SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant Filed by a party other than the registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MANHATTAN BAGEL COMPANY, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii),
14a-6(i)(l), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth amount on which the filing fee is calculated
and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) 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 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 statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
MANHATTAN BAGEL COMPANY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Stockholders of MANHATTAN BAGEL COMPANY, INC.
The Annual Meeting of the Shareholders of Manhattan Bagel Company, Inc.
("Manhattan Bagel") will be held at the offices of Manhattan Bagel on Wednesday,
June 26, 1996, at 10:00 A.M., for the purpose of considering and acting upon the
following matters:
(1) Election of directors.
(2) Approval of the 1996 Stock Option Plan.
(3) Approval of an amendment to Manhattan Bagel's Certificate
of Incorporation increasing the number of authorized
shares of common stock to 25,000,000.
(4) Ratify an amendment to the Underwriting Agreement from
Manhattan Bagel's 1994 initial public offering relating to
employment agreements of certain executive officers.
(4) Such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on May 23, 1996
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting.
You are cordially invited to attend the meeting. Whether or not you
plan to attend the meeting, you are urged promptly to complete, date and sign
the enclosed proxy and to mail it to Manhattan Bagel in the enclosed envelope,
which requires no postage if mailed in the United States. Return of your proxy
does not deprive you of your rights to attend the meeting and to vote your
shares in person.
Dated: Eatontown, New Jersey
May 24, 1996
By Order of the Board of Directors,
Andrew Gennusa,
Secretary
<PAGE>
MANHATTAN BAGEL COMPANY, INC.
246 Industrial Way West
Eatontown, New Jersey 07724
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by and on behalf of the Board of Directors of Manhattan Bagel
Company, Inc. ("Manhattan Bagel" or the "Company") for use at the Annual Meeting
of Shareholders on June 26, 1996 and at any adjournment thereof. May 24, 1996 is
the approximate date on which this Proxy Statement and the accompanying form of
proxy are first being mailed to shareholders.
As of May 23, 1996, the record date for the meeting, Manhattan Bagel
had outstanding [7,145,935] shares of Common Stock, each of which entitles the
record holder thereof on such date to one vote on each matter presented at the
meeting. The proxy solicited by this Proxy Statement is revocable at any time
before it is voted.
The presence at the meeting in person or by proxy of shareholders
entitled to cast a majority of the votes at the meeting constitutes a quorum.
The election of directors is decided by a plurality of the votes cast. The
favorable vote of holders of shares entitling them to cast a majority of votes
entitled to be cast by holders present or represented at the meeting is required
to approve the 1996 Stock Option Plan, to approve the proposed amendment to the
Certificate of Incorporation to increase the number of authorized common shares
of common stock, and to ratify the amendment to the 1994 Underwriting Agreement
relating to employment agreements of certain executive officers. Abstentions
have the same legal effect as a vote against the 1996 Stock Option Plan, the
proposed amendment to the Certificate of Incorporation and the ratification of
the amendment to the Underwriting Agreement relating to the Company's 1994
initial public offering. Broker non-votes have no effect on the proposals being
acted upon.
The proxies named in the enclosed form of proxy and their substitutes
will vote the shares represented by the enclosed form of proxy, if the proxy
appears to be valid on its face, and, where a choice is specified by means of
the ballot on the form of proxy, will vote in accordance with each specification
so made.
<PAGE>
ELECTIONS OF DIRECTORS
NOMINEES OF THE BOARD OF DIRECTORS
The proxy will be voted as specified thereon and, in the absence of
contrary instruction, will be voted for the reelection of six current directors
until the next annual meeting following the June 26, 1996 meeting, and until
their respective successors are elected and qualified. Information with respect
to each such nominee is set forth below:
NAME ............... AGE POSITION WITH MANHATTAN BAGEL
Jack Grumet ........ 59 Chairman of the Board and Chief Executive Officer
David Goldsmith .... 56 Vice Chairman of the Board
Jason Gennusa ...... 37 President and Chief Operating Officer and Director
Andrew Gennusa ..... 30 Vice President and Director
Julia S. Heckman ... 46 Director
Jack Levy .......... 44 Director
JACK GRUMET became Chairman of the Board and Chief Executive Officer of
the Company in April 1991. He was Chairman and Chief Financial Officer of Banner
Financial Services, a wholesale mortgage broker, from April 1989 until April
1991. From 1984 to 1989, Mr. Grumet was involved as an executive officer in a
variety of business enterprises. Prior to 1984, he was the founder and Chief
Executive Officer of Jo-Ann's Nut House and Chez Chocolat, the nation's second
largest retail franchise chain of nut and candy stores. The chain operated 149
locations in nineteen states with five branch warehouses. The company was sold
in 1983 to Carrols Corporation.
DAVID GOLDSMITH became director and Vice Chairman of the Board of the
Company in April 1996, after serving as consultant to the Company since December
1995. Prior to joining the Company, from 1973 to 1996, Mr. Goldsmith was
president and chief executive officer of Ventec Inc., a food manufacturing and
distribution concern.
JASON GENNUSA has been President, Chief Operating Officer and a
director of the Company since he co-founded the Company in 1987. From 1981 until
1991, Mr. Gennusa was Vice President and a principal owner/operator of five
Chicken Holiday restaurants located throughout New Jersey. Jason Gennusa and
Andrew Gennusa are brothers.
ANDREW GENNUSA has been Vice President and a director of the Company
since 1987, and is the other co-founder of the Company. From 1985 until 1991,
Mr. Gennusa was a principal
<PAGE>
owner/operator of five Chicken Holiday restaurants located throughout New
Jersey. Andrew Gennusa and Jason Gennusa are brothers.
JULIA S. HECKMAN became a director of the Company in November 1995.
Mrs. Heckman has been a Managing Director with Rodman & Renshaw, Inc.'s
Investment Banking Group since April 1995 and had been a Managing Director with
Mabon Securities Corp.'s Investment Banking Group since 1991. Prior to joining
Mabon Securities Corp., Mrs. Heckman was a Managing Director with Paine Webber
Group Inc.'s Corporate Finance Group. Mrs. Heckman serves as a Director of ATC
Environmental Inc., an environmental consulting and engineering firm.
JACK LEVY became a director of the Company in October 1995. Mr. Levy
has been engaged in the private practice of law in New York City since 1976.
Since April 1996, Mr. Levy has been a partner with the law firm of Morrison
Cohen Singer & Weinstein, LLP, counsel to the Company. From April 1995 to April
1996, he was a partner at Wise & Shepard, LLP and from April 1993 to April 1995,
he was a partner at Lane & Mittendorf. From 1978 to April 1993, he was an
attorney at Summit Solomon & Feldesman, first as an associate and from 1984 to
1993 as a partner.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Manhattan Bagel has a standing audit committee and a compensation
committee and does not have a standing nominating committee of the Board of
Directors. Julia Heckman and Jack Levy are the members of both the audit
committee and compensation committee. The audit committee's duties include
consulting with the Company's independent auditors concerning the scope of the
audit and reviewing the results of their examination as well as the adequacy of
internal controls. The audit committee will also meet with appropriate corporate
personnel to review internal auditing programs. The audit committee is also
responsible for recommending to the Board of Directors, the accounting firm to
be employed by the Company as its independent auditors. The compensation
committee will review compensation arrangements with senior executives. Neither
the audit committee nor the compensation committee, both of which were
constituted in late November 1995, held any meetings during 1995. Manhattan
Bagel's Board of Directors held six meetings during 1995 (not including actions
by unanimous written consent) each of which was attended by all directors.
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<PAGE>
SECURITIES OF OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF MANAGEMENT
The following table sets forth certain information regarding shares of
Common Stock beneficially owned within the meaning of Securities and Exchange
Commission Rule 13d-3, as of the date hereof by (i) each person known to
Manhattan Bagel who owns at least five percent of the Common Stock, (ii) each of
Manhattan Bagel's directors and nominees and executive officers, and (iii) all
executive officers and directors as a group.
Amount and
Nature of
Beneficial Percentage
NAME AND ADDRESS OF BENEFICIAL OWNERS Ownership(1) of Class
- ------------------------------------- ------------ --------
Jack Grumet(2)(3)(4) .......................... 596,900 8.4%
David Goldsmith(5) .............................. 30,000 *
Jason Gennusa(2)(6) ............................ 700,000 9.8%
Andrew Gennusa(2)(7) ........................... 700,000 9.8%
Eugene Cerroti(2) ............................... -- --
Ronald Hari(2) .................................. -- --
Leonard R. Johnson(2) ........................... -- --
Daniel J. Levy(8) ............................... 37,500 *
Julia S Heckman ................................. -- --
2 World Financial Center, Tower B,
30th Floor
New York, New York 10281
Jack Levy(9) .................................... 3,100 *
750 Lexington Avenue, 8th Floor
New York, New York 10022
American Express Financial Corporation (10) ..... 505,000 7.1%
IDS Tower 10
Minneapolis, Minnesota 55440
Grumet Partners, L.P.(3) ........................ 465,668 6.5%
19 Seven Oaks Drive
Holmdel, New Jersey 07733
All executive officers and directors
as a group (10 persons) ......................... 2,067,500 28.6%
- ----------
* Less than 1%
(footnotes on next page)
3
<PAGE>
--------------
(1) Unless otherwise noted, the Company believes that all persons named
in the table have sole voting and sole investment power with respect to
all share of Common Stock beneficially owned by such person.
(2) The address of each of Jack Grumet, David Goldsmith, Jason Gennusa,
Andrew Gennusa, Eugene Cerroti, Ronald Hari, Leonard R. Johnson and
Daniel D. Levy is c/o Manhattan Bagel Company, Inc., 246 Industrial Way
West, Eatontown, New Jersey 07724.
(3) Includes 465,668 shares held by Grumet Partners, L.P., a limited
partnership of which Mr. Grumet and his sister, Linda Philips, are the
general partners, and of which trusts for the benefit of Mr. Grumet's
children are the limited partners. Linda Philips' address is 621 Terra
Peralta Hills, Anaheim, California 92807.
(4) Includes 100,000 shares owned by Mr. Grumet's wife, as to which Mr.
Grumet disclaims beneficial ownership.
(5) Includes 30,000 shares available upon exercise of currently
exercisable options.
(6) Includes 33,000 shares held in trust for the benefit of members of
Mr. Gennusa's family.
(7) Includes 21,000 share held in trust for the benefit of members of
Mr. Gennusa's family.
(8) Includes 37,500 shares issuable upon exercise of currently
exercisable options.
(9) Includes 3,000 shares of Common Stock issuable upon exercise of
currently exercisable options and 100 shares owned under the Uniform
Gift to Minors Act for the benefit of Mr. Levy's daughter.
(10) Includes shares beneficially owned by American Express Financial
Corporation ("AEFC"), an investment advisor, its parent holding
company, American Express Company ("AMEX"), and IDS Life Aggressive
Growth Fund ("IDS"), a registered investment Company. AMEX's address is
World Financial Center, New York, New York 10285, and IDS's address is
the same as that of AEFC. Of the 505,000 shares beneficially owned, IDS
has sole voting power with respect to 410,000 shares and AEFC and AMEX
have shared voting power with respect to the balance of the 95,000
shares. AEFC and AMEX also have shared dispositive power with respect
to all 505,000 shares beneficially owned, which include 410,000 shares
as to which IDS has shared dispositive power. In presenting this
information, the Company has relied on Amendment No. 1 to Schedule 13G
reporting beneficial ownership as of December 31, 1995, jointly filed
by AMEX, AEFC and IDC.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual
compensation paid by Manhattan Bagel for the fiscal years ended December 31,
1993, 1994 and 1995, respectively, to the Chief Executive Officer and executive
officers and another employee of the Company whose compensation exceeded
$100,000 in 1995.
Summary Compensation Table
Name and Annual Compensation
Principal Position Year Salary Other
Jack Grumet 1995 $121,880 --
Chairman and Chief 1994 $152,404 $8,232 (2)
Executive Officer 1993 $79,477 --
Jason Gennusa 1995 $120,358 --
President and Chief 1994 $147,840 --
Operating Officer 1993 $58,250 --
Andrew Gennusa 1995 $122,084 --
Vice President 1994 $147,608 --
1993 $58,250 --
Fredrick Austin 1995 $125,00 --
Manager of Cream Cheese 1994 $56,577 --
Operations 1993 $27,968 --
- -------------------
(1) Excluding perquisites and other personal benefits, securities and
properties otherwise categorized as salary or bonuses which in the
aggregate as for each named person did not exceed the lesser of either
$50,000 or ten percent of the total of annual salary reported for such
person.
(2) Consists solely of car lease payments.
Manhattan Bagel has entered into five (5) year employment agreements,
as amended, with each of Messrs. Jack Grumet, Jason Gennusa and Andrew Gennusa
extending through December 31, 1998. Each such agreement provides for base
annual compensation equal to $125,000, plus in the second, third, fourth and
fifth years, increases based on increases in the consumer price index capped at
ten percent. In addition, each agreement provides for bonus compensation equal
to two percent of the Company's net income before taxes. Each of Messrs. Grumet,
Gennusa and Gennusa waived
5
<PAGE>
such bonus compensation for 1995. The agreements contain customary provisions
regarding benefits and restrictions on compensation.
Manhattan Bagel proposes to enter into an employment agreement
effective April 23, 1996 and ending December 31, 1998 with David Goldsmith under
which he will receive compensation at the rate of $132,000 during 1996 and
$150,000 in 1997 and 1998, plus in each year increases based on increases in the
consumer price index capped at 10% per annum. In addition, the agreement will
provide for bonus compensation equal to 2% of the Company's net income before
taxes, provided the net income of Manhattan Bagel is at least $.61 per share for
1996 and other amounts to be determined for 1997 and 1998. Under the terms of
the agreement, if Mr. Goldsmith's employment is terminated by Manhattan Bagel
without cause during the first three months of employment, he will be entitled
to receive six month's base salary and thereafter, during the balance of the
term of the agreement, one year's salary. In addition, if Mr. Goldsmith's
employment is terminated after a change of control of the Company, Mr. Goldsmith
will be entitled to receive eighteen month's base salary, plus the bonus earned
to date of termination. Mr. Goldsmith's employment agreement will also include
customary provisions requiring benefits and restrictions on competition. Mr.
Goldsmith also has been granted ten year options expiring 2006 to purchase
130,000 of common stock at an exercise price of $16.25 per share. Of such
options, 30,000 were vested on issuance, and the balance vests in three equal
annual installments, on January, 29, 1996, 1997, and 1998, and, subject to the
next sentence, unvested amounts will terminate in the event Mr. Goldsmith's
employment is terminated. If Mr. Goldsmith is terminated without cause after
three months, all unvested options will vest immediately. Such options were
granted while Mr. Goldsmith was engaged as a consultant to the Company.
Manhattan Bagel has entered into a four (4) year employment agreement
with Mr. Fred Austin, through December 31, 1998, pursuant to which Mr. Austin is
employed as the manager of the cream cheese operations of the Company, for a
salary of $125,000, plus increases based on increases in the consumer price
index capped at ten percent. Under the Agreement, Mr. Austin transferred to
Manhattan Bagel all of his rights with respect to the recipes for cream cheese
which the Company manufactures. The Agreement provides that in the event
Manhattan Bagel shall sell the cream cheese operations or any interest therein
to a third party or shall separate the cream cheese operations and distribute
all or a part of the equity therein to Manhattan Bagel's shareholders in a
"spin-off" transaction, Manhattan Bagel shall deliver to Mr. Austin as a special
bonus, 25% of the net proceeds of any such sale or securities constituting 25%
of the equity in the cream cheese operations, as the case may be. The agreement
contains customary provisions regarding benefits and restrictions on
competition.
6
<PAGE>
<TABLE>
<CAPTION>
Option Grants in 1995
(Individual Grants)
Number of
Securities Percent of total Exercise
Underlying Options Granted to Price Per
<S> <C> <C> <C>
Name Options Employees in 1995 Share Expiration Date
Jack Grumet...................... 0 0 0
Jason Gennusa................... 0 0
Andrew Gennusa............... 0 0 0
Frederick Austin................ 6,000 (1) 2.8% $7.00 January 2, 2005
- -------------------
</TABLE>
(1) The options become exercisable in three annual equal installments
on the first, second and third anniversary date of grant.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options at, In-the-Money Options at
on Exercise Value December 31, 1995 December 31, 1995
<S> <C> <C> <C> <C>
Name Realized Exercisable/Unexercisable Exercisable/Unexercisable
Jack Grumet........... 0 0 0 0
Jason Gennusa........ 0 0 0 0
Andrew Gennusa.... 0 0 0 0
Frederick Austin..... 2,000 $26,500 0/10,000 0/$118,000
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Manhattan Bagel's executive officers and directors are required under
the Securities Exchange Act of 1934 to file reports of ownership and changes in
beneficial ownership of Manhattan Bagel's common stock. Based solely on a review
of the copies of reports furnished to Manhattan Bagel and written
representations that no Forms 5 were required, Manhattan Bagel believes that
during 1995 all filing requirements applicable to executive officers and
directors were complied with, except that
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<PAGE>
filings relating to the transfer by Jack Grumet to Grumet Partners, L.P. and to
his wife were made in 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to September 1993, the operations of Manhattan Bagel were being
conducted through four corporations -- Manhattan Bagel, Manhattan Bagel Factory
of NJ, Inc. ("MBF"), Manhattan Bagel Ventures, Inc. ("MBV") and Manhattan Bagel
Enterprises, Inc. ("MBE"). On September 30, 1993, each of these companies, all
of which were owned by Messrs. Grumet, Gennusa and Gennusa, merged with
Manhattan Bagel.
Messrs. Jack Grumet and Jason Gennusa and members of their families are
investors in Manda Associates, which was founded in 1991 to provide equipment
lease financing to Manhattan Bagel and Manhattan Bagel's franchisees. Manda
Associates formed separate partnerships to finance individual franchisees. To
date, a total of approximately $542,000 has been invested in 17 separate
partnerships. Additionally, amounts owed by Manhattan Bagel to Manda Associates
for notes payable aggregated approximately $13,000. Although Manhattan Bagel
does not expect that the financing from the principal shareholders and their
families will continue in the future, circumstances may arise when other
conventional financing may not be available to franchisees, in which event Manda
Associates may assist in financing arrangements with such franchisees.
Two of Manhattan Bagel's franchises are owned by Mr. Grumet's son. The
terms of the franchises are the same as in other franchised stores. Mr. Grumet
also owns a satellite store which sells bagels baked by another franchised
store.
Main Street Bagel, Inc. ("Main Street"), a company owned by Messrs.
Jason Gennusa and Andrew Gennusa, owes Manhattan Bagel $81,400, pursuant to a
note bearing interest at 9% per annum due July 2002 with interest only through
October 1995, and monthly installments of various amounts, including principal
and interest, from November 1995 through June 2002. This loan was made for bona
fide business purposes. Main Street was a franchisee of Manhattan Bagel and
previously operated a Manhattan Bagel Company store. Manhattan Bagel had
provided financing to Main Street to fund the construction and start-up costs of
the store at the time Main Street was two-thirds owned by Messrs. Gennusa and
Gennusa. The franchise and store were sold to an unrelated third party in May
1993, for a purchase price of $150,000, payable $40,000 in cash at the closing
and the balance of $110,000 in monthly installments over a period of eight years
with interest at 9% per annum. Main Street is expected to pay the outstanding
loan to Manhattan Bagel from the proceeds of the monthly installments it
receives from the third party franchisee.
Manhattan Bagel was founded in October 1987 by Messrs. Jason Gennusa
and Andrew Gennusa, each of whom acquired 50% of the then outstanding shares for
nominal consideration. Mr. Jack Grumet joined Manhattan Bagel in April 1991 and
acquired his portion of the outstanding shares for nominal consideration.
Following the merger of MBF, MBV and MBE, each of Messrs. Jack
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Grumet, Jason Gennusa and Andrew Gennusa owned 1,000,000 shares of the Common
Stock of Manhattan Bagel. Pursuant to an agreement with the Underwriter,
immediately prior to the effectiveness of the registration statement relating to
Manhattan Bagel's June 1994 public offering, each of Messrs. Jack Grumet, Jason
Gennusa and Andrew Gennusa contributed, for no consideration, 150,000 shares of
Common Stock.
Julia S. Heckman, a director of the Company, is a Managing Director
with Rodman & Renshaw, Inc.'s Investment Banking Group. Rodman & Renshaw, Inc.
acted as co-managing underwriter of Manhattan Bagel's November 1995 public
offering in which the Company sold 1,618,000 shares, including shares sold
pursuant to the underwriters overallotment option. The underwriting discounts on
such shares aggregated $1,909,240. Ms. Heckman was elected to the board in
November 1995 pursuant to the underwriting agreement under which Rodman &
Renshaw, Inc. had the right to appoint a member to the Board of Directors to
serve until the 1996 Annual Meeting. Rodman & Renshaw, Inc. also acted as one of
the underwriters of an underwritten public offering of shares owned by a selling
shareholder pursuant to which Manhattan Bagel sold 90,000 upon exercise of the
underwriters' overallotment option. The aggregate underwriting discount relating
to these overallotment shares was $113,850.
Law firms of which Jack Levy, a director of Manhattan Bagel since
October 1995, has acted as counsel for Manhattan Bagel since 1993.
1996 STOCK OPTION PLAN
The Board of Directors has adopted the 1996 Stock Option Plan (the
"1996 Plan"), subject to shareholder approval. The Board of Directors believes
that the 1996 Plan is desirable to attract and retain the best available talent
and to encourage the highest level of performance
The 1996 Plan is set forth as Exhibit A to this Proxy Statement, and
the following description is qualified in its entirety by this reference
thereto.
Under the 1996 Plan, options to purchase an aggregate of 750,000 shares
of Manhattan Bagel's Common Stock, no par value ("Common Stock"), may be granted
from time to time to employees, including officers and directors who are
employees of, and consultants to Manhattan Bagel or of any subsidiary of
Manhattan Bagel. Approximately 300 current employees, including four executive
officers, are eligible to participate in the 1996 Plan.
The 1996 Plan is to be administered by a committee (the "Committee"),
appointed by the Board of Directors, consisting of at least two disinterested
directors. The members of the Committee are currently Messrs. Jack Grumet, Jason
Gennusa and Andrew Gennusa, each of whom has agreed that he will not be eligible
for awards of options under the 1996 Plan or any other plan of the Company. The
Committee is generally empowered to interpret the 1996 Plan, to prescribe rules
and regulations, relating thereto, to determine the terms of option agreements,
to amend them with the
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<PAGE>
consent of the optionee, to determine the employees to whom options are to be
granted and to determine the number of shares subject to each option granted.
The per share exercise price of each option is established by the
Committee and in each instance will not be less than the fair market value of a
share of Common Stock on the date the option is granted (110% of fair market
value on the date of grant of an ISA, as defined below, if the optionee owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of Manhattan Bagel or any of its subsidiary corporations (a "10%
Holder")). Upon exercise of an option, the optionee may pay the purchase price
with securities of Manhattan Bagel previously acquired by him, if so permitted
by the Committee or by the related option agreement.
Options will be exercisable for a term determined by the Committee,
which term will not be greater than ten years from the date of grant (five years
for ISOs granted to a 10% Holder). Except in the event of certain terminations
of employment or death or permanent and total disability, no option may be
exercised unless the holder thereof is then an employee of Manhattan Bagel or
any subsidiary corporation. Options will not be transferable other than by will
or the laws of descent and distribution and may be exercised during the
optionee's lifetime only by the optionee or his guardian or legal
representative.
Options granted pursuant to the 1996 Plan may be designated as
incentive stock options ("ISOs") with the attendant tax benefits provided under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The
1994 Plan provides that the aggregate fair market value (determined at the time
an ISO is granted) of the Common Stock subject to ISOs exercisable for the first
time by an employee during any calendar year (under all plans of Manhattan Bagel
and any subsidiary corporation) may not exceed $100,000.
TAX CONSEQUENCES
Manhattan Bagel has been advised as follows regarding the federal
income tax consequences with respect to stock options, ISOs and payment in stock
of the exercise price of options under the 1996 Plan.
Optionees will not be taxed upon the grant of an option. Except as
noted below, the time of exercise of an option other than an ISO, the optionee
generally will recognize ordinary income in an amount equal to the excess of the
then fair market value of the shares over the option price, and Manhattan Bagel
generally will be entitled to a deduction in the same amount. The shares
acquired pursuant to the exercise for an option other than an ISO will have a
basis to the optionee equal to their fair market value on, and a holding period
commencing on, the date of exercise.
At the time of exercise of an ISO, the optionee will recognize no
income, and Manhattan Bagel will not be entitled to any deduction; the optionee
generally will have an item of tax preference equal to the excess of fair market
value of the shares at such time over the option price.
<PAGE>
Upon the sale of a share acquired pursuant to the exercise of an option
other than an ISO, any gain or loss will result in a capital gain or loss
measured by the difference between the optionee's basis and the amount realized
on such sale, provided the share sold is a capital asset in the hands of the
holder. Upon the sale of a share acquired pursuant to the exercise of an ISO,
any gain or loss will be measured by the difference between the amount realized
on such sale and the exercise price, provided the share sold is a capital asset
in the hands of the holder, any such gain will be long term capital gain if at
the time of sale the optionee held the share at least one year after its
issuance to him following exercise and at least two years since the grant of the
ISO. In the case of a disposition of an ISO share having a shorter holding
period (a "Premature Disposition"), a portion (or all) of such gain will be
ordinary income to the extent of the lesser of (a) the excess of the fair market
value of the share at the time of exercise over the option price and (b) the
gain on the sale, and Manhattan Bagel will be entitled to a deduction in the
same amount.
If the optionee uses previously acquired shares of Common Stock to pay
the exercise price of a stock option, the optionee ordinarily will not recognize
taxable income to the extent that the number of new shares of Common Stock
received does not exceed the number of previously acquired shares so used. If
non-recognition treatment applies to the payment for option shares with
previously acquired shares, the tax basis and holding period of the shares
received without recognition of taxable income will be determined by reference
to the basis and holding period of the shares surrendered as payment. If a
greater number of shares of Common Stock is received upon exercise than the
number of share surrendered in payment of the option price, where an ISO is
being exercised, such excess shares will have a zero basis in the hands of the
holder; when an option other than an ISO is being exercised, the option holder
will be required to include in gross income (and Manhattan Bagel will be
entitled to deduct) an amount equal to the fair market value of the additional
shares on the date the option is exercised less any cash paid for the shares,
and the holding period will commence on the exercise date.
Moreover, if stock previously acquired by exercise of an ISO is
transferred in connection with the exercise of another ISO, and if, at the time
of such transfer, the stock so transferred has not been held for the holding
period required in order the receive favorable treatment under the statutory
stock option rules, then such transfer would be treated as a Premature
Disposition. Accordingly, with respect to the shares so transferred, an option
holder would recognize ordinary income under the rules governing a Premature
Disposition discussed earlier in this section. However, the shares so acquired
upon exercise of and ISO can still qualify for ISO treatment, if all of the
other ISO requirements are fulfilled.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE 1996 STOCK
OPTION PLAN.
11
<PAGE>
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has approved a proposed amendment to Manhattan
Bagel's Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 10,000,000 to 25,000,000. The full text
of the proposed amendment is included as Appendix B to this Proxy Statement.
If approved by the shareholders, the proposed amendment will become
effective upon the filing of an amendment to Manhattan Bagel's Restated
Certificate of Incorporation with the Secretary of the State of New Jersey,
which will occur as soon as reasonably practicable.
The Board of Directors believes that it is in Manhattan Bagel's best
interests to increase the number of authorized shares of Common Stock in order
to have additional authorized but unissued shares available for issuance to meet
business needs as they arise. The Board of Directors believes that the
availability of such additional shares will provide Manhattan Bagel with the
flexibility to issue Common Stock for possible financings, stock dividends or
distributions, acquisitions, or other proper corporate purposes which may be
identified in the future by the Board of Directors, without the expense and
delay of a special shareholder's meeting. The issuance of additional shares of
Common Stock may have a dilutive effect on earnings per share and, for persons
who do not purchase additional shares to maintain their pro rate interest in the
Company, on such shareholder's percentage voting power.
The authorized shares of Common Stock in excess of those issued will be
available for issuance at such times and for such corporate purposes as the
Board of Directors may deem advisable without further action by Manhattan
Bagel's shareholders, except as may be required by applicable law or by the
rules of any stock exchange or national securities association trading system on
which the securities may be listed or traded. Upon issuance, such shares will
have the same rights as the outstanding shares of Common Stock. Holders of
Common Stock have no preemptive rights.
Issuance of Common Stock could have the effect of making acquisition of
control of Manhattan Bagel more difficult. For example, the acquisition of
shares of Manhattan Bagel's Common Stock by an entity in order to acquire
control of Manhattan Bagel might be discouraged through the public or private
issuance of additional shares of Common Stock, since such issuance would dilute
the stock ownership of the acquiring entity. Common Stock could also be issued
to existing shareholders as a dividend or privately placed with purchasers who
might side with the Board in opposing a takeover bid, thus discouraging such a
bid.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
12
<PAGE>
RATIFICATION OF AMENDMENT OF
1994 UNDERWRITING AGREEMENT TO DELETE PROVISION
RELATING TO EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
The Underwriting Agreement relating to Manhattan Bagel's initial public
offering, dated June 16, 1994, between the Company and First Montauk Securities
Corp. (the "1994 Underwriting Agreement"), provides, in pertinent part, as
follows:
Section 4
(x) The Company shall not amend or alter any term or
condition of any written employment agreement, as described in
the Registration Statement, between the Company and any
executive officer or director, for the term thereof, in a
manner more favorable to such employee or director, without
the express written consent of the Underwriter for a period
from the Effective Date to December 31, 1995, and thereafter
shall require shareholders approval.
At the time of the initial public offering, the Board of Directors of the
Company consisted of Jack Grumet, Jason Gennusa and Andrew Gennusa, each of
whom was a principal shareholder of the Company and who together owned
approximately 70% of the Common Stock of the Company following the offering, and
each of whom had an employment agreement governed by such provision.
The Board of Directors believes that the restrictions set forth in
Section 4(x) of the 1994 Underwriting Agreement restricts the ability of the
Company's Board of Directors, which now includes outside directors as well as a
compensation committee of the Board comprised of outside directors, to
appropriately set compensation policy for the Company and to reward the
performance of the Company's executive officers. Accordingly, pursuant to the
request of the Board of Directors the Company sought and received from First
Montauk Securities Corp. its agreement to amend the 1994 Underwriting Agreement
to delete Section 4(x). The Board of Directors has also determined to request
the shareholders to approve a resolution at the Annual Meeting ratifying such
deletion.
The resolution to be presented to the Shareholders at the meeting is as follows:
RESOLVED, that the amendment of the Underwriting
Agreement, dated June 16, 1994, between this corporation and
First Montauk Securities Corp. to delete Section 4(x), be, and
it hereby is, approved, ratified and confirmed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE RESOLUTION
RATIFYING THE AMENDMENT TO DELETE SECTION 4(X).
13
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young, LLP has been selected to serve as independent auditors
of Manhattan Bagel for its fiscal year ending December 31, 1996. Representatives
of Ernst & Young, LLP are expected to be present at the meeting and will have an
opportunity to make a statement if they desire to do so and be available to
respond to appropriate questions. Ernst & Young, LLP served as the independent
auditors of Manhattan Bagel for its fiscal year ended December 31, 1005.
On September 13, 1995, Manhattan Bagel dismissed Amper, Politziner &
Mattia ("AP&M") as its independent accountants. Their report on Manhattan
Bagel's financial statements for the past two years did not contain an adverse
opinion or disclaimer of opinion, nor was such report modified as to
uncertainty, audit scope or accounting principles. There were no disagreements
between Manhattan Bagel and AP&M on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or proceeding, which
if not resolved to AP&M's satisfaction would have caused AP&M to make reference
to the subject matter of its disagreements in connection with their report. The
dismissal of AP&M was approved by Manhattan Bagel's Board of Directors.
On September 14, 1995, Manhattan Bagel engaged Ernst & Young, LLP as
its independent accountants.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals intended for inclusion in the proxy statement for
the next annual meeting must be received by Manhattan Bagel at its principal
executive offices by January 25, 1997.
GENERAL
The Board of Directors did not know, a reasonable time before the
commencement of the solicitation, of any business constituting a proper subject
for action by the shareholders to be presented to the meeting other than as set
forth in this Proxy Statement. However, if any other matter should properly come
before the meeting, the persons named in the enclosed form of proxy intend to
vote such proxy in accordance with their best judgment.
MANHATTAN BAGEL'S 1996 FORM 10-KSB ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION, EXCLUSIVE OF EXHIBITS, WILL BE MAILED WITHOUT CHARGE TO
ANY SHAREHOLDER ENTITLED TO VOTE AT THE MEETING, UPON WRITTEN REQUEST TO
MANHATTAN BAGEL COMPANY, INC., 246 INDUSTRIAL WAY WEST, EATONTOWN,
NEW JERSEY 07724, ATTENTION: INVESTOR
RELATIONS DEPARTMENT.
Manhattan Bagel will bear the entire cost of preparing, assembling,
printing and mailing this Proxy Statement, the accompanying proxy and any
additional material which may be furnished to stockholders. Solicitation
material will be furnished to brokers, fiduciaries and other custodians to
forward to beneficial owners of stock held in their names, and Manhattan Bagel
will reimburse these
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<PAGE>
organizations in accordance with the New York Exchange schedule of charges for
the cost of forwarding proxy material to such beneficial owners. The
solicitation of proxies will also be made by the use of the mails and through
direct communication with certain stockholders or their representatives by
officers, directors or employees of Manhattan Bagel, who will receive no
additional compensation therefor.
By Order of the Board of Directors,
Andrew Gennusa,
Secretary
<PAGE>
EXHIBIT A
MANHATTAN BAGEL COMPANY, INC.
1996 STOCK OPTION PLAN
1. PURPOSE OF THE 1996 STOCK OPTION PLAN.
Manhattan Bagel Company, Inc. (the "Corporation") desires to attract
and retain the best available talent and to encourage the highest level of
performance. The 1996 Stock Option Plan (the "1996 Plan") is intended to
contribute significantly to the attainment of these objectives, by affording
employees of and consultants to the Corporation or any of its parent or
subsidiary corporations the opportunity to acquire and to increase their
proprietary interests in the Corporation and by providing incentives for such
employees and consultants to put forth maximum efforts for the success of the
business.
2. SCOPE AND DURATION OF THE 1996 PLAN.
Under the 1996 Plan, options ("Options") to purchase common stock of
the Corporation, no par value per share ("Common Stock") may be granted. Options
granted to employees may, at the time of grant, also be designated as incentive
stock options ("ISOs") with the attendant tax benefits provided under Section
422 of the Internal Revenue Code of 1986 (the "Code"). The aggregate fair market
value (determined at the time an ISO is granted) of the Common Stock covered by
ISOs exercisable for the first time by an employee during any calendar year
(under all plans of the Corporation and any parent corporation or any of its
subsidiary corporations), may not exceed $100,000.
The aggregate number of shares of Common Stock reserved for grant from
time to time under the 1996 Plan is 750,000, which shares may be authorized but
unissued shares or shares which shall have been or which may be reacquired by
the Corporation. Such aggregate numbers shall be subject to adjustment as
provided in paragraph 10. If an Option shall expire or terminate for any reason
without having been exercised in full, the shares represented by the portion
thereof not so exercised or surrendered shall (unless the 1996 Plan shall have
been terminated) become available for other Options to be granted under the 1996
Plan. The 1996 Plan shall become effective as provided in paragraph 11. No
Option shall be granted under the 1996 Plan after January 16, 2006.
The grant of an Option is sometimes referred to herein as an award thereof.
<PAGE>
3. ADMINISTRATION OF THE 1996 PLAN.
The Board of Directors shall appoint a 1996 Plan Committee
(the "Committee") to administer the 1996 Plan, except as otherwise specifically
provided in the 1996 Plan. The Committee shall consist of not less than two
members of the Board of Directors, each of whom shall be a disinterested person
(as hereinafter defined). The Board of Directors may from time to time appoint
members of the Committee in substitution for or in addition to members
previously appointed and may fill vacancies, however caused, in the Committee.
The Committee shall have plenary authority in its discretion,
subject to and not inconsistent with the express provisions of the 1996 Plan, to
direct the grant of Options, to determine the number of shares and purchase
price of the Common Stock covered by each Option, the employees and consultants
to whom, and the time or times at which, Options shall be granted and may be
exercised; to designate Options as ISOs; to interpret the 1996 Plan; to
prescribe, amend, and rescind rules and regulations relating to the 1996 Plan,
including, without limitation, such rules and regulations as it shall deem
advisable so that transactions involving Options may qualify for exemption under
such rules and regulations as the Securities and Exchange Commission may
promulgate from time to time exempting transactions from Section 16 (b) of the
Securities Exchange Act of 1934 (the "Exchange Act"); to determine the terms and
provisions of and to cause the Corporation to enter into, agreements with
employees in connection with awards made under the 1996 Plan ("Agreements"),
which Agreements may vary from one another as the Committee shall deem
appropriate; to amend any such Agreements from time to time, with the consent of
the optionee; and to make all other determinations it may deem necessary or
advisable for the administration of the 1996 Plan. Any interpretation or
determination made by the Committee pursuant to the foregoing shall be
conclusive and binding upon any person having or claiming any interest under the
1996 Plan.
The Committee shall hold its meetings at such times and places
as it shall deem advisable. Members may participate in meetings through
conference telephone or similar arrangements. A majority of the members of the
Committee shall constitute a quorum. All determinations of the Committee shall
be made by a majority of its members. Any decision or determination reduced to
writing and signed by all of the members shall be fully as effective as if it
had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary, shall keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it shall deem
advisable. The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as the Committee may deem advisable and
may employ (or authorize any person to whom it has delegated duties as aforesaid
to employ) one or more persons to render advice with respect to any
responsibility the Committee (or such person) may have under the 1996 Plan.
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<PAGE>
4. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING AWARDS.
Options may be granted to employees (including officers and directors
who are employees) of and consultants to the Corporation or of any parent or
subsidiary corporation. In determining the persons to whom awards shall be made
and the number of shares to be covered by each option, the Committee shall take
into account the duties of the respective persons, their present and potential
contributions to the success of the Corporation or any parent or subsidiary
corporation, the anticipated number of years of effective service remaining, and
such other factors as the Committee, in its discretion, shall deem relevant in
connection with accomplishing the purposes of the 1996 Plan. No person shall be
eligible for an Option grant if he shall have filed with the Secretary of the
Corporation an instrument waiving such eligibility; provided that any such
waiver may be revoked by filing with the Secretary of the Corporation an
instrument of revocation, which revocation will be deemed effective upon such
filing. More than one award under the 1996 Plan may be made to any employee or
consultant.
5. OPTION PRICE.
The purchase price per share of the Common Stock covered by each Option
shall be established by the Committee, but in no event shall it be less than the
fair market value (as hereinafter defined) of a share of Common Stock on the
date the Option is granted.
In the case of an individual who at the time the Option is granted owns
stock possessing more than 10% of the total combined voting power of all classes
of the stock of the Corporation or of its parent or a subsidiary corporation (a
"10 % Holder"), the purchase price of the Common Stock covered by any ISO shall
in no event be less than 110% of the fair market value of the Common Stock on
the date the ISO is granted.
6. TERM OF OPTIONS.
The term of each Option shall be fixed by the Committee, but in no
event shall it be more than 10 years from the date of grant, subject to earlier
termination as provided in paragraph 10. The term of an ISO granted to a 10%
Holder shall be no more than 5 years from the date of grant. The term of any
Option may be extended from time to time by the Committee, provided that no such
extension shall extend the term beyond 10 years from the date of grant.
7. EXERCISE OF OPTIONS.
(a) An Option may be exercised as to any or all full shares as to which
the Option is then exercisable; provided that an Option may not be exercised as
to fewer than 100 shares (or less than all the shares as to which the Option is
then exercisable, if fewer than 100 shares).
3
<PAGE>
(b) The purchase price of the shares as to which an Option is exercised
shall be paid in full in cash at the time of exercise; provided that, if
permitted by the related Agreement or by the Committee, the purchase price may
be paid, in whole or in part, by surrender or delivery to the Corporation of
securities of the Corporation having a fair market value on the date of exercise
equal to the portion of the purchase price being so paid. In addition, the
optionee shall, upon notification of the amount due and prior to or concurrently
with delivery to the optionee of a certificate representing such shares, pay
promptly any amount necessary to satisfy applicable federal, state or local tax
requirements.
(c) No person shall have the rights of a stockholder with respect to
shares covered by an Option until such person becomes the holder of record of
such shares.
8. NON-TRANSFERABILITY OF OPTIONS.
Options granted under the 1996 Plan shall not be transferable, other
than by will or the laws of descent and distribution, and Options may be
exercised, during the lifetime of the optionee, only by the optionee, or by his
guardian or legal representative.
9. NO RIGHTS TO REMAIN EMPLOYEE OR CONSULTANT.
Nothing in the 1996 Plan or in any award made pursuant to the 1996 Plan
shall confer upon any employee any right to continue in the employ of, or
consultant to continue to be engaged by, the Corporation or any parent or
subsidiary corporation or affect the right of the Corporation or such parent or
subsidiary corporation to terminate his employment or engagement at any time.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Notwithstanding any other provision of the 1996 Plan, each Agreement may
contain such provisions as the Committee shall determine to be appropriate for
the adjustment of the number and class of shares covered by such Option, the
exercise prices and the number of shares as to which Options shall be
exercisable at any time, in the event of changes in the outstanding Common Stock
of the Corporation by reason of stock dividends, split-ups, reverse splits,
recapitalization, mergers, consolidations, combinations or exchanges of shares,
spin-offs, reorganizations, liquidations and the like. In the event of any such
change in the outstanding Common Stock of the Corporation, the aggregate number
of shares as to which Options may be granted under the 1996 Plan and to any
employee shall be appropriately adjusted by the Committee, whose determination
shall be conclusive. No adjustment shall be made in the requirements set forth
in paragraph 7(b) with respect to the minimum number of shares that must be
purchased upon any exercise.
In the event that a (i) dissolution, liquidation, merger or
consolidation of the Corporation, (ii) sale of all or substantially all of the
assets of the Corporation or sale of substantially all of the assets or a
majority of the stock of a subsidiary of which the optionee is then an employee,
or (iii) change
4
<PAGE>
in control of the Corporation has occurred or is about to occur, then, if the
Committee shall so determine, each Option under the 1996 Plan, if such event
shall occur with respect to the Corporation, or each Option held by an employee
of a subsidiary corporation respecting which such event shall occur, shall be
terminated upon the occurrence of such event, and the Corporation shall pay the
optionee in lieu thereof an amount equal to (i) the excess of the fair market
value of one share at the close of business on the day next preceding occurrence
of such event over the option price per share, multiplied by (ii) the full
number of shares subject to the Option, without regard to whether any
installment is then otherwise exercisable.
For purposes of the 1996 Plan, the term "change in control" means an
event or series of events that would be required to be described as a change in
control of the Corporation in a proxy or information statement pursuant to
Schedule 14A or 14C promulgated under the Exchange Act. The determination
whether and when a change in control has occurred or is about to occur shall be
made by vote of a majority of the persons who shall have constituted the
Committee immediately prior to the occurrence of the event or series of events
constituting such change in control.
11. EFFECTIVENESS OF THE 1996 PLAN.
Options may be granted under the 1996 Plan at any time and from time to time
after its adoption by the Board of Directors, subject to the approval and
authorization of the 1996 Plan by a majority of the votes properly cast thereon
at a meeting of stockholders of the Corporation duly called and held, but no
option may be exercised under the 1996 Plan until the 1996 Plan shall have been
so approved by stockholders. If so approved by stockholders, the 1996 Plan shall
become effective as of January 17, 1996, the date of its adoption by the Board
of Directors.
12. TERMINATION AND AMENDMENT OF THE 1996 PLAN.
The Board of Directors of the Corporation may, at any time prior to the
termination of the 1996 Plan, suspend, terminate, modify or amend the 1996 Plan;
provided that any increase in the aggregate number of shares reserved for
issuance upon the exercise of Options, any increase in the maximum number of
shares for which Options may be granted to any employee during any period, any
reduction in the purchase price of the Common Stock covered by any Option, any
extension of the period during which Options may be granted or increase beyond
ten years in the maximum term of Options, or any material modification in the
eligibility requirements for participation in the 1996 Plan, shall be subject to
the approval of stockholders in the manner provided in paragraph 11, except that
any such increase, reduction, or change that may result from any adjustment
authorized by paragraph 10 or any modification or amendment based on any
amendment of the Exchange Act, the Code or change in any regulation promulgated
thereunder (to the extent permitted by the Exchange Act, the Code, the
Securities and Exchange Commission or the Internal Revenue Service) shall not
require such approval. No suspension, termination, modification or amendment of
the 1996 Plan may, without the consent of the holder of an outstanding option,
adversely affect the rights of such holder.
5
<PAGE>
13. FINANCING FOR INVESTMENT IN STOCK OF THE CORPORATION.
Until January 16, 2006, the Board of Directors may cause the Corporation or
any subsidiary to give or arrange for financing, including direct loans, secured
or unsecured, or guaranties of loans by banks, which guaranties may be secured
in whole or in part by assets of the Corporation or any subsidiary, to any
employee of the Corporation or any parent corporation or any subsidiary
corporation who shall have been so employed for a period of at least two years
at the end of the fiscal year ended immediately prior to the arranging of such
financing; but the Board of Directors may, in any specific case, authorize
financing for an employee who shall not have served for such period. Such
financing shall be for the purpose of providing funds for any one or more of the
purchase by the employee of shares pursuant to the exercise of an Option; the
payment of taxes incurred in connection with such exercise; or otherwise
purchasing or carrying a stock investment in the Corporation. Such financing
shall bear interest at a rate not less than the lowest rate that avoids
imputation of interest at a higher rate under the Code. Each recipient of such
financing shall be personally liable for the full amount of all financing
extended to him. Such financing shall be based upon the judgment of the Board of
Directors that such financing may reasonably be expected to benefit the
Corporation, and that such financing as may be granted shall be consistent with
the Certificate of Incorporation and by-laws of the Corporation or such
subsidiary, and applicable laws.
If any such financing is authorized by the Board of Directors, such
financing shall be administered by a special committee of the Board to be
denominated the Stock Investment Financing Committee. Such Committee shall
consist of not less than two directors, each of whom shall be a disinterested
person.
14. SEVERABILITY.
In the event that any one or more provisions of the 1996 Plan or any
Agreement, or any action taken pursuant to the 1996 Plan or such Agreement,
should, for any reason, be unenforceable or invalid in any respect under the
laws of the United States, any state of the United States or any other
government, such unenforceability or invalidity shall not affect any other
provision of the 1996 Plan or of such or any other Agreement, but in such
particular jurisdiction and instance the 1996 Plan, and the affected Agreement
shall be construed as if such unenforceable or invalid provision had not been
contained therein or if the action in question had not been taken thereunder.
15. EFFECT ON PRIOR OPTIONS.
The adoption of the 1996 Plan shall have no effect on outstanding options
previously granted by the Corporation.
6
<PAGE>
16. CERTAIN DEFINITIONS.
(a) The term "parent corporation" and
"subsidiary corporation" shall have the meanings, with respect to the
Corporation, set forth in Sections 425(e) and (f) of the Code, respectively.
(b) The term "disinterested person" shall
mean a director who is not, during the one year prior to service as an
administrator of the 1996 Plan, or during such service, granted or awarded
equity securities pursuant to the 1996 Plan or any other plan of the Corporation
or any of its affiliates, except that: (A) participation in a formula plan
meeting the conditions in paragraph (c)(2)(ii) of Rule 16b-3 promulgated under
the Exchange Act of 1934 ("Rule 16b-3") shall not disqualify a director from
being a disinterested person, and (B) participation in an ongoing securities
acquisition plan meeting the conditions in paragraph (d)(2)(i) of Rule 16b-3
shall not disqualify a director from being a disinterested person.
(c) The term "fair market value" of a share
of Common Stock shall mean as of the date on which such fair market value is
to be determined the closing price of a share of Common Stock as reported in
The Wall Street Journal (or a publication deemed equivalent to The Wall Street
Journal for such purpose by the Committee) for the national securities exchanges
and other securities markets which at the time are included in the stock price
quotations of such publication. In the event that the Committee shall determine
such stock price quotation is not representative of fair market value, the
Committee may determine fair market value in such a manner as it shall deem
appropriate under the circumstances.
7
<PAGE>
EXHIBIT B
PROPOSED AMENDMENT
TO CERTIFICATE OF INCORPORATION
RESOLVED, that Article 4 of the Amended Certificate of Incorporation be
amended to read as follows:
"4) the aggregate number of shares which the
corporation shall have authority to issue is as follows:
a) Twenty-Five Million (25,000,000) shares
common without par value; and
b) Two Million (2,000,000) shares preferred
with such designations, rights, preferences and limitations,
and such divisions and determinations, and such rights as to
dividends, liquidation, and voting, in such class or series,
including but not limited to rights of conversion at the
option of the holder or of the corporation, or both, into
shares of any other class or classes as may be determined by
the Board of Directors without shareholder approval. The Board
of Directors is authorized to act under this provision by its
resolution and cause to be executed and filed an amendment to
the certificate of incorporation as may be necessary or
desirable to accomplish its action, as authorized by NJSA
14A7-2."
<PAGE>
FRONT OF PROXY CARD
MANHATTAN BAGEL COMPANY, INC.
P R O X Y
ANNUAL MEETING OF SHAREHOLDERS - JUNE 26, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS OTHERWISE
PROPERLY MARKED, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS AND FOR
PROPOSALS 2, 3 AND 4.
The undersigned hereby appoints Jack Grumet, Jason Gennusa, Andrew
Gennusa and Leonard R. Johnson, and each of them, each with full power to act
without the other and with full power of substitution, the attorneys and proxies
of the undersigned and hereby authorizes them to represent and to vote, all of
the shares of Common Stock of Manhattan Bagel Company, Inc. that the undersigned
would be entitled to vote, if personally present, at the Annual Meeting of
Shareholders to be held on Wednesday, June 26, 1996, at 10:00 A.M., local time,
and at any adjournment thereof, upon such business as may properly come before
the meeting, including the items set forth below:
<TABLE>
<S> <C> <C>
(1) Election of Directors [ ] FOR ALL NOMINEES [ ] AUTHORITY WITHHELD
(except as marked as to all nominees
to the contrary)
</TABLE>
NOMINEES: Jack Grumet, David Goldsmith, Jason Gennusa, Andrew Gennusa, Julia S.
Heckman, Jack Levy
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
<TABLE>
<S> <C> <C> <C>
(2) Approval of 1996 Stock Option Plan [ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Approval of amendment to Certificate [ ] FOR [ ] AGAINST [ ] ABSTAIN
of Incorporation increasing the number
of authorized shares of common stock to
25,000,000.
(4) Ratify amendment to 1994 Underwriting [ ] FOR [ ] AGAINST [ ] ABSTAIN
Agreement
(5) Upon all such other matters as may properly come before the meeting or any
adjournments thereof, as the proxies, in their discretion may determine.
</TABLE>
<PAGE>
BACK OF PROXY CARD
(continued from Reverse Side)
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as 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.
Dated:____________________, 1995
------------------------------
Signature
-----------------------------------
Signature if held jointly
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
