FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: February 28, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________________ to _________________
Commission file number: 0-27068
BAB Holdings, Inc.
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(Name of small business issuer in its charter)
Illinois 36-3857339
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8501 West Higgins Road, Suite 320, Chicago, Illinois 60631
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (773) 380-6100
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(Former name, former address and former fiscal year, if changed
since last report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 7,143,069 shares of Common Stock, as
of March 31, 1997.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Financial Statements.............................................
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................
PART II
Item 1. Legal Proceedings...............................................
Item 2. Changes in Securities............................................
Item 3. Defaults Upon Senior Securities..................................
Item 4. Submission of Matters to a Vote of Security Holders..............
Item 5. Other Information................................................
Item 6. Exhibits and Reports on Form 8-K.................................
SIGNATURE...................................................................
INDEX TO EXHIBITS...........................................................
PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BAB Holdings, Inc.
Condensed Consolidated Balance Sheet
February 28, 1997
(Unaudited)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents, including restricted cash of $118,200 $ 815,875
Other current assets 1,457,890
-----------
Total current assets 2,273,765
Property, plant, and equipment, net of accumulated depreciation of $46,675 4,816,793
Goodwill, net of accumulated amortization of $46,675 2,729,264
Other assets and intangible assets, net of accumulated amortization
of $236,393 1,653,441
-----------
$11,473,263
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,249,197
Deferred franchise fee revenue 530,145
Current portion of long-term debt 1,128
Other current liabilities 839,552
-----------
Total current liabilities 2,620,022
Long-term debt, less current portion 32,907
Shareholders' equity:
Common stock 10,211,189
Accumulated deficit (1,390,855)
-----------
Total shareholders' equity 8,820,334
-----------
$11,473,263
===========
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
BAB Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED
February 28, February 29,
1997 1996
----------- -----------
<S> <C> <C>
REVENUES
Net sales by Company-owned stores $ 1,807,277 $ 236,171
Royalty fees from franchised stores 406,221 285,251
Franchise and area development fees 234,900 301,500
Licensing fees and other income 325,722 2,719
----------- -----------
2,774,120 825,641
OPERATING COSTS AND EXPENSES
Food, beverage, and paper costs 600,421 77,445
Store payroll and other operating expenses 1,058,621 124,646
Selling, general, and administrative expenses:
Payroll-related expenses 442,596 294,751
Depreciation and amortization 234,584 33,656
Other 432,700 315,447
----------- -----------
1,109,880 643,854
----------- -----------
2,768,922 845,945
----------- -----------
Income (loss) before interest 5,198 (20,304)
Interest expense (45) (3,972)
Interest income 20,172 103,088
----------- -----------
Net income $ 25,325 $ 78,812
=========== ===========
Net income attributable to common and common equivalent
share:
Primary $ 0.00 $ 0.01
=========== ===========
Fully diluted $ 0.00 $ 0.01
=========== ===========
Average number of common and common equivalent shares
used in calculation:
Primary 7,274,943 6,962,199
=========== ===========
Fully diluted 7,274,943 6,995,825
=========== ===========
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
BAB Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
THREE MONTHS ENDED
February 28, February 29,
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided/(used) by operating activities $ 116,475 $ (475,686)
INVESTING ACTIVITIES
Business acquisitions (374,134) --
Purchases of property, plant and equipment (996,917) (168,330)
Other (85,249) (163,363)
----------- -----------
Net cash used for investing activities (1,456,300) (331,693)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock -- 889,485
Repayment of long-term obligations (7,593) (30,671)
----------- -----------
Net cash (used)/provided by financing activities (7,593) 858,814
----------- -----------
Net (decrease)/increase in cash and cash equivalents (1,347,418) 51,435
Cash and cash equivalents at beginning of period 2,163,293 7,679,009
----------- -----------
Cash and cash equivalents at end of period $ 815,875 $ 7,730,444
=========== ===========
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
BAB Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements represent
the financial activity of BAB Holdings, Inc. (the " Company" or" Holdings"), an
Illinois corporation incorporated on November 25, 1992, and its three
wholly-owned subsidiaries, BAB Operations, Inc. ("Operations"), BAB Systems,
Inc. ("Systems"), and Brewster's Franchise Corporation ("BFC"). Systems was
incorporated on December 2,1992,and was primarily established to franchise "Big
Apple Bagels" specialty bagel retail stores. Systems has a wholly owned
subsidiary, Systems Investments,Inc. ("Investments"), which was created to
operate the first Company-owned Big Apple Bagels store, which, until December
1995, also operated as the franchise training facility. Operations was formed on
August 30, 1995, primarily to operate Company-owned stores, including one which
currently serves as the franchise training facility. BFC was established on
February 15,1996, to franchise "Brewster's Coffee" concept retail coffee stores.
The interim financial data is unaudited; however, in the opinion of management,
the interim data includes all adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation of the results for the interim
periods. The financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading.
2. STORES OPEN AND UNDER DEVELOPMENT
Stores which have been opened and unopened stores for which an agreement has
been executed and franchise or area development fees collected at February 28,
1997 are as follows:
Stores opened:
Company-owned 22
Franchisee-owned 107
Licensed 35
-------
164
Unopened franchised stores for which an
agreement has been sold:
Franchise agreement 28
Area development agreement 27
-------
55
=======
Total 219
=======
3. NET INCOME ATTRIBUTABLE TO COMMON SHARE
All share information presented has been adjusted for the three-for-two stock
split effected in the form of a 50% dividend which occurred in April 1996.
4. ACQUISITIONS AND DISPOSITIONS
In January 1997, the Company completed the acquisitions of Just Bagels, Inc.
("JBI"), and affiliate, franchisees of the Company, operating a total of four
stores in southern California. The total purchase price paid was $770,000
including $120,000 related to a noncompetition agreement with the former owners
of JBI and was paid in part through the forgiveness of notes receivable from JBI
of approximately $455,000.
In February 1997, the Company purchased the 50% interest held by its joint
venture partner in Downtown Bagels, a franchise Big Apple Bagels satellite unit,
for $20,000. The unit, and certain other assets, were sold by the Company to a
franchisee for $60,000 consisting of a note receivable from the purchasers of
$55,000 and cash of $5,000. The note receivable bears interest at prime plus one
percent, and is payable monthly over a seven-year period.
Also in February 1997, the Company sold its Park Ridge, Illinois
Company-operated unit to a franchisee for $233,000. In payment, the Company
received a note receivable for $183,000 from the purchasers, bearing interest at
9%, payable monthly over a seven-year period, and cash of $50,000.
The Company signed a letter of intent in February 1997 to aquire My Favorite
Muffin Too, Inc. and My Favorite Muffin Inc., privately held operators and
franchisors of 64 specialty muffin and bagel cafes primarily located in the
eastern United States, including five company-owned units. The letter of intent
calls for total consideration of between 320,000 and 444,275 shares of Holdings
common stock, cash of $125,000 and assumption of bank debt of between $400,000
and $450,000. The Company is currently finalizing the definitive agreement to
effect this transaction which is anticipated to be accounted for using purchase
accounting treatment.
5. SUBSEQUENT EVENTS
PREFERRED STOCK ISSUANCE
The Company is currently in the process of placing 120,000 shares of $25.00
Series A Convertible Preferred Stock (the "Preferred Stock")in a private
placement to institutional investors. The offering, of which approximately
$2,000,000 has been sold to date, is expected to be completed during the last
half of April 1997. The Preferred Stock carries an 8% annual dividend payable in
cash or, at the option of the Company, in shares of Holdings common stock at the
conversion rate inherent in the convertibility feature of the security described
below.
The Preferred Stock is convertible to common stock at the option of the holder,
(i) on and after August 1, 1997 (the "Initial Conversion Date") until the close
of business on July 31, 1999 (the "Expiration Date"), subject to certain
conversion suspension provisions, prior to expiration, or (ii) upon the
effective date of the first registration statement filed by the Company after
the issuance date, and prior to August 1, 1997. Each share of Preferred Stock is
convertible into common stock by dividing (i) $25.00 (the "Original Purchase
Price"), by (ii) the lesser of (A) 140% of the average closing bid price of the
Company's common stock for the 15 trading days immediately preceding the
original issue date and (B) 85% of the average closing bid price of the
Company's common stock for the 30 trading days immediately preceding the
conversion date (the "Conversion Rate"). Not withstanding the foregoing, in the
event of conversion of Preferred Stock by a holder following notice of an
underwritten public offering in which said holder has given notice of
participation, the Conversion Rate is the lesser of the rate determined pursuant
to the above Conversion Rate, and eighty-five percent of the "price to public"
as set forth in the final prospectus for such underwritten public offering. The
Company is not required to convert any shares of the Preferred Stock during a
conversion suspension period as defined below.
A conversion suspension period goes into effect if, at any time on or after the
later of (i) September 15, 1997, or (ii) the date which is 30 trading days
following the date that a registration statement for these securities is
declared effective by the Securities and Exchange Commission, the closing bid
price for shares of the Company's common stock is less than 60% of the closing
bid price of the common stock on the trading day immediately preceding the date
of first issuance of any Preferred Stock (as to such closing bid price, the
"Lodestar Price") for 30 consecutive trading days. Such conversion suspension
period continues until the first trading day thereafter that the closing bid
price for the common stock has exceeded 60% of the Lodestar Price for 30
consecutive trading days; provided however that a conversion suspension period
may not continue for more than sixty days in any period of 365 days.
During any conversion suspension period, the Company at its option may redeem
any or all of the Preferred Stock by payment to the holders of 115% of the
Original Purchase Price plus all accrued and unpaid dividends for each share of
Preferred Stock.
The Company is required to use its best efforts to prepare and file a
registration statement under the Securities Act of 1933 covering the common
shares issuable upon conversion not later than May 15, 1997, and must use its
best efforts to cause such registration statement to become effective, not later
than August 1, 1997. If a registration statement is not effective by August 1,
1997, each holder of Preferred Stock will receive two-year warrants to acquire
an additional two shares of Holdings common stock for each share of Preferred
Stock purchased. Each holder receives an additional warrant for every thirty
days thereafter that a registration statement is not effective. Such warrants
are exercisable at a price equal to the lesser of (A) eighty-five percent (85%)
of the Lodestar Price, or (B) eighty-five percent of the average closing bid
price of the Company's common stock for the thirty trading days immediately
preceding the date of issuance of the warrant.
The Company has agreed to pay Merrill Weber & Company, the placement agent in
this private placement, a commission of six percent of the value of securities
placed, as well as warrants to purchase two percent of the common stock issuable
upon conversion of the Preferred Stock.
AQUISITION
In April 1997, the Company purchased a Big Apple Bagels operating unit located
in Buffalo Grove, Illinois from a franchisee, Heartland Bagels, Inc.
("Heartland"), for approximately $170,000. After reductions from the purchase
price for liabilities assumed by the Company and other amounts receivable from
Heartland, the purchase price was paid through the issuance of 25,611 shares of
Holdings common stock to Heartland. The Company expects to operate this unit as
a Company-owned store.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The selected financial data contained herein have been derived from the
condensed consolidated financial statements of BAB Holdings, Inc. included in
Item 1. above. The data should be read in conjunction with the condensed
consolidated financial statements and notes thereto.
Certain statements contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations, including statements regarding
the development of the Company's business, the markets for the Company's
products, anticipated capital expenditures, and the effects of completed and
proposed acquisitions, and other statements contained herein regarding matters
that are not historical facts, are forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995.) Because such
statements include risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly release the results of any revision to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
GENERAL
The Company franchises and operates both Big Apple Bagels concept specialty
bagel retail stores and Brewster's Coffee concept specialty retail coffee
stores. It also licenses the Big Apple Bagels store concept to Host Marriott
Services Corporation (Host Marriott) for use in airports, travel plazas and
other locations operated by Host Marriott. From its inception in November 1992,
the Company at February 28, 1997 has grown to 22 Company-owned, 107 franchised
and 35 licensed units, including two Company-owed and five franchised Brewster's
Coffee units. This rapid expansion in operations significantly affects the
comparability of results of operations of the Company in several ways,
particularly in the recognition of initial franchise fee revenue and ongoing
royalty fees, as well as the significant increase in Company-owned store
revenues.
The Company's revenues are derived primarily from the operation of Company-
owned stores, initial franchise fees and ongoing royalties paid to the Company
by its franchisees. Additionally, the Company derives revenue from the sale of
licensed products including Brewster's Coffee through its franchise,
Company-owned and licensed units, and par-baked Big Apple Bagels through
licensed units operated by Host Marriott and by sales of par-baked bagels to
selected Mrs. Fields Cookies ("Mrs. Fields") units. Additionally, the Company
generates other revenue through the sale of store units to franchisees of the
Company.
Cost of revenue includes expenses occurring at the Company-owned stores, such as
food, beverage and paper costs, payroll related expenses, occupancy and other
operating expenses, depreciation and amortization, and other store expenses, and
selling, general and administrative costs occurring Company-wide, such as
payroll related expenses, advertising and promotion expenses, professional
service fees, franchise-related expenses, depreciation and amortization, and
other expenses.
The Company's strategy is to increase revenues by continuing internal growth and
through strategic acquisitions and mergers. During January, the Company acquired
the operations of two franchisees located in Southern California, Just Bagels,
Inc. and an affiliate, operating four units. Additionally, the Company
constructed and opened five operating units in three Company-owned store
markets. In February 1997 the Company signed a letter of intent to aquire My
Favorite Muffin Too, Inc. and My Favorite Muffin Inc., privately held operators
and franchisors of 64 specialty muffin and bagel cafes primarily located in the
eastern United States, including five company-owned units. The Company is
currently finalizing the definitive agreement to complete this transaction. It
is expected that these additions will further create operating leverage as
existing administrative expenses are spread over increasing revenue streams.
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 1997 VERSUS THE THREE MONTHS ENDED FEBRUARY 29,
1996
Total revenues increased 236% to $2,774,000 in the first quarter 1997 from
$826,000 in the prior year quarter. This increase was driven primarily by the
increase in Company-owned store revenues which accounts for 65.1% of total
revenue this quarter, up from 28.6% in the prior year quarter. The Company added
8 Company-owned units during the quarter but sold one bringing the total to 22
in operation at February 28, 1997. Franchise and area development fees declined
to $235,000 or 8.5% of total revenue in first quarter 1997 from $302,000 or
36.5% of total revenue in the year-ago quarter as a result of opening only 12
franchise units during the quarter, compared to 15 during first quarter 1996.
Royalty fees from franchise stores increased to $406,000 or 14.6% of revenue in
this quarter from $285,000 or 34.5% or revenue in last year's quarter, as a
result of the higher number of franchise stores in operation during the quarter
compared to the prior year. Licensing fees and other income increased from
approximately $3,000 in first quarter 1996 to $326,000 in this year's first
quarter or 11.7% of total revenues as a result of the Company's entrance into
various nontraditional channels of distribution, including the sale of
Brewster's Coffee to franchisees and licensees of the Company, licensing fees
paid by Host Marriott on the sales of product in Big Apple Bagels licensed
units, and commissions received on the sale to Host Marriott and Mrs. Fields by
a third party commercial baker of par-baked Big Apple Bagels. Additionally, the
Company generated $156,000 from the resale to franchisees of Company-operated
units during the quarter.
Food, beverage and paper costs, and store payroll and other operating expenses
increased by 675% and 749%, respectively, in first quarter 1997 from the
year-ago quarter as a result of increasing the Company-owned stores base from
two units in operation last year to 22 at February 28, 1997. Total food,
beverage and paper costs consumed 33.2% of Company-store revenue in the first
quarter this year versus 32.8% during last year's first quarter, while store
payroll and other operating expenses increased to 58.6% of Company-store revenue
in first quarter 1997 versus 52.8% in last year's quarter. The levels of these
rates, and the increases from first quarter 1996 in food, beverage and paper
costs, and store payroll and other operating expenses, are a direct result of
the increase in Company-owned stores during the quarter and related start-up
inefficiencies. The construction of five new Company-operated units during the
quarter, as well as the conversion to Company-operated units of three former
franchise units in January, coupled with the opening of two new Company-operated
units late in the fourth quarter 1996, significantly decreased operating results
of the Company-operated system in the first quarter. Additionally, the impact of
revenue seasonality in the colder climates of the midwestern United States,
where eleven of the Company's 22 units operate, also contributed to reduced
operating results of Company-owned operations.
Selling, general and administrative expenses increased 72% to $1,110,000 in
first quarter 1997 from $644,000 in the prior year quarter as a result of
supporting an increasing base of franchise stores as well as the significant
increase in Company-owned stores from last year's quarter. Payroll-related costs
increased 50% from the year-ago quarter due to the increase in corporate-level
headcount from 23 at February 29, 1996 to 36 at February 28, 1997. Depreciation
and amortization expense increased 597% due to the significant increase in
Company-owned store depreciation and amortization of intangible assets including
goodwill, contract rights, noncompetition agreements and trademarks resulting
from the Company's various acquisitions during 1996 prior to the first quarter.
Other selling, general and administrative expenses increased 37% as a result of
the increase in Company-owned and franchise units, as well as the increase in
office space of the corporate headquarters supporting the increased corporate
headcount. Selling, general and administrative expenses, as a percent of total
revenue, declined to 40% in this quarter versus 78% in last year's quarter.
Income from operations was $5,000 in first quarter 1997 versus a loss from
operations of $20,000 in first quarter 1996. Interest income decreased to
$20,000 in this year's quarter from $103,000 in last year's quarter as the
Company's cash and equivalents balances were $7.7 million at February 29, 1996
as compared to $816,000 at February 28, 1997.
Net income for first quarter 1997 decreased to approximately $25,000 as compared
to the prior year quarter of $79,000. Net income per share for this quarter was
nil on both a primary and fully-diluted basis, as compared to net income per
share in first quarter 1996 of $ 0.01.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended February 28, 1997, cash provided by operating
activities was $116,000 as compared with $476,000 used by operating activities
during first quarter 1996. This increase is a direct result of the improved
operating results of the Company on a cash basis, without the impact of $235,000
in depreciation and amortization expense related to the Company's increased base
of operations.
Cash used for investing activities during first quarter 1997 totaled $1,456,000
of which $997,000 was used in the purchase of property, plant and equipment
primarily for new Company-owned store construction. Business acquisitions during
the quarter required $374,000, net of forgiveness of $455,000 in notes
receivable related to the Just Bagels, Inc. and affiliate acquisition in January
1997. Collections on notes receivable provided approximately $102,000 during the
quarter.
Financing activities used a total of $8,000 in first quarter 1997 due
principally to the repayment of a loan outstanding on a delivery van.
The Company is currently in the process of placing $3 million of Series A
Convertible Preferred stock, the net proceeds of which is expected to be $2.8
million after placement agent commissions and costs. It is expected that the
proceeds of this private placement of securities, of which approximately
two-thirds have been sold to date, together with cash generated by operations,
will adequately fund the Company-store development and aquisition plans for the
year and provide additional working capital to assist the Company in meeting its
current goals. It is expected that the sale of these securities will be
completed in late April 1997.
PART II
ITEM 1. LEGAL PROCEEDINGS
On April 16, 1996, the Company filed an arbitration action against a franchisee
alleging breach of its franchise agreement for refusal to submit required sales
reports and pay royalty fees and contributions to the national marketing fund.
The franchisee filed suit in the Circuit Court of Cook County, Illinois against
the Company and its officers and directors on April 19, 1996. The franchisee
alleges that the Company misrepresented the initial investment required to
establish a store and made untrue and unauthorized earnings claims in violation
of the Illinois Franchise Disclosure Act. Plaintiffs seek rescission of the
franchise agreement, damages of $600,000 and punitive damages in the amount of
$6,000,000. Management believes the case is without merit and on May 28, 1996,
filed a motion to stay litigation in order to compel the plaintiffs to have
their claims heard in arbitration as required by the provisions of the franchise
agreement. No definite date has been set for the arbitration hearing.
ITEM 2. CHANGES IN SECURITIES
On March 27, 1997, the Company authorized and issued a series of
convertable preferred stock which has liquidation and dividend rights
senior to that of common stock. See financial statements above, and
exhibit 4.4 for further information on this series.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On February 10, 1997, BAB Systems, Inc. ("Systems"), a wholly-owned
subsidiary of the Company, entered into an agreement with Franchise
Mortgage Acceptance Company, LLC ("FMAC") of Greenwich, Connecticut to
provide financing to qualifying existing Big Apple Bagels franchisees
for the purpose of adding second or subsequent units. The program is
completely administered by FMAC and gives Systems the final right of
financing approval on individual applications. Under the agreement,
Systems has provided a guarantee of borrowings up to a maximum of 10%
of the total amount of financing provided to qualified franchisees in a
twelve-month period under the program. FMAC has reserved a total of $25
million for the program.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
EXHIBITS
The following exhibits are filed herewith.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
[i] 2.1 Asset Purchase Agreement dated February 2, 1996 between the
Company, and Brewster's Coffee Company, Inc. and Peter D.
Grumhaus
[ii] 2.2a Asset Purchase Agreement by and among BAB Systems, Inc.,
Bagels Unlimited, Inc. ("BUI"), and Donald Nelson and Mary Ann
Varichak dated May 1, 1996
[ii] 2.2b Non-Competition Agreement by and among the Company and Donald
Nelson and Mary Ann Varichak dated May 1, 1996
[ii] 2.2c Stock Option Agreement between the Company and BUI dated May
1, 1996
[ii] 2.2d Registration Rights Agreement between the Company and BUI
dated May 1, 1996
[iii] 2.3a Asset Purchase Agreement by and between the Company and
Strathmore Bagels Franchise Corp. ("Strathmore") dated May 21,
1996
[iii] 2.3b Stock Option Agreement dated May 21, 1996 between the Company
and Strathmore
[iii] 2.3c Registration Rights Agreement dated May 21, 1996 between the
Company and Strathmore
[iii] 2.3d Non-Competition Agreement dated May 21, 1996 among the
Company, and Strathmore, Jack Freedman and Glen Steuerman
[iii] 2.3e Memorandum of Understanding Regarding Form of License
Agreement effective November 30, 1995, between Strathmore and
Host International, Inc.
[iii] 2.3f Consent to Assignment between Strathmore and Host
International, Inc., dated March 13, 1996, as amended May 21,
1996
[iv] 3.1 Amended Articles of Incorporation of the Company
[iv] 3.2 Bylaws of the Company, as amended
[iv] 4.1 Form of Stock Certificate evidencing Common Stock, no par
value
[iv] 4.2 Forms of Lock-up Agreement executed by certain shareholders
[iv] 4.3 Form of 8% Convertible Bond due July 1, 2002
*4.4 Statement of Designation, Number, Voting Powers, Preferences
and Rights of Series of Preferred Stock of BAB Holdings, Inc.
to be Designated Series A Convertible Preferred Stock dated
March 25, 1997
[iv] 10.1 Form of Franchise Agreement
[iv] 10.2 Form of Franchise Agreement--Satellite
[iv] 10.3 Form of Franchise Agreement--Wholesale
[iv] 10.4 Form of Area Development Agreement
[iv] 10.5 Confidentiality and Non-Competition Agreement with Franchisees
[iv] 10.6 Form of Confidentiality Agreement with Employees
[iv] 10.7 Licensing Agreement dated November 20, 1992 between the
Company and Big Apple Bagels, Inc.
[iv] 10.8 Assignment of Royalty Mark & Trademark to the Company by Big
Apple Bagels, Inc. dated November 20, 1992
[iv] 10.9 Agreement dated September 14, 1995 among the Company, Big
Apple Bagels, Inc. and Paul C. Stolzer
[i] 10.10 Consulting agreement dated February 16, 1996 between Paul C.
Stolzer and BAB Holdings, Inc.
[iv] 10.11 Leases dated November 2, 1994 and February 14, 1995 for
principal executive office
[iv] 10.12 1995 Long-Term Incentive and Stock Option Plan
[iv] 10.13 1995 Outside Directors Stock Option Plan
[iv] 10.14 Settlement Agreement with Timothy Williams d/b/a Big Apple
Deli and Stipulated Dismissal with Prejudice
[v] 10.15 Program Agreement dated February 10, 1997 between BAB Systems,
Inc., a wholly-owned subsidiary of the Company, and Franchise
Mortgage Acceptance Company LLC
*11.1 Calculation of earnings per share
[v] 21.1 List of Subsidiaries of the Company
*27.1 Financial Data Schedule
- ----------------------------------
[i] Incorporated by reference to the Company's Report on Form
10-KSB for the fiscal year ended November 30, 1995
[ii] Incorporated by reference to the Company's Report on Form 8-K
dated May 1, 1996
[iii] Incorporated by reference to the Company's Report on Form 8-K
dated May 21, 1996
[iv] Incorporated by reference to the Company's Registration
Statement on Form SB-2, effective November 27, 1995
(Commission File No. 33-98060C)
[v] Incorporated by reference to the Company's Report on Form
10-KSB for the fiscal year ended November 30, 1996
* Filed herewith.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BAB HOLDINGS, INC.
Dated: April 15, 1997 By: /s/ THEODORE P. NONCEK
--------------------------------
Theodore P. Noncek, Chief Financial Officer,
Treasurer and Secretary
(Principal accounting and financial officer)
INDEX
NUMBER DESCRIPTION PAGE #
- ------ ----------- ------
4.4 Statement of Designation, Number,
Voting Powers, Preferences and
Rights of Series of Preferred Stock of
BAB Holdings, Inc. to be Designated
Series A Convertible Preferred Stock dated
March 25, 1997
11.0 Computation of earnings per share
27.1 Financial data schedule
Exhibit 4.4
- -----------
Amended and Restated Statement of Designation, Number, Voting Powers,
Preferences and Rights of Series of Preferred Stock of BAB Holdings, Inc.
To be Designated Series A Convertible Preferred Stock
BAB Holdings, Inc., an Illinois corporation (the "Corporation"),
pursuant to authority conferred on the Board of Directors of the Corporation by
the Articles of Incorporation and in accordance with the Illinois Business
Corporation Act, certifies that the Board of Directors of the Corporation, by
unanimous written action, duly adopted the following amended and restated
resolution providing for the establishment and issuance of a series of Preferred
Stock designated as "Series A Convertible Preferred Stock" consisting of 120,000
shares, which shall supersede and replace in its entirety that certain
"Statement of Designation, Number, Voting Powers, Preferences and Rights of
Series of Preferred Stock of BAB Holdings, Inc. to be Designated Series A
Convertible Preferred Stock" filed of record with the Secretary of State of
Illinois on February 27, 1997 as Filing No. 05707-411-6.
RESOLVED, that, pursuant to the authority expressly granted and vested
in the Board of Directors of this Corporation in accordance with the provisions
of its Articles of Incorporation, a series of Series Preferred Stock of the
Corporation be and hereby is established, consisting of 120,000 shares, to be
designated "Series A Convertible Preferred Stock" (hereinafter "Series A
Preferred Stock"); the Board of Directors be and hereby is authorized to issue
such shares of Series A Preferred Stock from time to time and for such
consideration and on such terms as the Board of Directors shall determine; and
subject to the limitations provided by law and by the Articles of Incorporation,
the powers, designations, preferences and relative, participating, optional or
other special rights of, and the qualifications, limitations or restrictions
upon, the Series A Preferred Stock shall be as follows:
1. Dividends:
(a) From and after the date of issuance (the "Original Issue Date") until the
Expiration Date (defined in Section 4(a) below), the holders of the Series A
Preferred Stock shall be entitled to an annual dividend per share prior to the
payment of any cash dividends on the Corporation's Common Stock, equal to eight
percent (8%) of $25.00 (the "Original Purchase Price"), or $2.00 per share,
which shall be payable, if and when the Preferred Stock shall be converted to
Common Stock, in cash or, at the option of the Corporation, in shares of Common
Stock at the Conversion Rate (as defined in Section 4(a) herein) determined if
and when the Preferred Stock shall be converted to Common Stock; provided that
during a Conversion Suspension Period, dividends will accrue at the rate of 15%
per annum, or $3.75 per share. Dividends shall accrue and be deemed to accrue
day-to-day based on a 360-day year of twelve 30 day months, whether or not
declared, and shall be cumulative. The accumulation of dividends on the Series A
Preferred Stock shall not bear interest.
2. Liquidation, Dissolution or Winding Up:
(a) The holders of shares of Series A Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its shareholders, after and subject to the payment in full of
all amounts required to be distributed to the holders of any other class or
series of stock of the Corporation ranking on liquidation prior and in
preference to the Series A Preferred Stock (collectively referred to as "Senior
Preferred Stock"), but before any payment shall be made to the holders of Common
Stock by reason of their ownership thereof, an amount per share equal to the
Original Purchase Price of $25.00 per share plus accrued dividends (subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares). If upon
any such liquidation, dissolution or winding up of the Corporation the remaining
assets of the Corporation available for distribution to its shareholders shall
be insufficient to pay the holders of shares of Series A Preferred Stock the
full amount to which they shall be entitled, the holders of shares of Series A
Preferred Stock and any class or series of stock ranking on liquidation on a
parity with the Series A Preferred Stock shall share ratably in any distribution
of the remaining assets and funds of the Corporation.
(b) After the payment of all preferential amounts required to be paid to the
holders of Series A Preferred Stock upon the dissolution, liquidation or winding
up of the Corporation, the holders of the Series A Preferred Stock shall not be
entitled to share in or receive any remaining assets or funds of the Corporation
available for distribution to its shareholders.
3. Voting; Limitations on Certain Actions:
The holders of the outstanding shares of Series A Preferred Stock shall have no
rights to vote, and shall have no rights to approve or disapprove any matter
presented for vote or other action by the holders of the Common Stock, except as
specifically required by applicable law.
4. Optional Conversion:
The holders of the Series A Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Right to Convert.
The Preferred Stock shall be convertible to Common Stock at the option of the
holder, (i) on and after August 1, 1997 (the "Initial Conversion Date") until
the close of business on July 31, 1999 (the "Expiration Date"), subject to
extension by a number of days equal to the number of trading days in any
Conversion Suspension Period (defined below) during the period prior to July 31,
1999, and (ii) upon the effective date of the first registration statement filed
by the Corporation under the Securities Act of 1933 on and after the Original
Issue Date and prior to August 1, 1997 (except for a registration statement on
Form S-8 or a registration statement in connection with any acquisition by the
Corporation). Each share of Series A Preferred Stock shall be convertible into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing (i) the Original Purchase Price, by (ii) the lesser of
(A) 140% of the average closing bid price of the Corporation's Common Stock for
the 15 trading days immediately preceding the Original Issue Date and (B) 85% of
the average closing bid price of the Corporation's Common Stock for the 30
trading days immediately preceding the Conversion Date (as defined in Section
4(c) below) (as so determined, the "Conversion Rate"). Not withstanding the
foregoing, in the event of conversion of Series A Preferred Stock by a Holder
following notice of an underwritten public offering pursuant to section 6(a) in
which said holder has given notice of participation, the Conversion Rate shall
be the lesser of the rate determined pursuant to the immediately preceding
sentence, and eighty-five percent (85%) of the "price to public" as set forth in
the final prospectus for such offering. The Corporation shall not be required to
convert any shares of the Series A Preferred Stock during a Conversion
Suspension Period as defined below.
A Conversion Suspension Period shall go into effect if, at any time on or after
the later of (i) September 15, 1997, or (ii) the date which is 30 trading days
following the date that the registration statement (as described in Section 6(b)
below) is declared effective by the Securities and Exchange Commission, the
closing bid price for shares of the Common Stock is less than 60% of the closing
bid price of the Common Stock on the trading day immediately preceding the date
of first issuance of any Series A Preferred Stock (as to such closing bid price,
the "Lodestar Price") for 30 consecutive trading days. Such Conversion
Suspension Period shall continue until the first trading day thereafter that the
closing bid price for the Common Stock has exceeded 60% of the Lodestar Price
for 30 consecutive trading days; provided however that a Conversion Suspension
Period shall not continue for more than sixty (60) days in any period of 365
days.
During any Conversion Suspension Period, the Corporation at its option may
redeem any or all of the Series A Preferred Stock by payment to the holders of
115% of the Original Purchase Price plus all accrued and unpaid dividends for
each such share of Series A Preferred Stock.
In the event of a liquidation of the Corporation prior to the Expiration Date,
the Conversion Rights shall terminate at the close of business on the first full
day preceding the date fixed for the payment of any amounts distributable on
liquidation to the holders of Series A Preferred Stock.
(b) Fractional Shares.
No fractional shares of Common Stock shall be issued upon conversion of the
Series A Preferred Stock. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Corporation shall pay cash.
(c) Mechanics of Conversion
(i) In order for a holder of Series A Preferred Stock to convert shares of
Series A Preferred Stock into shares of Common Stock, such holder shall deliver
written notice of conversion of such shares of Series A Preferred Stock (which
may be by facsimile transmission), at the office of the transfer agent for the
Series A Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent for the Series A Preferred Stock).
Such notice shall state such holder's name or the names of the nominees in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. Prior to issuance of any Common Stock, the certificates representing
the Series A Preferred Stock shall be surrendered for conversion and shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder.
The date of receipt of notice by the transfer agent (or by the Corporation if
the Corporation serves as its own transfer agent) shall be the conversion date
(as to each such date, a "Conversion Date"). The Corporation shall, use its best
efforts to ensure that, within five (5) business days after receipt of the
certificates representing the Series A Preferred Stock, its transfer agent shall
issue and deliver to such Holder or to his, her or its nominees, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled, together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series A Preferred Stock shall
be outstanding, reserve and keep available out of its authorized but unissued
stock, for the purpose of effecting the conversion of the Series A Preferred
Stock, such number of its duly authorized shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding Series A
Preferred Stock.
(iii) All shares of Series A Preferred Stock which shall have been surrendered
for conversion as herein provided shall no longer be deemed to be outstanding
and all rights with respect to such shares shall immediately cease and terminate
on the Conversion Date, except for the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any accrued and
unpaid dividends thereon. Any shares of Series A Preferred Stock so converted
shall be retired and canceled and shall not be reissued, and the Corporation may
from time to time take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
(d) Adjustment for Merger, Sale, or Reclassification, etc.
In case of any consolidation or merger of the Corporation with or into another
corporation in which the Corporation is not the surviving entity, the sale of
all or substantially all of the assets of the Corporation to another
corporation, or a reclassification or other change in the Common Stock, each
share of Series A Preferred Stock shall thereafter be convertible into the kind
and amount of shares of stock or other securities or property to which a holder
of the number of shares of Common Stock of the Corporation deliverable upon
conversion of such Series A Preferred Stock would have been entitled upon such
consolidation, merger or sale or reclassification or other change; and, in such
case, appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions in this Section 4
set forth with respect to the rights and interest thereafter of the holders of
the Series A Preferred Stock, to the end that the provisions set forth in this
Section 4 shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of the Series A Preferred Stock.
(e) No Impairment.
The Corporation will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in taking
of all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(f) Certificate as to Adjustments.
Upon the occurrence of each adjustment pursuant to this Section 4, the
Corporation, at its expense, shall promptly compute such adjustment in
accordance with the terms hereof and furnish to each holder of Series A
Preferred Stock a certificate setting forth such adjustment, the facts upon
which such adjustment is based, and the number of shares of Common Stock or
other securities or property which then would be received upon the conversion of
Series A Preferred Stock.
(g)Notice of Record Date.
In the event: (i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Corporation; (ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock; (iii) of any reclassification of the Common
Stock of the Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or stock distribution
thereon), or of any consolidation or merger of the Corporation into or with
another corporation, or of the sale of all or substantially all of the assets of
the Corporation; or (iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation; then the Corporation shall cause
to be mailed to the holders of the Series A Preferred Stock at their last
address as shown on the records of the Corporation a notice stating (A) the
record date of such dividend, distribution, subdivision or combination, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, subdivision or combination
are to be determined, or (B) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, dissolution.
6. Registration Rights.
(a) Piggyback Registration.
(i) For a period commencing on and after March 24, 1997 and ending at close of
business on the Expiration Date, each time the Corporation shall determine to
proceed with the preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for money of any
of its securities by it on a form permitting the inclusion of securities by
selling holders, the Corporation will give written notice of its determination
to holders of the Series A Preferred Stock and holders of Common Stock acquired
upon conversion of the Preferred Stock (the "Common Shares"). Upon the written
request of any such holder, (individually, a "Holder" and collectively, the
"Holders") provided to the Corporation within 30 days after receipt of any such
notice from the Corporation, the Corporation will, except as herein provided,
cause all issued Common Shares with respect to which the Holder has requested
registration, to be included in such registration statement, all to the extent
required to permit the sale or other disposition by the Holder of the Common
Shares to be so registered; provided, however, that nothing herein shall prevent
the Corporation from, at any time, abandoning or delaying any such registration
initiated by it.
(ii) If any such registration shall be underwritten in whole or in part, the
Corporation may require that the Common Shares requested for inclusion by a
Holder pursuant to this Section be included in the underwriting on the same
terms and conditions as the securities otherwise being sold through the
underwriters. All Common Shares as to which Holders did not request inclusion,
shall be withheld from the market by the Holders for a period, not to exceed 180
days, which the managing underwriter reasonably determines is necessary in order
to effect such underwritten public offering pursuant to written agreement by the
Holders (the "Lock-out Agreement").
(iii) In exchange for such Lock-out Agreement, if any, by Holders who requested
inclusion in the registration statement but whose participation was reduced or
eliminated, the Corporation shall issue two-year warrants to each such Holder
for purchase of shares of Common Stock in an amount equal to fifty percent (50%)
of the number of the Common Shares held by such Holder that were excluded from
such offering at the direction of the managing underwriters. The exercise price
for the warrants shall be equal to one hundred thirty percent (130%) of the
closing bid price of the Corporation's Common Stock on the effective date of the
offering. Notwithstanding the foregoing, if an offering occurs prior to the
Initial Conversion Date, then Holders who did not elect to participate shall
also receive warrants, as described above, for purchase of a number of shares of
Common Stock equal to fifty percent (50%) of the Common Shares which have been
issued to each such Holder, or are issuable to each such Holder on the effective
date of the offering upon conversion.
(b) Required Registration.
(i) The Corporation shall use its best efforts to prepare and file a
registration statement under the Securities Act covering the Common Shares not
later than May 15, 1997, and shall use its best efforts to cause such
registration statement to become effective, not later than the Initial
Conversion Date (or December 15, 1997 if, prior to August 1, 1997, the
Corporation has offered all Holders the opportunity to participate in a
registration under Section 6(a) without reduction in the number of Common Shares
included). The Corporation shall be entitled to include in such registration
statement securities of the Corporation offered by the Corporation for its own
account, on an underwritten basis or otherwise. The Corporation shall be
obligated to prepare, file and cause to become effective only one (1)
registration statement pursuant to this Section 6(b).
(ii) If such registration statement is not effective by the Initial Conversion
Date (or December 15, 1997 if, prior to August 1, 1997, the Corporation has
offered all Holders the opportunity to participate in a registration under
Section 6(a) without reduction in the number of Common Shares included), then
each Holder of Preferred Stock shall receive two-year warrants to acquire an
additional two shares of Common Stock for each share of Preferred Stock
purchased by such Holder from the Company. Each such Holder shall receive an
additional warrant for every thirty (30) days thereafter that a registration
statement is not effective. Such a warrant shall be exercisable at a price equal
to the lesser of (A) eighty-five percent (85%) of the Lodestar Price, or (B)
eighty-five percent (85%) of the average closing bid price of the Corporation's
Common Stock for the thirty (30) trading days immediately preceding the date of
issuance of the warrant.
(c) Registration Procedures.
If and whenever the Corporation is required by the provisions of this Section 6
to effect the registration of any Common Shares under the Securities Act, the
Corporation will:
(i) prepare and file with the Commission a registration statement with respect
to such securities, such amendments to such registration statement and
supplements to the prospectus contained therein as may be necessary and use its
best efforts to cause such registration statement to become and remain effective
for two (2) years, unless such continued effectiveness is not reasonably
necessary to effect the sale of such securities;
(ii) furnish to the Holders and to the underwriters of the securities being
registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as the
underwriters may reasonably request in order to facilitate the public offering
of such securities;
(iii) use its best efforts to register or qualify the securities covered by such
registration statement under the state securities or blue sky laws of such
jurisdictions as the underwriters or the holders of a majority of the Common
Shares for which registration has been requested may reasonably request, except
that the Corporation shall not for any purpose be required to execute a general
consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified; and
(iv) prepare and promptly file with the Commission and promptly notify the
Holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading.
(d) Expenses.
With respect to any registration of Common Shares pursuant to this Section 6,
the Corporation shall bear the following fees, costs and expenses: printing
expenses, fees and disbursements of counsel and accountants for the Corporation,
fees and disbursements of counsel for the underwriter or underwriters of such
securities, all internal Corporation expenses, filing fees with the Commission
and the National Association of Securities Dealers, Inc., legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered, and the
premiums and other costs of policies of insurance against liability arising out
of the public offering. To the extent permitted under applicable law, the
Corporation shall bear all underwriting discounts and commissions and transfer
taxes of the Holders. Fees and disbursements of counsel and accountants for the
Holders, and any other expenses incurred by the Holders not expressly included
above, shall be borne by the Holders.
(e) Indemnification.
In the event that any Common Shares owned by Holders are included in a
registration statement under this Section 6:
(i) The Corporation will indemnify and hold harmless each Holder, and its
officers, directors, agents, employees, and control persons from and against any
and all loss, damage, liability, cost and expense to which such Holder may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the Corporation will not be liable in
any such case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished in writing by or on behalf of such Holder.
(ii) Each Holder will indemnify and hold harmless the Corporation and any
underwriter and their respective officers, directors, agents, employees, and
control persons from and against any and all loss, damage, liability, cost or
expense to which the Corporation or any underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with information furnished in writing by the Holder.
(iii) Promptly after receipt by an indemnified party pursuant to the provisions
of paragraph (i) or (ii) of this Section 6(e) of notice of the commencement of
any action involving the subject matter of the foregoing indemnity provisions,
such indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said paragraph (i) or (ii),
promptly notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
if the defendants in any action include both the indemnified party and the
indemnifying party and there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party or parties shall have the right to select separate counsel
to participate in the defense of such action on behalf of such indemnified party
or parties. After notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party pursuant to the provisions of said
paragraph (i) or (ii) for any legal or other expense subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (A) the indemnified party shall have
employed counsel in accordance with the proviso of the preceding sentence, (B)
the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action, or (C) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
(f) Termination.
The Corporation's obligations under this Section 6 shall terminate as to any
Common Shares issued or issuable upon conversion of Series A Preferred Stock if
such Common Shares may be transferred and taken by the transferee thereof
without further restriction on transfer under the Securities Act.
IN WITNESS WHEREOF, the Corporation has caused its corporation seal to be
affixed hereto and this to be signed by its President and attested by its
Secretary this 25th day of March, 1997.
BAB HOLDINGS, INC.
By: /s/ MICHAEL W. EVANS
-----------------------------------
Subscribed and sworn to before me this 25th day of March, 1997.
/s/ THEODORE P. NONCEK
--------------------
Exhibit 11.0
BAB HOLDINGS, INC.
COMPUTATION OF EARNINGS PER SHARE
3 MONTHS ENDED FEBRUARY 28, 1997 V. 3 MONTHS ENDED FEBRUARY 29, 1996
3 Months 3 Months
2/28/97 2/29/96
----------- ------------
PRIMARY EPS
Net income $ 25,325 $ 78,812
=========== ============
Weighted average share o/s 7,274,943 6,962,199
Net income per common share $ 0.0035 $ 0.0113
FULLY DILUTED EPS
Net income $ 25,325 $ 78,812
=========== ============
Weighted average share o/s 7,274,943 6,962,199
Net income per common share $ 0.0035 $ 0.0113
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BAB HOLDINGS, INC. FOR THE THREE MONTH PERIOD ENDED
FEBRUARY 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. (b)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> FEB-28-1997
<CASH> 815,875
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,273,765
<PP&E> 5,169,132
<DEPRECIATION> 352,339
<TOTAL-ASSETS> 11,473,263
<CURRENT-LIABILITIES> 2,620,022
<BONDS> 32,907
0
0
<COMMON> 10,211,189
<OTHER-SE> (1,390,855)
<TOTAL-LIABILITY-AND-EQUITY> 11,473,263
<SALES> 1,807,277
<TOTAL-REVENUES> 2,794,293<F1>
<CGS> 600,421
<TOTAL-COSTS> 2,768,922
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 25,325
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,325
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,325
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
<FN>
<F1>NOTES TO FINANCIAL DATA SCHEDULE:
(a) Total revenues include $20,173 in interest income.
(b) Entire Financial Data Schedule presentation is based on condensed format
presentation of Form 10-QSB financial statements.
</FN>
</TABLE>
