $33,333 each
August 1, 1998, August 1, 1999 $33,333 each
September 1, 1998, September 1, 1999 $33,333 each
July 1, 2000 (Balance) $33,330
Interest Payments on the unpaid balance of the Principal Amount shall be
paid on the first day of each calendar month commencing March 1, 1997.
Payments of principal and interest are to be made to Chefs International,
Inc., at 62 Broadway, Point Pleasant Beach, New Jersey 08742, or its registered
assigns, as the case may be, or at such other place as the Payee shall designate
to the Payor in writing, in lawful money of the United States of America.
<PAGE>
A. Mandatory Prepayment. The Principal Amount of this Note or so much thereof as
shall remain unpaid, with all accrued interest thereon shall be paid in full to
the Payee (the "Mandatory Prepayment") upon consummation of a public sale of the
Payor's securities, or a private sale or sales of the Payor's securities for
gross proceeds aggregating at least $100,000 (excluding loans from the Payor's
senior bank or institutional lender); such Mandatory Prepayment to be made at
the consummation of such public or private sale.
B. Prepayment Provision. This Note is prepayable in whole or in part without
penalty at any time prior to the Maturity Date. Any prepayment shall first be
applied to outstanding interest before being applied to principal.
C. Security Interest and Subordination Thereof. The Payor has provided the Payee
with a lien on all of its assets to secure repayment of this Note, and
represents that same will constitute a first lien upon removal of First Union
National Bank's lien thereon provided that such first lien shall be subordinated
to any lien subsequently granted by the Payor to its senior bank or
institutional lender, but solely with respect to a maximum aggregate $1,750,000
of indebtedness.
D. Events of Default. The following shall constitute "Events of Default"
under this Note.
(i) failure to pay any Principal Payment installment when due, such
failure continuing twenty (20) business days after notice;
(ii) failure to pay any installment of interest when due, such failure
continuing ten (10) business days after notice;
(iii) failure to pay the Mandatory Prepayment when due;
(iv) dissolution, liquidation, bankruptcy or insolvency of the Payor or
the making by the Payor of an assignment for the benefit of creditors;
(v) institution of bankruptcy, reorganization, dissolution, liquidation or
similar proceedings by the Payor;
(vi) institution of bankruptcy, reorganization, dissolution, liquidation
or similar proceedings against the Payor which proceedings remain undismissed
for sixty (60) days;
(vii) sale by the Payor of substantially all of its assets;
(viii) the Payor ceasing to conduct its ice cream manufacturing and
distribution business;
2
<PAGE>
(ix) failure of the security interest provided to the Payor referred to
above to constitute a first lien on all of Payor's assets upon removal of First
Union National Bank's lien thereon and prior to subordination thereof as herein
provided; and
(x) the occurrence of an "Event of Default" as therein defined under the
Payor's Note A in the Principal Amount of $100,000 and/or the Payor's
Subordinated Note C in the Principal Amount of $500,000, each payable to the
Payee or its registered assigns and issued as of January 26, 1997.
Upon the occurrence of an Event of Default, the above described Principal
Amount or so much thereof as shall remain unpaid, with all arrearages of
interest thereon, shall, without notice or demand, at the option of the Payee,
become due and payable immediately thereafter to the Payee. The Payor agrees
that this Note is a full recourse note as against the Payor.
E. Waiver of Notice. The Payor hereby waives any requirement, express or
implied, of prior notice of presentment or dishonor and agrees that should the
indebtedness represented by this Note or any part thereof be placed in the hands
of attorneys for collection after a default in payment, the Payor shall pay in
addition to the unpaid principal and interest due and payable thereon, all costs
of collection including reasonable attorneys' fees and expenses.
F. Governing Law. New Jersey law shall govern and be applicable to this Note.
IN WITNESS WHEREOF and intending to be legally bound hereunder, the Payor
has caused this Note to be duly executed and delivered as of the date first
above written.
MISTER COOKIE FACE, INC.
By:
[SEAL] Name: Frank Koenemund
Title: President
3
<PAGE>
Item 7(c). Exhibits
8 1/4% PROMISSORY NOTE
(Subordinated Note C)
As of
$500,000 January 26, 1997
- -------- ----------------
Principal Amount Issue Date
FOR VALUE RECEIVED, MISTER COOKIE FACE, INC., a New Jersey corporation
(the "Payor") promises to pay to
CHEFS INTERNATIONAL, INC., a Delaware corporation, or its registered
assigns (the "Payee")
the Principal Amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000) on or before
the close of business on Friday, February 20, 2004 (the "Maturity Date"),
together with interest thereon commencing January 27, 1997 at an annual rate of
8 1/4% on the unpaid principal balance, until the principal amount hereof shall
be paid in full. Interest shall accrue and not compound.
Payments of principal and interest are to be made to Chefs International,
Inc., at 62 Broadway, Point Pleasant Beach, New Jersey 08742, or its registered
assigns, as the case may be, or at such other place as the Payee shall designate
to the Payor in writing, in lawful money of the United States of America.
A. Mandatory Prepayments. This Note shall be prepaid ("Mandatory Prepayments")
first as to interest and then as to principal from 30% of the Payor's "cash
flow" on a consolidated basis as determined by Payor's auditors on a quarterly
basis, the first quarterly period to commence January 27, 1997 and to expire on
April 30, 1997; each three calendar month period thereafter to constitute the
next quarterly period. "Cash flow" is defined as "net after tax income plus
depreciation and amortization, less capital expenditures and less principal
payments on debt." Each quarterly computation of "cash flow" signed by the
Payor's auditors shall be due and Mandatory Prepayment based on "cash flow"
shall be due and payable on the fiftieth (50th) day after the end of the quarter
to which it relates.
In addition, the Principal Amount of this Note or so much thereof as shall
remain unpaid, with all accrued interest thereon shall be paid in full to the
Payee upon consummation of a public sale of the Payor's securities, or a private
sale or sales of the Payor's securities for gross proceeds aggregating at least
$100,000 (excluding loans from the Payor's senior bank or institutional lender);
such Mandatory Prepayment to be made at the consummation of such public or
private sale.
B. Prepayment Provision. This Note is prepayable in whole or in part without
penalty at any time prior to the Maturity Date. Any prepayment shall first be
applied to outstanding interest before being applied to principal.
<PAGE>
C. Security Interest and Subordination Thereof. The Payor has provided the Payee
with a lien on all of its assets to secure repayment of this Note, and
represents that same will constitute a first lien upon removal of First Union
National Bank's lien thereon provided that such first lien shall be subordinated
to any lien subsequently granted by the Payor to its senior bank or
institutional lender, but solely with respect to a maximum aggregate $1,750,000
of indebtedness.
D. Events of Default. The following shall constitute "Events of Default"
under this Note.
(i) failure to pay the outstanding principal and/or interest on this Note
on the Maturity Date;
(ii) failure to deliver a quarterly computation of "cash flow" signed by
the Payor's auditors and/or to pay any Mandatory Prepayment when due, such
failure continuing twenty (20) business days after notice;
(iii) dissolution, liquidation, bankruptcy or insolvency of the Payor or
the making by the Payor of an assignment for the benefit of creditors;
(iv) institution of bankruptcy, reorganization, dissolution, liquidation
or similar proceedings by the Payor;
(v) institution of bankruptcy, reorganization, dissolution, liquidation or
similar proceedings against the Payor which proceedings remain undismissed for
sixty (60) days;
(vi) sale by the Payor of substantially all of its assets;
(vii) the Payor ceasing to conduct its ice cream manufacturing and
distribution business;
(viii) failure of the security interest provided to the Payor referred to
above to constitute a first lien on all of Payor's assets upon removal of First
Union National Bank's lien thereon and prior to subordination thereof as herein
provided; and
(ix) the occurrence of an "Event of Default" as therein defined under the
Payor's Note A in the Principal Amount of $100,000 and/or the Payor's
Subordinated Note B in the Principal Amount of $500,000, each payable to the
Payee or its registered assigns and issued as of January 26, 1997.
Upon the occurrence of an Event of Default, the above described Principal
Amount or so much thereof as shall remain unpaid, with all arrearages of
interest thereon, shall, without notice or demand, at the option of the Payee,
become due and payable immediately thereafter to the Payee. The Payor agrees
that this Note is a full recourse note as against the Payor.
2
<PAGE>
E. Waiver of Notice. The Payor hereby waives any requirement, express or
implied, of prior notice of presentment or dishonor and agrees that should the
indebtedness represented by this Note or any part thereof be placed in the hands
of attorneys for collection after a default in payment, the Payor shall pay in
addition to the unpaid principal and interest due and payable thereon, all costs
of collection including reasonable attorneys' fees and expenses.
F. Governing Law. New Jersey law shall govern and be applicable to this Note.
IN WITNESS WHEREOF and intending to be legally bound hereunder, the Payor
has caused this Note to be duly executed and delivered as of the date first
above written.
MISTER COOKIE FACE, INC.
By:
[SEAL] Name: Frank Koenemund
Title: President
3
<PAGE>
