SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date earliest event reported)November 24, 1998
New World Coffee & Bagels, Inc.
(Exact name of registrant as specified in charter)
Delaware 0-27148 13-3690261
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
379 West Broadway,New York, New York 11746
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 343-0552
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets
On November 24, 1998, the Registrant acquired 100 shares of common stock of
Manhattan Bagel Company, Inc., Debtor in Possession, a New Jersey corporation
("MBC"), representing 100% of its then issued and outstanding capital stock. The
acquisition of MBC was made pursuant to a First Amended Joint Plan of
Reorganization (the "Plan"), under Chapter 11 of the federal bankruptcy code,
for MBC and its principal subsidiary, I & J Bagel, Inc., which Plan was approved
by United States Bankruptcy Court for the District of New Jersey, Newark
Division, on November 20, 1998. To acquire MBC, the Registrant paid
$7,300,000.00 in cash, $2,250,000.00 in the Registrant's common stock, and
delivered a promissory note in the amount of $5,500,000.00, which promissory
note is secured by a junior lien on the assets of the Registrant and its
subsidiaries. The Promissory Note bears interest at 9% per annum and is payable
as to principal in eight (8) quarterly installments of $687,500.00, each
commencing February 24, 2000, and ending February 24, 2002. The acquisition was
funded in part by a $5,000,000.00 term loan to the Registrant from BET
Associates, L.P., a Delaware Limited Partnership. This lender has a first lien
on all assets of the Registrant and its subsidiaries, and, accordingly, a
default under this loan could result in a change of control in the Registrant.
In addition, the Registrant undertook limited guaranties to two (2) lenders each
of whom has advanced funds to certain franchisees of MBC in the aggregate
maximum amount of $1,500,000.00.
Furthermore, the Registrant agreed to indemnify certain former officers of
MBC from certain liabilities under an existing class action lawsuit alleging
securities laws violations up to an aggregate maximum amount of $1,250,000.00,
and against any other securities litigation (of which none is presently known)
up to an aggregate maximum amount of $250,000.00.
Consideration paid to acquire MBC was determined at arm's length through
negotiation conducted with MBC and its creditors committee. One director of the
Registrant, Mr. Ronald S. Hari had previously been an officer of MBC, and,
therefor, was excluded from any negotiation between MBC and the Registrant.
Although, the principal place of operations for MBC is New Jersey, the
acquisition included certain plants, equipment and physical property of MBC in
South Carolina and California, as well as New Jersey. These facilities are used
by MBC to produce bagels and bagel spreads, and the Registrant intends that such
use shall continue as appropriate. Until November 24, 1998, MBC was required
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to file reports on Form 10-K, 10-Q and 8-K with the Securities and Exchange
Commission. Further information concerning MBC and its subsidiaries is included
in such reports.
In connection with the consummation of the acquisition of MBC, the
Registrant entered into Employment Agreements with Jason Gennusa and Andrew
Gennusa and a Consulting Agreement with Jack Grumet, each of whom was a member
of the management of MBC.
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Item 7. Financial Statements and Exhibits.
a) Financial Statements. The consolidated financial statements of MBC and its
subsidiaries for its fiscal years ended December 31, 1997 and 1998, including
the report of Ernst & Young, LLP, are incorporated by reference to the report on
Form 10-K of MBC for the year ended December 31, 1997 filed on May 19, 1998.
b) Pro Forma Financial Information. Consistent with the provisions of Item
7(a)(4), the pro forma financial information required by Article 11 of
Regulation S-X will be provided within 60 days after the date on which this
report on Form 8-K is initially required to be filed.
c) Exhibits. The following exhibits are hereby filed with this form 8-K:
Exhibit
Number Description
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10.1 Amended Acquisition Agreement and Exhibits
10.2 First Amended Joint Plan of Reorganization
10.3 Confirmation Order
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 7, 1998
NEW WORLD COFFEE & BAGELS,
INC.
By: /s/ R. RAMIN KAMFAR
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R. RAMIN KAMFAR
President and
Chief Executive
Officer
AMENDED ACQUISITION AGREEMENT
AGREEMENT (the "Agreement") made as of the 28th day of July, 1998, by and
between MANHATTAN BAGEL COMPANY, INC., Debtor in Possession, a New Jersey
corporation ("MBC") and NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation
("NWCB").
RECITALS
MBC filed a petition for reorganization under Chapter 11 of the Bankruptcy
Code on or about November 19, 1997, as a debtor in possession, and its
wholly-owned subsidiary, I & J Bagels, Inc. a California corporation ("I&J"),
filed a petition for reorganization under Chapter 11 of the Bankruptcy Code on
or about December 31, 1997, as a debtor in possession. Except as the context
otherwise requires, the term "MBC" shall include MBC and I&J.
As presently constituted, the business of MBC includes the operation of a
franchise company for Manhattan Bagel stores, the ownership and operation of 11
Manhattan Bagel stores, and the manufacture of bagels and related products at
two locations for sale to franchisees and others.
MBC and NWCB have agreed to co-propose a plan of reorganization (the
"Plan") for confirmation by the United States Bankruptcy Court for the District
of New Jersey (the "Bankruptcy Court") pursuant to which NWCB would acquire MBC
and through MBC's ownership of its subsidiaries' stock, its subsidiaries.
The purpose of this Agreement is to set forth the terms of the acquisition,
the manner in which the Plan will be put forward, approved and implemented, and
certain other matters as set forth herein.
NOW, THEREFORE, it is agreed by and between the parties hereto as follows:
SECTION 1
PLAN OF REORGANIZATION
1.1 The Plan. MBC and NWCB will prepare and will file with the Bankruptcy
Court the Plan, as promptly as practicable, but in no event later than September
4, 1998. The Plan shall adopt this Agreement, shall include the provisions set
forth herein, and shall provide for modification as necessary to conform the
Plan to applicable law. Any modification that affects in any way the
consideration being paid or provided by NWCB hereunder or under the Plan or the
economic treatment of any class of claim or interest must first be approved by
NWCB in writing prior to filing with the Bankruptcy Court.
1.2 Approval of the Plan. MBC and NWCB will prepare and will file with the
Bankruptcy Court contemporaneously with the Plan the "disclosure statement"
required by 11 U.S.C. ss.1125. Thereafter,
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MBC and NWCB shall take all steps which are necessary or advisable in the
opinion of the parties and their counsel to obtain approval of the disclosure
statement, to obtain consent to the Plan by voting holders of claims or
interests, and to obtain confirmation of Plan by the Bankruptcy Court.
1.3 Effectiveness of the Plan. The date upon which the Plan shall become
effective, following requisite approval by the Bankruptcy Court, is referred to
as the "Effective Date."
SECTION 2
CONTRACT DEPOSIT
2.1 Deposit. Upon the execution and delivery of this Agreement, NWCB shall
deliver a check payable to MBC's counsel in the sum of $100,000. Such funds
shall be deposited in an interest bearing escrow account of such counsel. The
balance in such account from time to time, is referred to as the Escrow Amount.
2.2 Effective Date. On the Effective Date, the Escrow Amount shall be
applied to meet NWCB's payment obligations under the Plan.
2.3 Termination. If this Agreement terminates for any reason other than the
default of NWCB, the Escrow Amount shall be delivered to NWCB on the first
business day after the date of termination.
SECTION 3
NWCB'S PLAN OBLIGATIONS
3.1 Payment of Secured Creditors. On the Effective Date, pursuant to the
Plan, NWCB shall pay to MBC exclusively for satisfaction of the allowed claims
of MBC's secured creditors $3.5 million or such lesser amount equal to all of
the allowed claims of MBC's secured creditors. MBC, together with its Unsecured
Creditors' Committee, may settle and compromise the claims of First Union
National Bank ("FUNB") in its reasonable discretion, without causing an increase
of the amount alleged by FUNB as the balance due to it, substantially in
accordance with the term sheet annexed hereto; provided, that, fifty (50%)
percent of any reduction, net of the associated costs, from $3,500,000 in FUNB's
allowed claim and fifty (50%) percent of any recovery from FUNB, net of the
associated costs, shall be added to the payments to be made to unsecured
creditors under section 3.2 hereof.
3.2 Payment of Unsecured Creditors. On the Effective Date, pursuant to the
Plan, NWCB shall deliver to MBC (or to a creditor trust) exclusively for
satisfaction of the allowed claims of MBC's unsecured creditors (i) $4,000,000,
(ii) the greater of (a) shares
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of NWCB's common stock having a then market value of $2,250,000 to be determined
in accordance with section 3.3 hereof, (b) 750,000 shares (the "Shares"), (iii)
a promissory note in the principal amount of $5,500,000, with interest at nine
(9%) per annum payable quarterly in arrears, and with the principal amount to be
paid quarterly in installments of $687,500 commencing 15 months after the
Effective Date, such promissory note to be secured by a lien on the assets of
NWCB and its subsidiaries junior only to the lien granted to NWCB's senior
lenders to secure loans not in excess of $10,000,000; provided, that, should the
note be secured by a first (rather than a junior) lien on the notes payable
issued to MBC by Bagel Bros. or the stores which secure such notes and a junior
lien on all other assets, then the interest rate shall be six (6%) percent per
annum payable quarterly in arrears; and (iv) all causes of action accruing to
MBC pursuant to 11 U.S.C. ss.ss. 544(b), 547, 548, 549, 550 and 553.
3.3 The Shares. NWCB shall include the Shares in a registration statement
under the Securities Act of 1933, as amended, to be filed within 60 days after
the Effective Date. The number of Shares will be determined by using the average
daily trading price for twenty (20) trading days prior to the Confirmation Date.
Sales of the Shares, other than as approved by NWCB or a single "block" sale,
shall be restricted to $250,000 per month.
SECTION 4
OWNERSHIP OF MBC BY NWCB
On the Effective Date, MBC shall deliver to NWCB a certificate representing
100 shares of the common stock of MBC, as reorganized pursuant to the Plan
("Reorganized MBC"), registered in the name of NWCB, which shall represent all
of the authorized, issued, and outstanding common stock of Reorganized MBC.
SECTION 5
REPRESENTATIONS OF MBC
For the purposes of this section MBC means only Manhattan Bagel Company,
Inc. and I&J Bagels, Inc. MBC represents and warrants to NWCB as follows (it
being expressly understood by the parties that, as used in this Section 5, the
phrases "to the best of MBC's knowledge," "to the knowledge of MBC," "to MBC's
knowledge," and other similar phrases shall mean that MBC is making the
particular referenced representation and warranty after a determination of its
accuracy by reasonable investigation and due inquiry). Any exceptions shall be
set forth on a Disclosure Schedule delivered within seven (7) days of the date
hereof, with specific references to the applicable subsection of this Section 5.
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The information set forth on the Disclosure Schedule shall be deemed
confidential information.
5.1 Organization and Status of MBC. MBC is a corporation duly incorporated
and in good standing under the laws of the State of New Jersey. MBC is duly
qualified to do business and is in good standing in every other jurisdiction in
which the property owned, leased or operated by it, or the nature of the
business conducted by it, makes such qualification or licensing necessary.
5.2 No Interests. MBC does not own an interest, or have an investment, in
any other person, other than its subsidiaries or other entities set forth in the
Disclosure Schedule.
5.3 Due Execution. The execution and delivery of this Agreement by MBC and
the consummation by MBC of the transactions contemplated hereby and any
associated agreements signed in connection herewith, have been duly authorized
by all requisite action of the Board of Directors of MBC. Subject to Bankruptcy
Court approval the Agreement constitutes the valid and legally binding
obligations of MBC enforceable against MBC in accordance with its terms.
5.4 No Violation. Other than to the extent MBC requires Bankruptcy Court
approval of provisions hereof and implementation of the Plan, neither the
execution, delivery nor consummation of this Agreement by MBC will, with the
passage of time, the giving of notice, or otherwise, result in a violation or
breach of, or constitute a default under, any term or provision of any law,
rule, regulation, order, decree, judgment, indenture, mortgage, deed of trust,
lease, instrument, contract, agreement or other restriction to which MBC is a
party or to which MBC or its property is subject or bound; nor will it result in
the creation of any lien or other charge or encumbrance on any of the assets of
MBC, nor will it result in an acceleration or termination of any loan or
security agreement or similar agreement or instrument to which MBC is a party or
to which MBC's property is subject.
5.5 Ownership of the Assets. MBC is the true and lawful owner of its assets
and business, free and clear of all claims, liabilities, liens, pledges,
charges, encumbrances and equities of any kind or nature whatsoever other than
as provided in MBC's schedules and statement of financial affairs filed with the
Bankruptcy Court or in the Disclosure Schedule.
5.6 Business Information. The Disclosure Schedule contains a list of each
of the following items, true and correct copies of which have heretofore been
delivered, or will be delivered as soon as practicable after execution hereof,
to NWCB:
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(a) All insurance policies of or for MBC in force on the date hereof.
(b) All oral or written employment, union contracts, pension,
profit-sharing, bonus or retirement plans or other similar arrangements of MBC
which are in force or have otherwise been agreed to, and the names and current
annual salary rates of all persons whose total current salary and compensation
from MBC exceeds Fifty Thousand Dollars ($50,000.00) per annum, together with
the date and amount of the last salary increase awarded to each such person. All
information contained in this section shall be considered confidential and shall
not be revealed without MBC's prior written consent, which shall not be
unreasonably withheld.
(c) All instruments or other documents relating to any indebtedness owed by
or to MBC, and all leases, and conditional sales contracts, chattel mortgages
and other security agreements with respect to personal property used by MBC.
(d) A list of each MBC franchise agreement, including the name and address
of the franchisee, the date of the store opening, and any defaults under the
agreement known to MBC, or alleged by franchisees. Except as set forth in the
Disclosure Schedule, MBC is not in default under any franchise agreement.
(e) A description of each parcel of real property leased or owned by MBC
("Real Property") or as to which MBC has guaranteed the payments.
(f) A description of each Real Property lease and lease guaranty and any
defaults thereunder known to MBC, or alleged by lessors.
(g) A list of the machinery and equipment owned or leased by MBC.
(h) A list of all motor vehicles owned or leased by MBC.
(i) A list of customers of bagel and related products other than the
franchisees of MBC.
(j) A list of the 20 largest suppliers to MBC.
(k) Each state, and the status therein as franchisor, in which MBC
maintains a franchise agreement.
(l) A list of inventory on hand.
(m) A list of each agreement or contract to which MBC is
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a party, unless delivered pursuant to the paragraphs above, having a term of one
year or more or involving the receipt or expenditure of $25,000.00 or more.
5.7 Condition, etc., of Assets. Except as set forth in the Disclosure
Schedule:
(a) The cash on hand on the date prior to July 28, 1998 is not less than
$2,730,000, before the settlement with FUNB.
(b) Except for the Advertising Fund Receivables, the accounts receivable of
MBC set forth in the Disclosure Schedule; net of applicable reserves, are all
due and payable, to the knowledge of MBC, without defense, setoff, or
counterclaim.
(c) The inventory of MBC set forth in the Disclosure Schedule; net of
applicable reserves, is composed of usable and saleable goods and is valued, for
financial statement purposes, at the lower of cost or market.
(d) All of the machinery and equipment of MBC set forth in the Disclosure
Schedule is in good repair and generally usable for the purposes intended, and
to the best of MBC's knowledge, is in compliance with all laws, rules and
regulations.
(e) MBC is the sole and exclusive owner of all intangible property and all
designs, permits, labels and packages used on or in connection therewith used in
the course of its business, and the same are set forth in the Disclosure
Schedule (the "Intangible Property").
(f) The Intangible Property is sufficient to manufacture, market and sell
all of the products heretofore manufactured, marketed or sold by MBC and for the
conduct of its franchise business.
(g) MBC has received no notice of, and MBC has no knowledge of any basis
for, a claim against it that it, or any of MBC's operations, activities,
products or publications infringes on any patent, trademark, trade name,
copyright or other property right of a third party, or that MBC is illegally or
otherwise using the trade secrets, formulae or any property rights of others.
MBC has no disputes with or claims against any third party for infringement by
such third party of any trade name or other Intangible Property. MBC has taken
all steps reasonably necessary to protect MBC's right, title and interest in and
to the Intangible Property.
5.8 No Required Consents or Approvals. No consent or
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approval is required for the execution of this Agreement or, other than to the
extent MBC requires Bankruptcy Court approval of provisions hereof and of the
Plan, the consummation of any of the transactions contemplated hereby under any
law, rule or regulation, or to avoid the violation of, breach of, default under,
or creation of a lien on the assets of MBC pursuant to the terms of, any law,
rule, regulation, order, decree or award of any court or governmental agency or
any lease, contract, mortgage, note or any other instrument to which MBC is
bound or to which it or any of its property is subject.
5.9 Tax Returns and Audits. MBC has accurately prepared, and timely filed,
all income, franchise, sales, and other tax returns and reports of every nature
required to be filed by it and has paid in full all taxes reflected thereon as
due and payable by it. MBC has no knowledge of any unassessed tax deficiency
proposed or threatened against MBC as a result of the operation of its business,
and there is no tax investigation pending. The tax returns of MBC have never
been audited except as set forth in the Disclosure Schedule. MBC is not a party
to any audit, action or proceeding by any governmental authority for assessment
or collection of taxes, nor has any such event, to MBC's knowledge, been
asserted or threatened.
5.10 Compliance with Laws. MBC is not in violation in any material respect
of any law, regulation or ordinance including, without limitation, laws,
regulations or ordinances relating to the conduct of its business. Any
retirement plan maintained by MBC is in full compliance with all applicable
laws.
5.11 Litigation. Except as disclosed in the Disclosure Schedule, (a) MBC is
not a party to any litigation nor is its property affected by any litigation,
(b) MBC is not a party to any governmental proceeding or investigation, (c) none
of the foregoing has been threatened, and (d) to the best of MBC's knowledge, no
facts exist which are likely to result in any of the matters described in (a),
(b) or (c) hereof.
5.12 Conflicts of Interest. Except as disclosed in the Disclosure Schedule,
no officer, director, or other insider (as defined in 11 U.S.C. ss.101) of MBC,
directly or through an entity in which it, he or any relative has an interest of
any description, conducts any business with MBC of any description, including
the sale or lease of property, the provision of services, the lending of funds
or otherwise.
5.13 Financial Statements. The Disclosure Schedule includes a list of all
of the financial information and statements (the "Financial Statements") filed
by MBC with the Bankruptcy Court
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and the Securities and Exchange Commission, including all information concerning
assets, liabilities, revenues and expenses, copies of which have been provided
or, with the Disclosure Schedule, will be provided to NWCB. The Financial
Statements (including the notes thereto, if any): (a) are true and complete in
all material respects, (b) are in accordance with the books and records of MBC,
and (c) present fairly the financial position and results of operations of MBC
as of the dates and for the periods indicated.
5.14 Encumbrances. Except as disclosed in the Disclosure Schedule, MBC owns
outright all the property and assets, real, personal or mixed, tangible or
intangible, reflected in the Financial Statements, subject to no mortgages,
liens, security interests, pledges, charges or other encumbrances of any kind.
5.15 Permits, Licenses and Franchises. MBC has all licenses, corporate
franchises and other authorizations necessary for the conduct of its business in
the manner and in the areas in which such business is presently being conducted,
as listed in the Disclosure Schedule, and all such permits, licenses, corporate
franchises and authorizations are valid and effective. MBC has not taken any
action or failed to take any action which would cause the revocation or
suspension of any such permits, licenses, franchises or authorizations, and no
action or proceeding looking to or contemplating the revocation or suspension of
any thereof is pending or, to MBC's knowledge, threatened.
5.16 Environmental Matters. To the best of MBC's knowledge as to each
parcel of Real Property:
(a) There is no hazardous waste, hazardous or toxic substance, or the
discharge, spillage or other release or filtration of any hazardous waste or
hazardous or toxic substance on, in, about or under the Real Property, or
emanating from or otherwise originating at the Real Property;
(b) There has been no activity carried on or undertaken at the Real
Property in connection with the handling, treatment, removal, storage,
decontamination, clean up, transport or disposal of any hazardous waste or
hazardous or toxic substance at any time located or present on, in, about or
under the Real Property;
(c) There has been no failure by MBC to comply with the terms of any order
or other ruling or decision issued by any Federal, state or municipal government
department or agency having regulatory authority over environmental matters
regarding or concerning the Real Property or regarding or concerning any
activity carried on or undertaken at the Real Property; and
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(d) There has been no lien, claim, assessment or other charge imposed upon
or against the Real Property by any Federal, state or municipal government
department or agency having regulatory authority over environmental matters
pursuant to any statute, regulation or order now in effect.
As used herein, the terms "hazardous waste" and "hazardous or toxic substance"
shall have the same meanings as defined and used in any applicable Federal or
New York State statutes, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.ss. 9601 et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901 et seq.;
the Hazardous Materials Transport action Act, 49 U.S.C. ss.ss. 1801 et seq.; the
Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601 et seq.; and/or the
regulations adopted and publications promulgated pursuant thereto.
5.17 Funding. MBC has sufficient assets to meet the requirements of 11
U.S.C. ss.1129(a)(13).
5.18 Administrative Claims. The (i) administrative claims allowable under
11 U.S.C. ss.507 and (ii) amounts necessary to cure defaults under unexpired
leases or executory contracts to be assumed hereunder or under the plan pursuant
to 11 U.S.C. ss.365 now known by MBC are set forth on the Disclosure Schedule,
and MBC has or will on the Effective Date (without giving effect to the
transactions herein) have sufficient cash to pay in full such cure amounts and
such administrative claims associated with leases or executory contracts to be
assumed as provided herein or designated to be assumed by NWCB no later than 15
days prior to the hearing on confirmation of the Plan (other than those
representing postpetition ordinary trade payables which are to be paid as and
when due by Reorganized MBC).
5.19 No False Statement. No representations or warranties made by MBC in
this Agreement or in any Schedule or Exhibit attached hereto, nor in any
documents delivered to NWCB pursuant hereto, contains any untrue statement of a
material fact, or omits to state a fact necessary to make the statements or
facts contained herein not misleading in any material respect. MBC has herein,
or in other documents delivered in connection herewith, advised NWCB, to the
best of MBC's knowledge, of all material adverse information concerning MBC and
its business.
SECTION 6
REPRESENTATIONS OF NWCB
NWCB represents and warrants to MBC as follows:
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6.1 Organization and Standing. NWCB is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to carry on its business as and where
conducted, and to own or lease, and operate, its properties at and where owned
or leased and operated by it.
6.2 Due Execution. The Agreement has been duly authorized and approved by
the Board of Directors of NWCB, have been executed and delivered by duly
empowered officers of NWCB, and is binding and enforceable against NWCB in
accordance with its terms.
6.3 No Violation. The execution of this Agreement by NWCB and the
consummation of the transactions contemplated thereby do not violate any
indenture, mortgage, deed of trust or other agreement to which NWCB is a party,
or any order or judgment of any court to which NWCB is subject.
6.4 Common Stock. Upon issuance, the Shares will be duly authorized and
validly issued, fully paid and non-assessable.
6.5 Debt Commitment. NWCB has received a financing commitment ("Financing
Commitment") from Dominion Income Management Corp. ("Dominion") a true and
complete copy of which has been previously provided to MBC, in an amount not
less than $8,000,000 which is in full force and effect including payment of all
commitment fees then due and payable. NWCB has investigated Dominion and
believes that Dominion has the ability to perform under the Financing
Commitment.
6.6 Equity Commitment. NWCB has received an equity financing commitment
("Equity Financing Commitment") a copy of which has been previously provided to
MBC, in an amount not less than $2,000,000 which is in full force and effect
including payment of all commitment fees then due and payable.
SECTION 7
NO BROKERS
NWCB, on the one hand, and MBC, on the other hand, represents to the other
that it has not engaged or dealt with any person as a broker in connection with
the transaction contemplated hereby and will indemnify and hold the other party
harmless from and against all costs and expenses related to a breach of this
representation.
SECTION 8
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COVENANTS OF MBC
The covenants and agreements set forth in this section are material
inducements upon which NWCB has relied in executing and delivering this
Agreement. On or before seven (7) days after execution of this Agreement, MBC
shall file with the Bankruptcy Court a motion seeking entry of an order (the
"Approval Order") authorizing and approving sections 8.1, 8.2, 8.3, 8.4, and 8.5
hereof.
8.1 Ordinary Course. From the date hereof through the Effective Date, MBC
(i) shall conduct its operations according to its ordinary and usual course of
business, (ii) shall use its best efforts to maintain and to preserve its
business organization, employees and relationships with suppliers, customers and
others and to promote sales of its products, and (iii) shall fully comply with
all applicable laws, including the Bankruptcy Code.
8.2 Preservation of Business and Financial Condition. From the date hereof
through the Effective Date, except (i) pursuant to existing contracts and
arrangements which have been expressly disclosed to, NWCB, or (ii) with the
prior written consent of NWCB, or (iii) in the ordinary course of business, MBC
shall not:
(a) Incur any obligation or liability, direct or indirect, absolute or
contingent, other than postpetition liabilities incurred in the ordinary course
of business or take any action that has the effect of increasing any secured
claim other than accrual, if any, of amounts allowable under 11 U.S.C. ss.506(b)
and in accordance with Annex A hereto.
(b) Incur any indebtedness for borrowed money; assume, guarantee, endorse
(other than for collection or deposit in the ordinary course of business) or
otherwise as an accommodation become responsible for the obligations of any
other individual, firm, partnership, corporation or other entity, or make any
loans or advances to any individual, firm, partnership, corporation or other
entity.
(c) Mortgage, pledge or otherwise encumber any of its properties or assets.
(d) Sell or transfer any of its properties or assets except in the ordinary
and usual course of its business.
(e) Enter into or terminate any contract or agreement, or make any change
in any of its existing agreements.
(f) Increase the compensation of any of its employees except
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for regularly scheduled pay increases to non-insiders limited to no more than
five (5%) percent (except for increases already required under union or
employment contracts and except for a one-year employment contract with James
O'Connor substantially in accordance with the terms of the proposed O'Connor
Agreement delivered to NWCB this date, pay or agree to pay any pension or
retirement allowance not required by any existing plan or agreement to any such
employees, or commit itself to any employment or union contracts, pension,
profit-sharing, bonus or retirement plans or other similar arrangements with or
for the benefit of any employees or other persons.
(g) Take any action or fail to take any action which shall cause any of its
representations set forth herein to not be true and correct on, and as of, the
Effective Date.
(h) Take any action requiring approval of the Bankruptcy Court involving
the sum of $50,000 or more.
(i) Notwithstanding the foregoing, MBC may (i) settle with FUNB in
accordance with the term sheet annexed hereto, (ii) settle with mechanics lien
claimants in accordance with Exhibit 6.7, and (iii) after written notice to NWCB
make adjustments to its books in accordance with generally accepted accounting
principles and auditing standards, including reserves against or write offs of
assets.
8.3 Other Offers. From the date hereof through the Effective Date, MBC
shall not directly or indirectly, solicit, initiate or encourage submission of
proposals or offers from any person relating to any acquisition or purchase of
all or a material portion of its assets, business or equity. MBC shall promptly
notify NWCB if any such proposal or offer, or any inquiry or contact with any
person with respect thereto, is made.
8.4 Break-up Fee; Expenses. If prior to termination by either MBC or NWCB,
one of the following conditions occurs (i) another offer for all or
substantially all of the assets or stock of MBC is accepted by MBC or Bankruptcy
Court approval thereof is sought by MBC, (ii) a plan of reorganization (or
liquidation) other than the Plan or amendments thereto is proposed by MBC, (iii)
another offer for all or substantially all of the assets or stock of MBC is
closed, or (iv) a plan of reorganization (or liquidation) other than the Plan is
proposed by a person other than MBC, and confirmed, then NWCB, at its election,
may terminate this Agreement and receive, as an allowed administrative claim, a
"break-up" fee in the amount of $500,000 together with its actual
"out-of-pocket" expenses expended in connection with the transactions
contemplated hereby (up to a cap of $250,000), in accordance with section 14.3
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hereof, which shall be paid to NWCB from property other than cash collateral of
secured parties without the need for further Bankruptcy Court order on the first
business day after receipt of written notice of termination issued by NWCB;
provided, that, any funds actually paid to NWCB under this section 8.4 shall be
refunded on the date that NWCB closes a transaction pursuant to which it
acquires or purchases all or substantially all assets or stock of MBC.
8.5 Best Efforts to Close. MBC shall use its best efforts to obtain the
satisfaction of the conditions to closing that it must satisfy under this
Agreement.
8.6 Tax Returns. Subsequent to the date hereof, MBC shall cause true and
correct Federal, state and local income, sales and other required tax returns
relating to the business of MBC, which are required to be filed for all periods,
to be timely filed with the appropriate governmental agencies, accompanied by
payment of all of the taxes due and payable.
8.7 Contracts. Pursuant to the Plan (i) MBC shall assume all franchise
agreements currently in force and in operation, all of which franchise
agreements shall be guaranteed by NWCB and all associated leases of
nonresidential real property, (ii) MBC shall use its best efforts to assign all
such leases to the associated franchisees, and (iii) MBC shall reject, assume or
assume and assign such other executory contracts, leases and master franchise
agreements as designated by NWCB at by the date of approval of the Disclosure
Statement associated with the Plan.
8.8 Inspection. From the date hereof through the Effective Date,
representatives of NWCB, including without limitation its auditors and legal
counsel, shall have the right to visit and inspect all the premises and
properties of MBC during normal business hours, and upon prior notice, to
examine the facilities, books of account, records, reports, leases, contracts
and other documents of MBC and to confer with employees, counsel, accountants
and other professionals. All information obtained by or for NWCB shall be kept
strictly confidential until after the Effective Date. If this Agreement is
terminated as set forth herein, such information shall be returned or kept
confidential for a period of three (3) years from the date of such termination.
Nothing contained in this paragraph shall be construed to require MBC or its
agents to perform any services for NWCB.
8.9 Warrant. On the date hereof, MBC shall execute and deliver a true and
correct copy of a warrant in form and substance acceptable to NWCB and MBC
permitting NWCB to purchase up to 4,000,000 shares of MBC common stock at an
exercise price of $0.01
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per warrant share. NWCB shall not exercise the warrant except upon seven (7)
business days prior notice to the Unsecured Creditors Committee at the address
set forth in section 15.3.
SECTION 9
COVENANT OF NWCB
9.1 Maintain Financing Commitment. NWCB covenants to use its reasonable
best efforts to maintain the Financing Commitment and Equity Financing
Commitment in full force and effect, and to satisfy the lender's requirements
for the funding thereunder.
9.2 Best Efforts to Close. NWCB shall use its best efforts to obtain the
satisfaction of the conditions to closing that it must satisfy under this
Agreement.
SECTION 10
CONDITIONS TO OBLIGATIONS OF NWCB
The obligations of NWCB hereunder are subject to the following conditions,
which may be waived in writing signed by NWCB, in its sole discretion, except
for paragraph 10.2 which may not be waived:
10.1 Approval Order. The Approval Order shall have been entered and shall
have become final and no longer subject to appeal or reconsideration.
10.2 Confirmation Order. The confirmation order shall have been entered.
10.3 Compliance. MBC shall have complied with each of its agreements
contained herein in all material respects, and each of MBC's representations and
warranties contained herein shall be true in all respects on and as of the date
hereof and the Effective Date, and NWCB shall have received a certificate of
MBC, dated the Effective Date, to such effect.
10.4 Grumet Consulting Agreement. Jack Grumet shall have executed and
delivered an consulting agreement (the "Grumet Consulting Agreement") with NWCB
and the other agreements in the form of Exhibit A attached hereto.
10.5 J. Gennusa Employment Agreement. Jason Gennusa shall have executed and
delivered an employment agreement (the "J. Gennusa Employment Agreement") with
NWCB and the other agreements in the form of Exhibit B attached hereto.
10.6 A. Gennusa Employment. Andrew Gennusa shall have
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executed and delivered an employment agreement (the "A. Gennusa Employment
Agreement") with NWCB and the other agreements in the form of Exhibit C attached
hereto.
10.7 Approvals. All consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation or any agreement or
otherwise which must be obtained or satisfied by MBC and which are necessary for
the consummation of the transactions contemplated by this Agreement have been
obtained and satisfied.
10.8 No Adverse Change. There shall have been no material adverse change,
from the date hereof to the Effective Date, in the business, assets, customers,
suppliers, distributors, prospects, or financial condition of MBC.
10.9 Force and Effect. MBC's existing leases, franchise agreements and
other material contracts shall be in force and effect when assumed.
SECTION 11
CONDITIONS TO OBLIGATIONS OF MBC
The obligations of MBC hereunder, other than those set forth in sections
8.1, 8.2, 8.3, 8.4, and 8.5 are subject to the following conditions:
11.1 Confirmation Order. The confirmation order shall have been entered.
11.2 Compliance. NWCB shall have complied with each of its agreements
contained herein in all material respects and each of its representations and
warranties contained herein shall be true in all material respects on and as of
the Effective Date; and MBC shall have received a certificate of NWCB, dated the
Effective Date, to each such effect.
11.3 Other Agreements. NWCB shall have executed and delivered the Grumet
Consulting Agreement, the J. Gennusa Employment Agreement, and the A. Gennusa
Employment Agreement.
SECTION 12
INDEMNIFICATION
12.1 Indemnification. For the purposed hereof, the term "Indemnified
Persons" shall include Jack Grumet, Jason Gennusa, Andrew Gennusa, and Leo
Johnson.
12.2 Subject Claims. For the purposes hereof, the term "Subject Claims"
shall include claims made against the Indemnified
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Persons pursuant to the following:
(a) The consolidated class action entitled "Roger Copland, et al v. Jack
Grumet, et al." filed in the United States District Court, District of New
Jersey, File No. 96-CV-3351.
(b) Claims made for alleged violation of the securities laws, rules and
regulations promulgated under the law of the United States or the laws of any
state, (collectively "Securities Laws") based on acts or omissions of the
Indemnified Persons alleged to have occurred on or prior to the date of the
filing of the bankruptcy petition by MBC.
12.3 Liability Insurance. If a Subject Claim is covered by
officers/directors liability insurance of MBC, a requisite claim shall timely be
made by MBC and the Indemnified Person who is entitled to make such a claim in
respect of the Subject Claim (the result being referred to as "Liability
Insurance Indemnification").
12.4 Indemnification. Subject to the provisions hereof (specifically
including the limitation set forth in section 12.7 hereof) NWCB (the
"Indemnifying Person") shall indemnify and hold harmless the Indemnified Persons
from (i) all liabilities, costs, and expenses in regard to the Subject Claims
described in section 12.2(a) hereof, (ii) all defense costs associated with the
Subject Claims described in section 12.2(b) hereof.
12.5 Claims for Indemnification. Whenever a Subject Claim shall be made,
the Indemnified Person shall promptly notify the Indemnifying Person of the
Subject Claim and, when known, the facts constituting the basis for the Subject
Claim, and the amount or an estimate of the amount of the liability arising
therefrom. The Indemnified Person shall not settle or compromise any Subject
Claim for which he is entitled to indemnification hereunder without the prior
written consent of the Indemnifying Person.
12.6 Defense of Claims. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any Subject Claim or legal
proceeding, the Indemnifying Person at its sole cost and expense may, upon
written notice to the Indemnified Person, assume the defense of such Subject
Claim or legal proceeding. The Indemnified Person shall participate in (but not
control) the defense of any such action, with his counsel and at his own
expense. The Indemnified Person shall promptly and timely cooperate in all
respects with the Indemnifying Person and provide all documents, information and
assistance as may be reasonably requested by the Indemnifying Person.
Notwithstanding anything to the contrary herein, to be entitled to
indemnification hereunder, the Indemnified Person shall use its best efforts to
defend against
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any Subject Claim.
12.7 Limitation. Anything herein to the contrary notwithstanding, NWCB
shall not be required to expend in excess of $1.25 million in the aggregate in
indemnifying Subject Claims identified in Section 12.2(a) hereof or $250,000 in
indemnifying Subject Claims identified in Section 12.2(b) hereof.
12.8 Claim. Each Indemnified Person represents to NWCB that he has made a
claim against MBC for all indemnification rights of such Indemnified Person.
Such claims shall be assigned to, and shall be enforceable by, the Indemnifying
Person which claims shall be expunged on the Effective Date.
12.9 Representation. Each of the Indemnified Persons represents and
warrants that he knows of no claims of the type described in Section 12.2(b) and
knows of no basis on which such claims could reasonably be made.
SECTION 13
PUBLIC ANNOUNCEMENTS
The parties agree that, except as otherwise required by law, any and all
public announcements or other public communications concerning this Agreement
made prior to the Effective Date shall be made by NWCB subject to the reasonable
approval of MBC.
SECTION 14
TERMINATION
14.1 Termination for Cause. This Agreement may be terminated by NWCB if at
any time prior to the Effective Date there shall occur a material breach of any
of the representations, warranties or covenants of MBC or MBC shall fail to
perform any condition or obligation hereunder, and may be terminated by MBC, if
at any time prior to the Effective Date there shall occur a material breach of
any of the representations, warranties or covenants of NWCB or NWCB shall fail
to perform any condition or obligation hereunder, provided that in either case,
the non-defaulting party has given the defaulting party ten (10) days' notice of
such default, and such default has not been cured or the cure thereof has not
commenced within such ten-day period.
14.2 Certain Events. NWCB may terminate this Agreement (i) if the
Disclosure Schedule is not delivered to NWCB and the motion for entry of the
Approval Order is not filed with the Bankruptcy Court on or before seven (7)
days after execution of this Agreement, (ii) the Approval Order has been denied
or has not been entered and become final and not subject to appeal or
reconsideration by
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September 15, 1998, (iii) if the Plan and the associated disclosure statement
has not been filed with the Bankruptcy Court by September 4, 1998, (iv) if the
Plan has been denied or has not been confirmed by order of the Bankruptcy Court
by November 30, 1998, or (v) if any of MBC's chapter 11 cases have been
dismissed or converted to chapter 7 cases. In each of the foregoing events time
is of the essence. MBC may terminate this Agreement (x) if confirmation of the
Plan is denied because of NWCB's noncompliance with 11 U.S.C. ss.1129(a)(11),
(y) if the Plan has not been confirmed by November 30, 1998 because NWCB is
unable to demonstrate compliance with 11 U.S.C. ss.1129(a)(11), or (z) if the
Effective Date has not occurred by the sixtieth (60th) day after entry of the
order confirming the Plan because NWCB is unable to meet its payment obligations
under Section 3 hereof.
14.3 Effect of Termination. If this Agreement terminates because of the
failure to achieve any of the events set forth by the dates specified in
subsections (i), (ii), (iii), (x), (y) or (z) of section 14.2, such termination
notice must be delivered within ten days after the failure of such event to
timely occur, and NWCB will not be entitled to reimbursement of expenses under
this section 14.3. If the Agreement is terminated other than upon a default by
NWCB, NWCB shall receive the Escrow Amount and shall receive, as an allowed
administrative claim, repayment of its out of pocket expenses and employee time
expended in connection with the transactions contemplated hereby (up to a cap of
$250,000). If the Agreement is terminated upon a default by NWCB, MBC shall be
entitled to recover its actual damages, if any, and upon judgment therefor, to
apply the Escrow Amount in payment thereof. Upon such application, all remaining
Escrow Amount, if any, shall be paid to NWCB.
SECTION 15
MISCELLANEOUS
15.1 Expenses. All legal and other costs and expenses incurred in
connection with the negotiation and execution of this Agreement, and the
consummation of the transactions contemplated hereby, shall be paid by the party
incurring such expenses, except as otherwise expressly set forth herein.
15.2 No Assignment. This Agreement shall be binding upon the parties, their
successors and legal representatives. This Agreement shall not be assigned by
any party without the prior written consent of the other party.
15.3 Notices. All notices and other communications hereunder shall be given
in writing and shall be deemed given when delivered personally, when received by
facsimile transmission or on the first
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attempted date of delivery after being mailed by certified or registered mail,
return receipt requested, to the parties at the addresses set forth below or at
such other address for a party as shall be specified by like notice:
If to NWCB, to:
New World Coffee & Bagels, Inc.
379 West Broadway, 4th Floor
New York, New York 10012
Attn: President
With a copy to:
Hollenberg Levin Solomon Ross Belsky & Daniels, LLP
585 Stewart Avenue
Garden City, New York 11530-4732
Attn: Stuart M. Sieger, Esq.
Kasowitz, Benson, Torres & Friedman LLP
1301 Avenue of the Americas
New York, NY 10019
Attn: David S. Rosner, Esq.
If to MBC, to:
Manhattan Bagel Company, Inc., Debtor in Possession
246 Industrial Way West
Eatontown, New Jersey 07724
Attn: Chairman
With a copy to:
Gibbons, Del Deo, Dolan, Griffinger & Vecchione LLP
1 Riverfront Plaza
Newark, New Jersey 07102
Attn: Paul DeFillippo, Esq.
All notices to:
Shanley & Fisher, P.C.
131 Madison Avenue
Morristown, NJ 07962-1974
Attn: Robert Malone, Esq.
15.4 Counterparts. This Agreement may be executed in two or more
counterparts for the convenience of the parties hereto, each of which executed
counterparts shall be deemed an original but all of such executed counterparts
shall be considered one and the same
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Agreement.
15.5 Merger. This Agreement and the Schedules and Exhibits hereto supersede
all prior agreements between the parties, whether written or oral, are intended
as a complete and exclusive statement of the terms of the agreements between the
parties and may not be changed or terminated orally but only in a writing signed
by the parties. The headings and captions contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Nothing in this Agreement, whether express or
implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement. This Agreement has been entered into and
is to be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MANHATTAN BAGEL COMPANY
Debtor in Possession
By /s/ JACK GRUMET
-----------------------------
Jack Grumet, Chairman
NEW WORLD COFFEE & BAGELS, INC.
By /s/ R. RAMIN KAMFAR
-----------------------------
R. Ramin Kamfar, President
SECTION 12 AGREED TO:
/s/ JACK GRUMET
- ---------------------
Jack Grumet
/s/ JASON GENNUSA
- ---------------------
Jason Gennusa
/s/ ANDREW GENNUSA
- ---------------------
Andrew Gennusa
SECTION 2 AGREED TO:
Gibbons Del Deo, Dolan Griffinger & Vecchione LLP
By: /s/ Paul DeFillippo
--------------------
A Member of the Firm
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CONSENTED TO OTHER THAN AS TO SECTION 8.9:
The Official Committee of Unsecured Creditors
of Manhattan Bagel Company, Inc.
By: /s/
---------------------
Its:
------------------
By: /s/
---------------------
Its:
------------------
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EXHIBITS
EXHIBITS
A Grumet Employment Agreement, Stock Purchase and Restrictive
Covenant Agreement, and Stock Option Agreement.
B J. Gennusa Employment Agreement, Stock Purchase and Restrictive
Covenant Agreement, and Stock Option Agreement.
C A. Gennusa Employment Agreement, Stock Purchase and Restrictive
Covenant Agreement, and Stock Option Agreement.
6.7 To be supplied.
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EXHIBIT A
CONSULTING AGREEMENT
AGREEMENT effective as of the ____ day of ____________, 1998, by and
between NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation (hereinafter
referred to as the "Company"), having a place of business at 379 West Broadway,
New York, New York 10012 and JACK GRUMET, residing at 7645 Fenwick Place, Boca
Raton, FL 33496 (hereinafter referred to as the "Consultant").
RECITALS
The Company desires to retain the services of the Consultant, and the
Consultant desires to provide his services, on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties herein, the parties hereto agree as follows:
1. Services of Consultant. The Consultant is hereby engaged as general
advisor and consultant to the Company on all matters pertaining to the business
of the Company and its subsidiaries, and will provide such advice and
consultation as the Company may reasonably request, in each case consistent with
the Consultant's experience and expertise. The Consultant shall not be required
to travel more than 100 miles from the Company's Eatontown, New Jersey facility
without his consent and may consult in person or via telephone or written
report. Consulting under this Agreement shall not materially interfere with
Consultant's other business activities and shall not exceed an amount of time
which is reasonably required for the performance of the Consultant's duties. The
Consultant shall perform his services under this Agreement solely as an
independent contractor and not as an agent or employee of the Company or any
subsidiary of the Company. The Company shall not be responsible for the payment
of any withholding taxes, FICA, workers' compensation, insurance, disability
benefits or any fringe benefits and the Consultant is not entitled to any of the
same. The only compensation and benefits to which the Consultant shall be
entitled hereunder are as set forth in Section 3 and 4 hereof. The Company shall
not be responsible for any injury, loss or damage suffered by Consultant arising
out of the performance of his duties hereunder. In connection with his duties
hereunder, the Consultant shall have no right to bind the Company or any of its
subsidiaries.
2. Term. The term (the "Term") for the services described in Section 1
hereof, except if earlier terminated pursuant to Section 5 hereof, shall be for
a period of two (2) years from the Effective Date as defined in the Acquisition
Agreement between the Company and Manhattan Bagel Co., Inc. dated as of July 28,
1998.
<PAGE>
3. Compensation.
(a) The compensation for the services to be rendered by the Consultant, and
the other agreements of the Consultant hereunder, including without limitation
those set forth in Sections 6, shall be the sum of $100,000.00 per annum
("Annual Fee"), payable in equal monthly installments in advance.
(b) In addition, the Consultant shall be entitled to a performance bonus of
up to fifty (50%) of the Annual Fee as determined by the Board of Directors. The
performance bonus shall be payable at its customary time following the end of
each fiscal year of the Company during the term hereof (pro-rated if services
are rendered during only a part of such fiscal year). The performance bonus
shall be paid if the annual operating budget of the Company, for such fiscal
year has been achieved. The annual operating budget shall be formulated by
management of the Company, subject to approval of the Board of Directors.
(c) It is anticipated that the Consultant shall, during the 18 months from
the date hereof, continue his existing medical insurance under a COBRA election.
The Company shall pay the medical insurance premiums for the Consultant during
such period, and shall reimburse the Consultant thereafter and during the Term
on a monthly basis for medical insurance paid for by the Consultant, up to the
cost of insurance per month under the the COBRA election, unless the Consultant
is then obtaining medical insurance from another person as part of his
employment or consulting activities.
(d) During the Term, the Company shall pay the Consultant an automobile
allowance equal to the Consultant's present automobile rental and insurance cost
4. Expenses. The Consultant shall be entitled to reimbursement for expenses
reasonably incurred by him in the course of his duties hereunder upon his
accounting therefor, provided that no expenses shall be incurred by the
Consultant without the prior approval of the Company.
5. Termination.
(a) The term of this Agreement may be ended prior to the date specified in
Section 2, under the following conditions:
(i) Upon the death of the Consultant;
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(ii) Upon notice to the Consultant, if the Consultant has committed
any act of fraud, embezzlement or misappropriation, which notice shall be
accompanied by the written evidence, or a summary of the other evidence, on
which the Company relied in giving such notice;
(iii) Thirty (30) days after notice to the Consultant of his breach of
his duties hereunder (other than as set forth in (ii) above), unless such
breach is fully remedied before the end of such thirty (30) day period or,
if such breach cannot be remedied within thirty (30) days, unless the
Consultant continues to use his best efforts until such breach is remedied.
(iv) If the Consultant shall be both unavailable for a period of at
least 90 days continuously or a total of 90 days within any 180 day period,
and shall be so mentally or physically incapacitated or disabled as to be
unable to perform his duties hereunder during such period and at the time
of termination.
(b) Upon any termination of this Agreement under Section 6(a), the Company
shall not be obligated to pay any compensation or expenses or provide other
benefits other than those accrued to the date of termination. The Consultant
shall also deliver to the Company all property of the Company which may then be
in the Consultant's possession.
6. Non-Disclosure of Confidential Information. The Consultant acknowledges
that it is the policy of the Company to maintain as secret and confidential all
information relating to its products, services and operations and the identity
of suppliers, franchisees and customers (the "Confidential Information"), and
the Consultant further acknowledges that the Confidential Information is of
substantial value to the Company. Accordingly, the Consultant agrees that he
will not, during or after the termination of this Agreement, disclose or use any
Confidential Information other than in connection with the business of the
Company.
7. Indemnification.
(a) The Consultant covenants and agrees to perform his services in
compliance in all material respects with all applicable laws, rules and
regulations of governmental agencies and in a manner which does not violate the
rights of any third person, and to timely pay all taxes relating to all payments
hereunder. The Consultant shall indemnify and hold harmless the Company from and
against all costs and expenses which the Company may incur, including by way of
example and not limitation, reasonable counsel fees and disbursements, as a
result of the violation by the Consultant
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of his covenants and agreements set forth in this Agreement.
(b) Provided the Consultant has complied with his duties hereunder, the
Company shall indemnify and hold harmless the Consultant from and against all
costs and expenses which the Consultant may incur, including by way of example
and not limitation, reasonable counsel fees and disbursements, as a result of
the rendering of services to the Company in accordance with this Agreement,
excluding the matters covered under Section 3 hereof.
8. General.
(a) Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and shall be deemed given when
delivered to a party or on the first attempted date of delivery after the same
is mailed to a party, certified mail, return receipt requested, to the address
set forth herein or such other address of which notice is given in accordance
herewith.
(b) Representation.
(i) The Consultant represents that he is not bound by any agreement,
court order or other obligation which may relate, directly or indirectly,
to his obligations hereunder.
(ii) The Company represents that the execution, delivery and
performance by the Company of this Agreement has been duly authorized by
all requisite corporate action by the Company and that this Agreement has
been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable in accordance with its
terms.
(c) Modification and Waiver. This Agreement may not be changed or
terminated orally but only in a writing signed by the parties hereto, and no
waiver of a breach of any provision hereof shall be effective unless in writing
signed by the party against whom enforcement is sought. No such waiver shall
operate or be construed as a waiver of any subsequent breach of such provisions.
(d) Applicable Law. This Agreement shall be subject to and governed by the
laws of the State of New York.
(e) Controversies. The parties agree that any legal proceedings hereunder
shall be brought only in the courts of the State of New York or the United
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States of America, sitting in the City, County and State of New York.
(f) Captions. The underlined captions set forth herein are descriptive
only, and shall not be deemed to be a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ [illegible]
--------------------------------
/s/ Jack Grumet
-----------------------------------
JACK GRUMET, Individually
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STOCK PURCHASE
AND
RESTRICTIVE COVENANT
AGREEMENT
July 28, 1998
To the Investor named on the
Investor Signature Page attached hereto
Dear Sir:
The undersigned, NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation
(the "Company"), hereby agrees with the person named on an Investor Signature
Page attached hereto (the "Investor") as follows:
SECTION 1. Issuance of the Subject Shares. Subject to the terms and
conditions hereof, the Company has authorized the issuance and sale at the
Closing (as hereinafter defined) of the number of shares of Common Stock, par
value $.001 per share (the "Subject Shares") set forth on the Investor Signature
Page, for sale at a price of $0.01 per share. Such sale is also expressly in
consideration of the covenants of the Investor set forth in Section 10 and
Section 11 of this Agreement. The Investor acknowledges that there is
substantial consideration for such covenants, and that the performance of the
same is material to this Agreement.
SECTION 2. Agreement to Sell and Purchase the Subject Shares. At the
Closing, the Company shall sell to the Investor, and the Investor shall purchase
from the Company, upon the terms and conditions hereinafter set forth, the
Subject Shares subscribed for by the Investor. Payment shall be made in cash at
such time.
SECTION 3. Delivery of the Subject Shares The closing (the "Closing")
hereunder with respect to the Subject Shares shall take place at the offices of
the Company, simultaneously with the commencement of the employment or
consultancy of the Investor by the Company. At the Closing the Company shall
issue to the Investor a certificate for the Subject Shares subscribed for by the
Investor. The certificate shall bear a restrictive legend in accordance with
applicable law and a stop transfer order in accordance with such legend shall be
placed against transfer of the Subject Shares
1
<PAGE>
represented thereby.
SECTION 4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor as follows:
4.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and as proposed to be conducted and
to carry out the transactions contemplated hereby.
4.2 Compliance. The Company (a) has complied, and in carrying out its
contemplated business will be in compliance, in all material respects, with all
Federal, state, local and foreign laws, ordinances, regulations and orders
applicable to it, its business or the ownership of its assets, and (b) will
obtain all Federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business.
4.3 Authorization of this Agreement. The execution, delivery and
performance by the Company of this Agreement, and the issuance and delivery of
the Subject Shares being subscribed for have been duly authorized by all
requisite corporate action by the Company; and this Agreement been duly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement and the issuance, sale and delivery of the
Subject Shares being purchased, and compliance with the provisions hereof by the
Company will not (a) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to the Company or
any of its properties or assets or (b) conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration under), or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company under, the Certificate of Incorporation or By-laws of the Company
(in each case as amended to the date hereof), or any note, indenture, mortgage,
lease agreement or other contract, agreement or instrument to which the Company
is a party or by which it or any of its property is bound or affected.
4.4 Use of Proceeds. The net proceeds received by the Company from the sale
of the Subject Shares shall be used by the Company for general working capital
purposes.
4.5 No Governmental Consent or Approval Required. Except for any filings
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under Regulation D of the General Rules and Regulations under the Securities Act
of 1933 (the "Securities Act") and the filing of any notice subsequent to the
Closing that may be required under applicable Federal and/or state securities
laws, no consent, approval or authorization of, or declaration to, or of or
filing with, any governmental or regulatory authority is required for the valid
authorization, execution and delivery by the Company of this Agreement or for
the valid authorization, issuance, sale and delivery of the Subject Shares, or,
if so required, has been duly and effectively obtained or made.
4.6 Brokers. The Company has not, nor have any of its officers, directors
or employees, employed any broker or finder in connection with the transactions
contemplated by this Agreement.
SECTION 5. Representations and Warranties of the Investors.
5.1 Investment. The Investor, represents and warrants to the Company that
the Investor is acquiring the Subject Shares, for his own account, for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act.
5.2 No Registration. The Investor understands that the Subject Shares have
not been registered under the Securities Act by reason of their issuance by the
Company in a transaction exempt from the registration requirements of the
Securities Act; and that the Subject Shares must be held by the Investor
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
5.3 Rule 144. The Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to the
Investors) issued under the Securities Act depends on the satisfaction of
various conditions and that, if applicable, Rule 144 affords the basis for sales
only in limited amounts.
5.4 [Omitted]
5.5 Due Authorization. The Investor represents and warrants to the Company
that this Agreement has been duly executed and delivered by the Investor and
constitutes the valid and binding obligations of the Investor, enforceable in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity).
5.6 No Transfer. The Investor represents and warrants to the Company that
it or he will not transfer any of the Subject Shares except in compliance with
the provisions of this Agreement.
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5.7 Accredited Investor. The Investor is an Accredited Investor as such
term is defined in the Rules and Regulations under the Securities Act.
5.8 Information. The Investor acknowledges that the Company has provided
such information has the Investor has requested.
SECTION 6. Conditions Precedent to Closing by the Investors on the Date
Hereof. The obligations of the Investor to purchase and pay for the Subject
Shares are subject to the following conditions precedent, any of which may be
waived by the Investor:
6.1 Corporate Proceedings; Consents, Etc. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be satisfactory in
form and substance to the Investor, who shall have received all such originals
or certified or other copies of such documents as he may reasonably request.
6.2 Accuracy of Representations and Warranties. All representations and
warranties of the Company contained herein shall be true and correct in all
material respects on and as of the date hereof.
SECTION 7. Registration Rights. The Company, at the request of the holders
of at least two thirds of the Subject Shares (the "Group Subject Shares") sold
under this Agreement and two similar agreements of even date herewith, made on
or after one year from the date of sale of the Subject Shares, shall file a
registration statement including the Group Subject Shares on one(l) occasion
only. The Company shall pay all expenses in connection with the registration
statements, except that the Investor shall pay his own selling commissions and
discounts. The Company shall, at the time of such registration(s), enter into a
customary registration rights agreement with the Investor relating to, among
other matters, indemnity and payment of expenses, etc.
SECTION 8. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender to the Company of certificates representing the Subject Shares, the
Company at its expense will issue in exchange therefor, and deliver to the
holder thereof, a new certificate or certificates, in such denomination or
denominations as may be requested by such holder. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
or any certificate representing any Subject Shares and in case of any such loss,
theft or destruction, upon delivery of an indemnity agreement satisfactory to
the Company, or in case of any such mutilation, upon surrender and cancellation
of such certificate, the Company at its expense will issue and deliver to the
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holder thereof a new certificate of like tenor, in lieu of such lost, stolen,
destroyed or mutilated instrument.
SECTION 9. Survival of Representations, Warranties and Agreements; etc. All
representations and warranties hereunder shall survive the Closing until the
third anniversary of the date hereof All statements contained in any certificate
or other instrument delivered by the Company pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement either at or
prior to the Closing, shall constitute representations and warranties by the
Company under this Agreement. All agreements contained herein shall survive
indefinitely until, by their respective terms they are no longer operative.
SECTION 10. Non-Solicitation. The Investor agrees that for a period of two
(2) years after termination of his employment or consultancy with the Company,
for any reason, he will not (a) solicit a business relationship with persons who
are franchisees or customers of the Company on the date of termination which is
directly or indirectly competitive with the business relationship of the Company
with such persons (i.e.; a business which features coffee and/or bagels), and
(b) solicit the services of persons who are employees of the Company on the date
of termination, or who were employed by the Company at any time within the
period of 180 days prior to such termination, except for employees of the
Company who were terminated by the Company.
SECTION 11. Non-Competition. The Investor agrees that for a period of two
(2) years after the termination of the Investor's employment or consultancy with
the Company, for any reason, he will not, directly or indirectly, within 50
miles of any location operated by the Company or a franchisee, conduct or have
an interest in, or consult for or have any other relationship with any business
competitive with the business engaged in by the Company or such franchisee
(i.e.; a business which features coffee and/or bagels). The parties hereto agree
that the duration and geographic scope of the non-competition provision set
forth in this Section 11 are reasonable. In the event that any court determines
that the duration or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the parties hereto agree that
the provision shall remain in full force and effect for the greatest time period
and in the greatest area that would not render it unenforceable. The parties
intend that this non-competition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. The parties agree that damages are an inadequate
remedy for any breach of Sections 10 and 11 and that the Company shall, whether
or not it is pursuing any potential remedies at law, be entitled to equitable
relief in the form of preliminary and permanent injunctions without bond or
other security upon
5
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any actual or threatened breach of such provisions.
SECTION 12. Resale of Stock. In the event that the Investor voluntarily
resigns his employment or consultancy with the Company, as distinct from his
death or disability (a "resignation"), during the periods described below, he
shall be required to resell certain Subject Shares to the Company at his cost
therefor, as set forth herein, and the Company shall repurchase the same on such
terms, and a legend shall be placed on the certificates representing the Subject
Shares to the following effect: The shares represented hereby are subject, in
whole or in part, to sale to and repurchase by the Company, pursuant to the
terms of a Stock Purchase and Restrictive Covenant Agreement dated [the date
thereof. If the Resignation occurs within twelve (12) months from the date of
the sale of the Subject Shares, all of the Subject Shares shall be sold and
repurchased as set forth above, and if the Resignation occurs after twelve (12)
months and before the end of eighteen (18) months from the date of the sale of
the Subject Shares, one half (1/2) of the Subject Shares shall be sold and
repurchased as set forth above.
SECTION 13 Successors and Assigns. This Agreement shall be binding upon the
parties, their successors, legal representatives and assigns.
SECTION 14. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto or in connection with the
transactions contemplated hereby which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 15. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor listing all parties:
(i) If to the Company, to:
New World Coffee & Bagels, Inc.
379 West Broadway, 4th Floor
New York, New York 10012
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(ii) If to the Investor, to his address set forth as the Investor
Signature Page attached hereto.
All such notices, advices and communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery and
(b) in the case of mailing, on the third business day following the date of such
mailing.
SECTION 16. This Agreement may be executed in counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one Agreement.
SECTION 17. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 18. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 19. Governing Law. This Agreement shall be governed by and
construed in accordance with, (a) the laws of the State of New York applicable
to contracts made and to be performed wholly therein, and (b) the laws of the
State of Delaware applicable to corporations organized under the laws of such
State.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first written above.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ [ILLEGIBLE]
---------------------------------
Authorized Signature
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<PAGE>
INVESTOR SIGNATURE PAGE
NAME/ADDRESS/EIN
Jack Grumet
Name
Address
7645 FENWICK PLACE
City
BOCA RATON FL 33496
EIN/SS
###-##-####
/s/ Jack Grumet
-----------------------------------
JACK GRUMET
NUMBER OF SUBJECT SHARES
PURCHASED 240,000
PURCHASE PRICE $2,400.00
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<PAGE>
NEW WORLD COFFEE & BAGELS, INC.
STOCK OPTION AGREEMENT
Jack Grumet
7645 Fenwick Place
Boca Raton, FL 33496
I. NOTICE OF OPTION GRANT
Jack Grumet ("Optionee") has been granted an option ("Option") to purchase
common stock of the Company, subject to the terms and conditions of this Option
Agreement, as follows:
Vesting Commencement Date Effective Date
Exercise Price per Share 1.656
Number of Shares Granted 250,000
Term Expiration Date: Five Years after the Effective Date
Vesting Schedule:
This Option may be exercised, in whole or in part, following the Vesting
Commencement Date.
II. DEFINITIONS
As used in this Option Agreement, the following definitions shall apply:
(a) "Administrator" means the Board of Directors or any if its Committees
appointed to administer this Option Agreement, which shall be done in
accordance with Rule 16b-3 of the Securities Exchange Act of 1934.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee designated by the Board to administer
the Option Agreement, which Committee shall be constituted in
accordance with Rule 16b-3, and continue to serve its designated
capacity until otherwise directed by the Board.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means New World Coffee & Bagels, Inc., a Delaware
corporation.
<PAGE>
(g) "Consultant" means any person, including an advisor, who is engaged by
the Company or any Parent or Subsidiary to render services and is
compensated for such services.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case
of: (i) any leave of absence approved by the Company, including sick
leave, military leave, or (ii) transfers between locations of the
Company or between the Company, its Parent, it Subsidiaries or its
successor.
(i) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "Effective Date" means the date as defined in the Acquisition
Agreement between the Company and Manhattan Bagel Company, Inc.
(k) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Optionee" means an Employee or Consultant who received an Option.
(n) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(0 of the Code.
III. AGREEMENT
1. Grant of Option. New World Coffee & Bagels, Inc., a Delaware corporation
(the "Company"), hereby grants to the Optionee the Option to purchase a total
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
"Exercise Price") subject to the terms, definitions and provisions set forth
herein. This Option Agreement shall become effective upon the Effective Date.
2. Exercise of Option. This Option shall be exercisable during its term in
accordance with the Exercise Schedule set out in the Notice of Grant as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a share.
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(b) In no event may this Option be exercised after the date of
expiration of the term of this option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election
to exercise the Option, the number of Shares in respect of which the option
is being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of this
Agreement.
Such written notice shall be signed by the Optionee and shall be delivered
in person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option shall
be deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his Investment Representation Statement in
the form attached hereto as Exhibit B.
4 Method of Payment. Payment of the Exercise Price shall be by any of the
following or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of Common Stock options of the Company which have a
fair market value on the date of surrender equal to the Exercise Price of
the Shares as to which the Option is being exercised; or
(iv) surrender of other shares of Common stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a fair market value on the date of
surrender equal to the Exercise Price of the Shares as to which the Option
is being exercised; or
(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect and
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<PAGE>
(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect and exercise the Option and delivery to the Company
of the sale proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon which exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates "For Cause", Optionee shall
forfeit, as of the date of such termination (the "Termination Date"), all rights
under this Option Agreement, including any rights to exercise any and all
Options whether vested or not. "For Cause" shall mean termination by the Company
of Optionee's employment by the Company by reason of Optionee's fraud,
embezzlement, or misappropriation, notice of which shall be accompanied by the
written evidence, or a summary of the other evidence, on which the Company
relied in giving such notice.
7. Non-transferability of Option. This Option may not be transferred in any
manner otherwise than by will or trust or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option. Death of Optionee shall not vitiate
terms of this Agreement
9. Increase in Total Number of Shares Granted. The period from the date
hereof to the third anniversary of such date is referred to as the Subject
Period. Unless, during the Subject Period, the Market Price, as defined below,
of the Common Stock, as presently constituted, closes in excess of $9.656 per
share of Common Stock for a minimum of five days, an additional Number Of Shares
Granted, not to exceed 125,000 additional shares, shall, on one occasion only,
be added to the terms of this Agreement as follows:
Additional Option Shares = (A-(B- 1.656))/A multiplied by C, where
A = $8.00 (per share, adjusted for combinations, splits and
reorganizations)
B = The average of the five highest closing prices during the Subject
Period
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C = The number of Option Shares stated in this Agreement
The closing price for a day shall be the last reported sale price or, in case no
such reported sale took place on such day, the average of the last reported bid
and asked prices, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") on such day, or if, on any day in
question, the Common Stock shall not be quoted on the NASDAQ, then such price
shall be equal to the last reported bid and asked prices on such day as reported
by any similar reputable quotation and reporting service.
NEW WORLD COFFEE & BAGELS, INC.
a Delaware corporation
By: /s/ [illegible]
----------------------------
Title:
-------------------------
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN
THE COMPANY'S STOCK OPTION PLAN, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of this Option and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof Optionee has reviewed
this Option in its entirety, has had an opportunity to obtain the advise of
counsel prior to executing this Option and fully understands all provisions of
the Option.
Dated: 7/28/98 Optionee: /s/ Jack Grumet
----------------------------
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<PAGE>
EXHIBIT A
EXERCISE NOTICE
New World Coffee & Bagels, Inc.
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, _____________ ,l9__ the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_______________ shares of the Common Stock (the "Shares") of New World Coffee &
Bagels, Inc., (the "Company") under and pursuant to the Optionee's Stock Option
Agreement ("Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and agrees to abide by and be
bound by its terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the optioned Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised.
4. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS
ARE BINDING ON TRANSFEREES OF THESE SHARES.
<PAGE>
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer
on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
5. Successors and Assigns. The Company will assign its rights, but shall
remain liable hereunder, under this Agreement to single or multiple assignees,
and this Agreement shall inure to the benefit of the successors and assigns of
the Company, in connection with the sale of all or substantially all of its
assets. Subject to the restrictions on transfer hereunder set forth, this
Agreement shall be binding upon optionee and his or her heirs, executors,
administrators, successors and assigns.
6. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
7. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
8. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement
9. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
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<PAGE>
10. Entire Agreement. The Notice of Grant/Option Agreement is incorporated
herein by reference. This Agreement, the Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof and is governed by state
law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
New World Coffee & Bagels Inc.
By:
---------------------------------
Title:
- ---------------------------------- ------------------------------
Address: Address:
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: NEW WORLD COFFEE & BAGELS, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for Investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection Optionee understands
that in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statues, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee understands that the certificate evidencing
the securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under applicable state securities laws.
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act; which, in substance permit limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited broker's transactions or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(c), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than one year, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, Optionee shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period following the effective date of a registration statement of
the Company filed under the 1933 Act; provided, however, that such restriction
shall only apply to the first registration statement of the Company to become
effective under the 1933 Act which include securities to be sold on behalf of
the Company to the public in an underwritten public offering under the 1933 Act.
The Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
rules 144 or 701 will
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<PAGE>
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk, Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
-----------------------------------
Date:
------------------------------
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<PAGE>
EXHIBIT B
EMPLOYMENT AGREEMENT
AGREEMENT made as of the ____ day of ____________, 1998, by and between NEW
WORLD COFFEE & BAGELS, INC., a Delaware corporation (hereinafter referred to as
the "Company"), having a place of business at 379 West Broadway, New York, New
York 10012 and JASON GENNUSA, residing at 15 McCampbell Road, Holmdel, NJ 07733
(hereinafter referred to as the "Employee").
WITNESSETH:
In consideration of the mutual covenants herein contained, the parties
hereto agree as follows.
1. Employment. The Company hereby agrees to employ the Employee, and the
Employee hereby agrees to accept such employment, subject to the terms and
conditions hereinafter set forth. The Employee shall be elected a Vice-President
of the Company.
2. Term. The term of the Employee's employment hereunder, except if earlier
terminated pursuant to Paragraph 6 hereof, shall be for a period of two (2)
years from the Effective Date as defined in the Acquisition Agreement between
the Company and Manhattan Bagel Co., Inc. dated as of July 28, 1998. The term
shall then continue from year to year thereafter unless either party gives
notice to the contrary to the other party not less than 90 days prior to the
commencement of any such one year extension period.
3. Duties.
(a) During the continuance of this Agreement, the Employee agrees to
devote his attention, full time and best efforts to the rendition of his
services hereunder, which shall include such executive responsibilities as
may be assigned to him from time to time by the President of the Company.
Subject to the control of the Board of Directors, the Employee shall
perform such executive duties as are assigned by the President of the
Company. The Employee will be based at the Company's Eatontown, New Jersey
facility.
(b) The Employee shall be entitled to make personal investments,
provided that none of the same are directly or indirectly competitive with
the business of the Company and further provided that any such activities
do not detract from the services due from the Employee hereunder. Purchases
of up to 2% of the stock of publicly traded companies shall not be
restricted.
4. Compensation. In consideration of all of the services to be rendered by
the Employee hereunder, the Employee shall be paid, and he agrees to accept
compensation as follows:
<PAGE>
(a) Compensation at an annual rate of One Hundred Thirty Two Thousand
Five Hundred Dollars ($132,500.00), payable bi-weekly less applicable
withholding taxes, subject to such increases, if any, as may be approved by
the Board of Directors of the Company (the rate per annum which is in
effect from time to time being referred to herein as the "Base Salary" of
the Employee). The Base Salary shall be increased, on each anniversary of
the term, by multiplying the Base Salary by a fraction, the numerator of
which is the consumer price index, all items, New York metropolitan area,
or a successor index (the "Index"), published by the United States
Department of Commerce for the month prior to such anniversary, and the
denominator of which is the Index published for the month preceding the
commencement of the term.
(b) With respect to each fiscal year of the Company, (i) a performance
bonus of up to twenty five (25%) percent of the Employee's Base Salary, as
determined by the Board of Directors, if the annual operating budget of the
Company for such fiscal year have been achieved; and (ii) a performance
bonus of up to twenty five (25%) percent of the Employee's Base Salary, as
determined by the Board of Directors, if the budget for operation for which
the Employee is responsible for such fiscal year have been achieved. Each
performance bonus shall be payable at its customary time following the end
of each fiscal year of the Company during the term hereof (pro-rated if
services are rendered during only a part of such fiscal year). The annual
operating budget and operations budget shall be formulated by management of
the Company, subject to approval of the Board of Directors.
(c) Such stock option grants as are determined by the Compensation
Committee of the Board of Directors.
(d) During the Term, an automobile allowance equal to the Employee's
present automobile rental and insurance cost..
(e) Three (3) weeks of paid vacation during each year of the Term.
5. Benefits.
(a) The Employee shall be entitled to such benefits as may be made
available by the Company to its executives, including sick leave, medical
and life insurance.
(b) Except as hereinafter provided in Paragraph 6 hereof, the Company
shall pay the Employee, for any period during which he is unable fully to
perform his duties because of physical or mental disability or incapacity,
an amount equal to the
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<PAGE>
compensation due him for such period less the aggregate amount of all
income disability benefits which he may receive or to which he may be
entitled under or by reason of (i) any group health or accident insurance
plan of the Company; (ii) any applicable compulsory State disability law;
(iii) the Federal Social Security Act; and (iv) any applicable workmen's
compensation law or similar law.
(c) The Employee shall be entitled to reimbursement for expenses
reasonably and necessarily incurred by him in the course of his duties,
upon accounting therefor.
(d) The Employee shall be entitled to indemnification as provided by
the By-Laws of the Company and applicable law, and shall also be covered by
existing officer/director liability insurance.
6. Termination.
(a) The term of this Agreement may be ended prior to the date
specified in Paragraph 2, under the following conditions:
(i) Upon the death of the Employee.
(ii) Upon notice to the Employee, if the Employee has committed
any act of fraud, embezzlement or misappropriation.
(iii) Thirty (30) days after notice to the Employee of his breach
of his duties hereunder (other than as set forth in (ii) above),
unless such breach is fully remedied before the end of such thirty
(30) day period or, if such breach cannot be remedied within thirty
(30) days, unless the Employee continues to use his best efforts to
cure the same until such breach is remedied.
(iv) If the Employee shall be both absent for a period of at
least 90 days continuously or a total of 90 days within any 180 day
period, and shall be so mentally or physically incapacitated or
disabled as to be unable to perform his duties hereunder during such
period and at the time of termination.
(b) Upon any termination of this Agreement under Paragraph 6(a), the
Company shall not be obligated to pay any compensation or expenses or
provide other benefits other than those accrued to the date of termination,
and the Employee shall cease
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<PAGE>
to hold all positions in the Company, and such termination shall constitute
a voluntary resignation by the Employee of each office and directorship
then held by him, and the Employee shall, if requested and if able, deliver
to the Company confirmatory written resignations. The Employee shall also
deliver to the Company all property of the Company which may then be in the
Employee's possession.
7. Non-Disclosure of Confidential Information. The Employee acknowledges
that it is the policy of the Company to maintain as secret and confidential all
information relating to its products, services and operations and the identity
of suppliers, franchisees and customers (the "Confidential Information"), and
the Employee further acknowledges that the Confidential Information is of
substantial value to the Company. Accordingly, the Employee agrees that he will
not, during or after the termination of this Agreement, disclose or use any
Confidential Information other than in connection with the business of the
Company. There shall be excepted herefrom any information that the Employee had
relating to the business of the Company before he became employed by Manhattan
Bagel Company, Inc., as specifically set forth on Attachment A hereto and signed
by the parties.
8. Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and shall be deemed given when
delivered to a party or five business days after the same is mailed to a party,
certified mail, return receipt requested, to the addresses set forth herein or
such other address of which notice is given in accordance herewith.
9. Modification and Waiver. This Agreement may not be changed or terminated
orally but only in a writing signed by the parties hereto, and no waiver of a
breach of any provision hereof shall be effective unless in writing signed by
the party against whom enforcement is sought. No such waiver shall operate or be
construed as a waiver of any subsequent breach of such provisions.
10. Applicable Law. This Agreement shall be subject to and governed by the
laws of the State of New York.
11. Remedies. The Company, in addition to any other remedy or remedies to
which it may be entitled, shall be entitled to obtain injunctive relief against
any breach or threatened breach by the Employee of the provisions of Section 7
and 8 hereof. In the event of a dispute hereunder, the party prevailing shall be
entitled to recover its reasonable expenses, including counsel fees, from the
party not prevailing.
12. Representation of Employee. The Employee hereby represents and warrants
that the Employee is not bound by any contract, agreement, court order or
decision which
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<PAGE>
conflicts in any manner with the duties to be performed by the Employee
hereunder or which would limit, in any respect, the right of the Employee to use
any of the Employee's knowledge or experience in the performance of the
Employee's duties hereunder.
13. Representation of the Company. The execution, delivery and performance
by the Company of this Agreement has been duly authorized by all requisite
corporate action by the Company and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms.
14. Captions. The underlined captions set forth herein are descriptive
only, and shall not be deemed to be a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ ILLEGIBLE
-------------------------------
Authorized Signature
/s/ JASON GENNUSA
-----------------------------------
JASON GENNUSA, Individually
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<PAGE>
ATTACHMENT A
PRIOR INFORMATION
NEW WORLD COFFEE & BAGELS, INC.
By /s/ ILLEGIBLE
-------------------------------
Authorized Signature
/s/ JASON GENNUSA
-----------------------------------
JASON GENNUSA, Individually
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<PAGE>
STOCK PURCHASE
AND
RESTRICTIVE COVENANT
AGREEMENT
July 28, 1998
To the Investor named on the
Investor Signature Page attached hereto
Dear Sir:
The undersigned, NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation
(the "Company"), hereby agrees with the person named on an Investor Signature
Page attached hereto (the "Investor") as follows:
SECTION 1. Issuance of the Subject Shares. Subject to the terms and
conditions hereof, the Company has authorized the issuance and sale at the
Closing (as hereinafter defined) of the number of shares of Common Stock, par
value $.001 per share (the "Subject Shares") set forth on the Investor Signature
Page, for sale at a price of $0.01 per share. Such sale is also expressly in
consideration of the covenants of the Investor set forth in Section 10 and
Section 11 of this Agreement. The Investor acknowledges that there is
substantial consideration for such covenants, and that the performance of the
same is material to this Agreement.
SECTION 2. Agreement to Sell and Purchase the Subject Shares. At the
Closing, the Company shall sell to the Investor, and the Investor shall purchase
from the Company, upon the terms and conditions hereinafter set forth, the
Subject Shares subscribed for by the Investor. Payment shall be made in cash at
such time.
SECTION 3. Delivery of the Subject Shares The closing (the "Closing")
hereunder with respect to the Subject Shares shall take place at the offices of
the Company, simultaneously with the commencement of the employment or
consultancy of the Investor by the Company. At the Closing the Company shall
issue to the Investor a certificate for the Subject Shares subscribed for by the
Investor. The certificate shall bear a restrictive legend in accordance with
applicable law and a stop transfer order in accordance with such legend shall be
placed against transfer of the Subject Shares
1
<PAGE>
represented thereby.
SECTION 4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor as follows:
4.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and as proposed to be conducted and
to carry out the transactions contemplated hereby.
4.2 Compliance. The Company (a) has complied, and in carrying out its
contemplated business will be in compliance, in all material respects, with all
Federal, state, local and foreign laws, ordinances, regulations and orders
applicable to it, its business or the ownership of its assets, and (b) will
obtain all Federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business.
4.3 Authorization of this Agreement. The execution, delivery and
performance by the Company of this Agreement, and the issuance and delivery of
the Subject Shares being subscribed for have been duly authorized by all
requisite corporate action by the Company; and this Agreement been duly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement and the issuance, sale and delivery of the
Subject Shares being purchased, and compliance with the provisions hereof by the
Company will not (a) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to the Company or
any of its properties or assets or (b) conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration under), or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company under, the Certificate of Incorporation or By-laws of the Company
(in which case as amended to the date hereof), or any note, indenture, mortgage,
lease agreement or other contract, agreement or instrument to which the Company
is a party or by which it or any of its property is bound or affected.
4.4 Use of Proceeds. The net proceeds received by the Company from the sale
of the Subject Shares shall be used by the Company for general working capital
purposes.
4.5 No Governmental Consent or Approval Required. Except for any filings
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<PAGE>
under Regulation D of the General Rules and Regulations under the Securities Act
of 1933 (the "Securities Act") and the filing of any notice subsequent to the
Closing that may be required under applicable Federal and/or state securities
laws, no consent, approval or authorization of, or declaration to, or of or
filing with, any governmental or regulatory authority is required for the valid
authorization, execution and delivery by the Company of this Agreement or for
the valid authorization, issuance, sale and delivery of the Subject Shares, or,
if so required, has been duly and effectively obtained or made.
4.6 Brokers. The Company has not, nor have any of its officers, directors
or employees, employed any broker or finder in connection with the transactions
contemplated by this Agreement.
SECTION 5. Representations and Warranties of the Investors.
5.1 Investment. The Investor, represents and warrants to the Company that
the Investor is acquiring the Subject Shares, for his own account, for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act.
5.2 No Registration. The Investor understands that the Subject Shares have
not been registered under the Securities Act by reason of their issuance by the
Company in a transaction exempt from the registration requirements of the
Securities Act; and that the Subject Shares must be held by the Investor
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
5.3 Rule 144. The Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to the
Investors) issued under the Securities Act depends on the satisfaction of
various conditions and that, if applicable, Rule 144 affords the basis for sales
only in limited amounts.
5.4 [Omitted]
5.5 Due Authorization. The Investor represents and warrants to the Company
that this Agreement has been duly executed and delivered by the Investor and
constitutes the valid and binding obligations of the Investor, enforceable in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity).
5.6 No Transfer. The Investor represents and warrants to the Company that
it or he will not transfer any of the Subject Shares except in compliance with
the provisions of this Agreement.
3
<PAGE>
5.7 Accredited Investor. The Investor is an Accredited Investor as such
term is defined in the Rules and Regulations under the Securities Act.
5.8 Information. The Investor acknowledges that the Company has provided
such information has the Investor has requested.
SECTION 6. Conditions Precedent to Closing by the Investors on the Date
Hereof. The obligations of the Investor to purchase and pay for the Subject
Shares are subject to the following conditions precedent, any of which may be
waived by the Investor:
6.1 Corporate Proceedings; Consents. Etc. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be satisfactory in
form and substance to the Investor, who shall have received all such originals
or certified or other copies of such documents as he may reasonably request.
6.2 Accuracy of Representations and Warranties. All representations and
warranties of the Company contained herein shall be true and correct in all
material respects on and as of the date hereof.
SECTION 7. Registration Rights. The Company, at the request of the holders
of at least two thirds of the Subject Shares (the "Group Subject Shares") sold
under this Agreement and two similar agreements of even date herewith, made on
or after one year from the date of sale of the Subject Shares, shall file a
registration statement including the Group Subject Shares on one(l) occasion
only. The Company shall pay all expenses in connection with the registration
statements, except that the Investor shall pay his own selling commissions and
discounts. The Company shall, at the time of such registration(s), enter into a
customary registration rights agreement with the Investor relating to, among
other matters, indemnity and payment of expenses, etc.
SECTION 8. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender to the Company of certificates representing the Subject Shares, the
Company at its expense will issue in exchange therefor, and deliver to the
holder thereof, a new certificate or certificates, in such denomination or
denominations as may be requested by such holder. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
or any certificate representing any Subject Shares and in case of any such loss,
theft or destruction, upon delivery of an indemnity agreement satisfactory to
the Company, or in case of any such mutilation, upon surrender and cancellation
of such certificate, the Company at its expense will issue and deliver to the
4
<PAGE>
holder thereof a new certificate of like tenor, in lieu of such lost, stolen,
destroyed or mutilated instrument.
SECTION 9. Survival of Representations, Warranties and Agreements; etc. All
representations and warranties hereunder shall survive the Closing until the
third anniversary of the date hereof. All statements contained in any
certificate or other instrument delivered by the Company pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement
either at or prior to the Closing, shall constitute representations and
warranties by the Company under this Agreement. All agreements contained herein
shall survive indefinitely until, by their respective terms they are no longer
operative.
SECTION 10. Non-Solicitation. The Investor agrees that for a period of two
(2) years after termination of his employment or consultancy with the Company,
for any reason, he will not (a) solicit a business relationship with persons who
are franchisees or customers of the Company on the date of termination which is
directly or indirectly competitive with the business relationship of the Company
with such persons (i.e.; a business which features coffee and/or bagels), and
(b) solicit the services of persons who are employees of the Company on the date
of termination, or who were employed by the Company at any time within the
period of 180 days prior to such termination, except for employees of the
Company who were terminated by the Company.
SECTION 11. Non-Competition. The Investor agrees that for a period of two
(2) years after the termination of the Investor's employment or consultancy with
the Company, for any reason, he will not, directly or indirectly, within 50
miles of any location operated by the Company or a franchisee, conduct or have
an interest in, or consult for or have any other relationship with any business
competitive with the business engaged in by the Company or such franchisee
(i.e.; a business which features coffee and/or bagels). The parties hereto agree
that the duration and geographic scope of the non-competition provision set
forth in this Section 11 are reasonable. In the event that any court determines
that the duration or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the parties hereto agree that
the provision shall remain in full force and effect for the greatest time period
and in the greatest area that would not render it unenforceable. The parties
intend that this non-competition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. The parties agree that damages are an inadequate
remedy for any breach of Sections 10 and 11 and that the Company shall, whether
or not it is pursuing any potential remedies at law, be entitled to equitable
relief in the form of preliminary and permanent injunctions without bond or
other security upon
5
<PAGE>
any actual or threatened breach of such provisions.
SECTION 12. Resale of Stock. In the event that the Investor voluntarily
resigns his employment or consultancy with the Company, as distinct from his
death or disability (a "Resignation"), during the periods described below, he
shall be required to resell certain Subject Shares to the Company at his cost
therefor, as set forth herein, and the Company shall repurchase the same on such
terms, and a legend shall be placed on the certificates representing the Subject
Shares to the following effect: The shares represented hereby are subject, in
whole or in part, to sale to and repurchase by the Company, pursuant to the
terms of a Stock Purchase and Restrictive Covenant Agreement dated [the date
thereof]. If the Resignation occurs within twelve (12) months from the date of
the sale of the Subject Shares, all of the Subject Shares shall be sold and
repurchased as set forth above, and if the Resignation occurs after twelve (12)
months and before the end of eighteen (18) months from the date of the sale of
the Subject Shares, one half (1/2) of the Subject Shares shall be sold and
repurchased as set forth above.
SECTION 13. Successors and Assigns. This Agreement shall be binding upon
the parties, their successors, legal representatives and assigns.
SECTION 14. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto or in connection on with the
transactions contemplated hereby which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 15. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor listing all parties:
(i) If to the Company, to:
New World Coffee & Bagels, Inc.
379 West Broadway, 4th Floor
New York, New York 10012
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<PAGE>
(ii) If to the Investor, to his address set forth as the Investor Signature
Page attached hereto.
All such notices, advices and communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery and
(b) in the case of mailing, on the third business day following the date of such
mailing.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one Agreement.
SECTION 17. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 18. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 19. Governing Law. This Agreement shall be governed by and
construed in accordance with, (a) the laws of the State of New York applicable
to contracts made and to be performed wholly therein, and (b) the laws of the
State of Delaware applicable to corporations organized under the laws of such
State.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first written above.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ ILLEGIBLE
--------------------------
Authorized Signature
7
<PAGE>
INVESTOR SIGNATURE PAGE
NAME/ADDRESS/EIN
Jason Gennusa
Name
15 McCampbell Rd
Address
Holmdel, NJ
City
###-##-####
EIN/SS
/s/ JASON GENNUSA
---------------------------
JASON GENNUSA
NUMBER OF SUBJECT SHARES
PURCHASED 280,000
PURCHASE PRICE $2,800.00
8
<PAGE>
NEW WORLD COFFEE & BAGELS, INC.
STOCK OPTION AGREEMENT
Jason Gennusa
15 McCampbell Road
Holmdel, NJ 07733
I. NOTICE OF OPTION GRANT
Jason Gennusa ("Optionee") has been granted an option ("Option") to purchase
common stock of the Company, subject to the terms and conditions of this Option
Agreement, as follows:
Vesting Commencement Date Effective Date
Exercise Price per Share 1.656
Number of Shares Granted 250,000
Term Expiration Date: Five Years after the Effective Date
Vesting Schedule:
This Option may be exercised, in whole or in part, following the Vesting
Commencement Date.
II. DEFINITIONS
As used in this Option Agreement, the following definitions shall apply:
(a) "Administrator" means the Board of Directors or any if its Committees
appointed to administer this Option Agreement, which shall be done in
accordance with Rule 16b-3 of the Securities Exchange Act of 1934.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee designated by the Board to administer
the Option Agreement, which Committee shall be constituted in
accordance with Rule 16b-3, and continue to serve its designated
capacity until otherwise directed by the Board.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means New World Coffee & Bagels. Inc., a Delaware
corporation.
<PAGE>
(g) "Consultant" means any person, including an advisor, who is engaged by
the Company or any Parent or Subsidiary to render services and is
compensated for such services.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case
of: (i) any leave of absence approved by the Company, including sick
leave, military leave, or (ii) transfers between locations of the
Company or between the Company, its Parent, it Subsidiaries or its
successor.
(i) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "Effective Date" means the date as defined in the Acquisition
Agreement between the Company and Manhattan Bagel Company, Inc.
(k) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Optionee" means an Employee or Consultant who received an Option.
(n) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
III. AGREEMENT
1. Grant of Option. New World Coffee & Bagels, Inc., a Delaware corporation
(the "Company"), hereby grants to the Optionee the Option to purchase a total
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
"Exercise Price") subject to the terms, definitions and provisions set forth
herein. This Option Agreement shall become effective upon the Effective Date.
2. Exercise of Option. This Option shall be exercisable during its term in
accordance with the Exercise Schedule set out in the Notice of Grant as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a share.
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<PAGE>
(b) In no event may this Option be exercised after the date of
expiration of the term of this option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election
to exercise the Option, the number of Shares in respect of which the option
is being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of this
Agreement.
Such written notice shall be signed by the Optionee and shall be delivered
in person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option shall
be deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Method of Payment. Payment of the Exercise Price shall be by any of the
following or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of Common Stock options of the Company which have a
fair market value on the daze of surrender equal to the Exercise Price of
the Shares as to which the Option is being exercised; or
(iv) surrender of other shares of Common stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a fair market value on the date of
surrender equal to the Exercise Price of the Shares as to which the Option
is being exercised; or
(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable
shall require to effect and
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<PAGE>
(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect and exercise the Option and delivery to the Company
of the sale proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon which exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates "For Cause", Optionee shall
forfeit, as of the date of such termination (the "Termination Date"), all rights
under this Option Agreement, including any rights to exercise any and all
Options whether vested or not "For Cause" shall mean termination by the Company
of Optionee's employment by the Company by reason of Optionee's fraud,
embezzlement, or misappropriation, notice of which shall be accompanied by the
written evidence, or a summary of the other evidence, on which the Company
relied in giving such notice.
7. Non-transferability of Option. This Option may not be transferred in any
manner otherwise than by will or trust or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option. Death of Optionee shall not vitiate
terms of this Agreement.
9. Increase in Total Number of Shares Granted. The period from the date
hereof to the third anniversary of such date is referred to as the Subject
Period. Unless, during the Subject Period, the Market Price, as defined below,
of the Common Stock, as presently constituted, closes in excess of $9.656 per
share of Common Stock for a minimum of five days, an additional Number Of Shares
Granted, not to exceed 125,000 additional shares, shall, on one occasion only,
be added to the terms of this Agreement as follows:
Additional Option Shares = (A-(B-1.656))/A multiplied by C, where
A = $8.00 (per share, adjusted for combinations, splits and
reorganizations)
B = The average of the five highest closing prices during the Subject
Period
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<PAGE>
C = The number of Option Shares stated in this Agreement
The closing price for a day shall be the last reported sale price or, in case no
such reported sale took place on such day, the average of the last reported bid
and asked prices, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") on such day, or if, on any day in
question, the Common Stock shall not be quoted on the NASDAQ, then such price
shall be equal to the last reported bid and asked prices on such day as reported
by any similar reputable quotation and reporting service.
NEW WORLD COFFEE & BAGELS, INC.
a Delaware corporation
By: /s/ [illegible]
----------------------------
Title: CFO
------------------------
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR [N
THE COMPANY'S STOCK OPTION PLAN, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of this Option and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
this Option in its entirety, has had an opportunity to obtain the advise of
counsel prior to executing this Option and fully understands all provisions of
the Option.
Dated: 7/28/98 Optionee: /s/ [illegible]
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<PAGE>
EXHIBIT A
EXERCISE NOTICE
New World Coffee & Bagels, Inc.
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ______________, 19__ the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
________________ shares of the Common Stock (the "Shares") of New World Coffee &
Bagels, Inc., (the "Company") under and pursuant to the Optionee's Stock Option
Agreement ("Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and agrees to abide by and be
bound by its terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the optioned Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised.
4. Restrictive Le2ends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS
ARE BINDING ON TRANSFEREES OF THESE SHARES.
<PAGE>
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer
on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
5. Successors and Assigns. The Company will assign its rights, but shall
remain liable hereunder, under this Agreement to single or multiple assignees,
and this Agreement shall inure to the benefit of the successors and assigns of
the Company, in connection with the sale of all or substantially all of its
assets. Subject to the restrictions on transfer hereunder set forth, this
Agreement shall be binding upon optionee and his or her heirs, executors,
administrators, successors and assigns.
6. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the Sate of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
7. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
8. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement
9. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
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<PAGE>
10. Entire Agreement. The Notice of Grant/Option Agreement is incorporated
herein by reference. This Agreement, the Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof and is governed by state
law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
New World Coffee & Bagels, Inc.
By:
---------------------------------
Title:
- ----------------------------------- -----------------------------
Address: Address:
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
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<PAGE>
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: NEW WORLD COFFEE & BAGELS, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for Investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection Optionee understands
that in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statues, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee understands that the certificate evidencing
the securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under applicable state securities laws.
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act; which, in substance permit limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited broker's transactions or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(c), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than one year, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, Optionee shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period following the effective date of a registration statement of
the Company filed under the 1933 Act; provided, however, that such restriction
shall only apply to the first registration statement of the Company to become
effective under the 1933 Act which include securities to be sold on behalf of
the Company to the public in an underwritten public offering under the 1933 Act.
The Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
rules 144 or 701 will
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<PAGE>
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk, Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
-----------------------------------
Date:
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<PAGE>
EXHIBIT C
EMPLOYMENT AGREEMENT
AGREEMENT made as of the ____ day of ____________, 1998, by and between NEW
WORLD COFFEE & BAGELS, INC., a Delaware corporation (hereinafter referred to as
the "Company"), having a place of business at 379 West Broadway, New York, New
York 10012 and ANDREW GENNUSA, residing at 70 Middletown Road, Holmdel, NJ 07733
(hereinafter referred to as the "Employee").
WITNESSETH:
In consideration of the mutual covenants herein contained, the parties
hereto agree as follows.
1. Employment. The Company hereby agrees to employ the Employee, and the
Employee hereby agrees to accept such employment, subject to the terms and
conditions hereinafter set forth. The Employee shall be elected a Vice-President
of the Company.
2. Term. The term of the Employee's employment hereunder, except if earlier
terminated pursuant to Paragraph 6 hereof, shall be for a period of two (2)
years from the Effective Date as defined in the Acquisition Agreement between
the Company and Manhattan Bagel Co., Inc. dated as of July 28, 1998. The term
shall then continue from year to year thereafter unless either party gives
notice to the contrary to the other party not less than 90 days prior to the
commencement of any such one year extension period.
3. Duties.
(a) During the continuance of this Agreement, the Employee agrees to devote
his attention, full time and best efforts to the rendition of his services
hereunder, which shall include such executive responsibilities as may be
assigned to him from time to time by the President of the Company. Subject to
the control of the Board of Directors, the Employee shall perform such executive
duties as are assigned by the President of the Company. The Employee will be
based at the Company's Eatontown, New Jersey facility.
(b) The Employee shall be entitled to make personal investments, provided
that none of the same are directly or indirectly competitive with the business
of the Company and further provided that any such activities do not detract from
the services due from the Employee hereunder. Purchases of up to 2% of the stock
of publicly traded companies shall not be restricted.
4. Compensation. In consideration of all of the services to be rendered by
the Employee hereunder, the Employee shall be paid, and he agrees to accept
compensation as follows:
<PAGE>
(a) Compensation at an annual rate of One Hundred Thirty Two Thousand Five
Hundred Dollars ($132,500.00), payable bi-weekly less applicable withholding
taxes, subject to such increases, if any, as may be approved by the Board of
Directors of the Company (the rate per annum which is in effect from time to
time being referred to herein as the "Base Salary" of the Employee). The Base
Salary shall be increased, on each anniversary of the term, by multiplying the
Base Salary by a fraction, the numerator of which is the consumer price index,
all items, New York metropolitan area, or a successor index (the "Index"),
published by the United States Department of Commerce for the month prior to
such anniversary, and the denominator of which is the Index published for the
month preceding the commencement of the term.
(b) With respect to each fiscal year of the Company, (i) a performance
bonus of up to twenty five (25%) percent of the Employee's Base Salary, as
determined by the Board of Directors, if the annual operating budget of the
Company for such fiscal year have been achieved; and (ii) a performance bonus of
up to twenty five (25%) percent of the Employee's Base Salary, as determined by
the Board of Directors, if the budget for operation for which the Employee is
responsible for such fiscal year have been achieved. Each performance bonus
shall be payable at its customary time following the end of each fiscal year of
the Company during the term hereof (pro-rated if services are rendered during
only a part of such fiscal year). The annual operating budget and operations
budget shall be formulated by management of the Company, subject to approval of
the Board of Directors.
(c) Such stock option grants as are determined by the Compensation
Committee of the Board of Directors.
(d) During the Term, an automobile allowance equal to the Employee's
present automobile rental and insurance cost.
(e) Three (3) weeks of paid vacation during each year of the Term.
5. Benefits.
(a) The Employee shall be entitled to such benefits as may be made
available by the Company to its executives, including sick leave, medical and
life insurance.
(b) Except as hereinafter provided in Paragraph 6 hereof, the Company shall
pay the Employee, for any period during which he is unable fully to perform his
duties because of physical or mental disability or incapacity, an amount equal
to the
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<PAGE>
compensation due him for such period less the aggregate amount of all income
disability benefits which he may receive or to which he may be entitled under or
by reason of (i) any group health or accident insurance plan of the Company;
(ii) any applicable compulsory State disability law; (iii) the Federal Social
Security Act; and (iv) any applicable workmen's compensation law or similar law.
(c) The Employee shall be entitled to reimbursement for expenses reasonably
and necessarily incurred by him in the course of his duties, upon accounting
therefor.
(d) The Employee shall be entitled to indemnification as provided by the
By-Laws of the Company and applicable law, and shall also be covered by existing
officer/director liability insurance.
6. Termination.
(a) The term of this Agreement may be ended prior to the date specified in
Paragraph 2, under the following conditions:
(i) Upon the death of the Employee.
(ii) Upon notice to the Employee, if the Employee has committed any
act of fraud, embezzlement or misappropriation.
(iii) Thirty (30) days after notice to the Employee of his breach of
his duties hereunder (other than as set forth in (ii) above), unless such
breach is fully remedied before the end of such thirty (30) day period or,
if such breach cannot be remedied within thirty (30) days, unless the
Employee continues to use his best efforts to cure the same until such
breach is remedied.
(iv) If the Employee shall be both absent for a period of at least 90
days continuously or a total of 90 days within any 180 day period, and
shall be so mentally or physically incapacitated or disabled as to be
unable to perform his duties hereunder during such period and at the time
of termination.
(b) Upon any termination of this Agreement under Paragraph 6(a), the
Company shall not be obligated to pay any compensation or expenses or provide
other benefits other than those accrued to the date of termination, and the
Employee shall cease
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<PAGE>
to hold all positions in the Company, and such termination shall constitute a
voluntary resignation by the Employee of each office and directorship then held
by him, and the Employee shall, if requested and if able, deliver to the Company
confirmatory written resignations. The Employee shall also deliver to the
Company all property of the Company which may then be in the Employee's
possession.
7. Non-Disclosure of Confidential Information. The Employee acknowledges
that it is the policy of the Company to maintain as secret and confidential all
information relating to its products, services and operations and the identity
of suppliers, franchisees and customers (the "Confidential Information"), and
the Employee further acknowledges that the Confidential Information is of
substantial value to the Company. Accordingly, the Employee agrees that he will
not, during or after the termination of this Agreement, disclose or use any
Confidential Information other than in connection with the business of the
Company. There shall be excepted herefrom any information that the Employee had
relating to the business of the Company before he became employed by Manhattan
Bagel Company, Inc., as specifically set forth on Attachment A hereto and signed
by the parties.
8. Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and shall be deemed given when
delivered to a party or five business days after the same is mailed to a party,
certified mail, return receipt requested, to the addresses set forth herein or
such other address of which notice is given in accordance herewith.
9. Modification and Waiver. This Agreement may not be changed or terminated
orally but only in a writing signed by the parties hereto, and no waiver of a
breach of any provision hereof shall be effective unless in writing signed by
the party against whom enforcement is sought. No such waiver shall operate or be
construed as a waiver of any subsequent breach of such provisions.
10. Applicable Law. This Agreement shall be subject to and governed by the
laws of the State of New York.
11. Remedies. The Company, in addition to any other remedy or remedies to
which it may be entitled, shall be entitled to obtain injunctive relief against
any breach or threatened breach by the Employee of the provisions of Section 7
and 8 hereof. In the event of a dispute hereunder, the party prevailing shall be
entitled to recover its reasonable expenses, including counsel fees, from the
party not prevailing.
12. Representation of Employee. The Employee hereby represents and warrants
that the Employee is not bound by any contract, agreement, court order or
decision which
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<PAGE>
conflicts in any manner with the duties to be performed by the Employee
hereunder or which would limit, in any respect, the right of the Employee to use
any of the Employee's knowledge or experience in the performance of the
Employee's duties hereunder.
13. Representation of the Company. The execution, delivery and performance
by the Company of this Agreement has been duly authorized by all requisite
corporate action by the Company and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms.
14. Captions. The underlined captions set forth herein are descriptive
only, and shall not be deemed to be a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ [illegible]
-----------------------------------
Authorized Signature
/s/ Andrew Gennusa
-------------------------------------
ANDREW GENNUSA, Individually
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<PAGE>
ATTACHMENT A
PRIOR INFORMATION
NEW WORLD COFFEE & BAGELS, INC.
By
----------------------------------
Authorized Signature
------------------------------------
ANDREW GENNUSA, Individually
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<PAGE>
STOCK PURCHASE
AND
RESTRICTIVE COVENANT
AGREEMENT
July 28, 1998
To the Investor named on the
Investor Signature Page attached hereto
Dear Sir:
The undersigned, NEW WORLD COFFEE & BAGELS, INC., a Delaware corporation
(the "Company"), hereby agrees with the person named on an Investor Signature
Page attached hereto (the "Investor") as follows:
SECTION 1. Issuance of the Subject Shares. Subject to the terms and
conditions hereof, the Company has authorized the issuance and sale at the
Closing (as hereinafter defined) of the number of shares of Common Stock, par
value $.001 per share (the "Subject-Shares") set forth on the Investor Signature
Page, for sale at a price of $0.01 per share. Such sale is also expressly in
consideration of the covenants of the Investor set forth in Section 10 and
Section 11 of this Agreement. The Investor acknowledges that there is
substantial consideration for such covenants, and that the performance of the
same is material to this Agreement.
SECTION 2. Agreement to Sell and Purchase the Subject Shares. At the
Closing, the Company shall sell to the Investor, and the Investor shall purchase
from the Company, upon the terms and conditions hereinafter set forth, the
Subject Shares subscribed for by the Investor. Payment shall be made in cash at
such time.
SECTION 3. Delivery of the Subject Shares The closing (the "Closing")
hereunder with respect to the Subject Shares shall take place at the offices of
the Company, simultaneously with the commencement of the employment or
consultancy of the Investor by the Company. At the Closing the Company shall
issue to the Investor a certificate for the Subject Shares subscribed for by the
Investor. The certificate shall bear a restrictive legend in accordance with
applicable law and a stop transfer order in accordance with such legend shall be
placed against transfer of the Subject Shares
1
<PAGE>
represented thereby.
SECTION 4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor as follows:
4.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and as proposed to be conducted and
to carry out the transactions contemplated hereby.
4.2 Compliance. The Company (a) has complied, and in carrying out its
contemplated business will be in compliance, in all material respects, with all
Federal, state, local and foreign laws, ordinances, regulations and orders
applicable to it, its business or the ownership of its assets, and (b) will
obtain all Federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business.
4.3 Authorization of this Agreement. The execution, delivery and
performance by the Company of this Agreement, and the issuance and delivery of
the Subject Shares being subscribed for have been duly authorized by all
requisite corporate action by the Company; and this Agreement been duly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement and the issuance, sale and delivery of the
Subject Shares being purchased, and compliance with the provisions hereof by the
Company will not (a) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to the Company or
any of its properties or assets or (b) conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration under), or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company under, the Certificate of Incorporation or By-laws of the Company
(in each case as amended to the date hereof), or any note, indenture, mortgage,
lease agreement or other contract, agreement or instrument to which the Company
is a party or by which it or any of its property is bound or affected.
4.4 Use of Proceeds. The net proceeds received by the Company from the sale
of the Subject Shares shall be used by the Company for general working capital
purposes.
4.5 No Governmental Consent or Approval Required. Except for any filings
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under Regulation D of the General Rules and Regulations under the Securities Act
of 1933 (the "Securities Act") and the filing of any notice subsequent to the
Closing that may be required under applicable Federal and/or state securities
laws, no consent, approval or authorization of, or declaration to, or of or
filing with, any governmental or regulatory authority is required for the valid
authorization, execution and delivery by the Company of this Agreement or for
the valid authorization, issuance, sale and delivery of the Subject Shares, or,
if so required, has been duly and effectively obtained or made.
4.6 Brokers. The Company has not, nor have any of its officers, directors
or employees, employed any broker or finder in connection with the transactions
contemplated by this Agreement.
SECTION 5. Representations and Warranties of the Investors.
5.1 Investment. The Investor, represents and warrants to the Company that
the Investor is acquiring the Subject Shares, for his own account, for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act.
5.2 No Registration. The Investor understands that the Subject Shares have
not been registered under the Securities Act by reason of their issuance by the
Company in a transaction exempt from the registration requirements of the
Securities Act; and that the Subject Shares must be held by the Investor
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
5.3 Rule 144. The Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to the
Investors) issued under the Securities Act depends on the satisfaction of
various conditions and that, if applicable, Rule 144 affords the basis for sales
only in limited amounts.
5.4 [Omitted]
5.5 Due Authorization. The Investor represents and warrants to the Company
that this Agreement has been duly executed and delivered by the Investor and
constitutes the valid and binding obligations of the Investor, enforceable in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity).
5.6 No Transfer. The Investor represents and warrants to the Company that
it or he will not transfer any of the Subject Shares except in compliance with
the provisions of this Agreement.
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5.7 Accredited Investor. The Investor is an Accredited Investor as such
term is defined in the Rules and Regulations under the Securities Act.
5.8 Information. The Investor acknowledges that the Company has provided
such information has the Investor has requested.
SECTION 6. Conditions Precedent to Closing by the Investors on the Date
Hereof. The obligations of the Investor to purchase and pay for the Subject
Shares are subject to the following conditions precedent, any of which may be
waived by the Investor:
6.1 Corporate Proceedings; Consents, Etc. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be satisfactory in
form and substance to the Investor, who shall have received all such originals
or certified or other copies of such documents as he may reasonably request.
6.2 Accuracy of Representations and Warranties. All representations and
warranties of the Company contained herein shall be true and correct in all
material respects on and as of the date hereof.
SECTION 7. Registration Rights. The Company, at the request of the holders
of at least two thirds of the Subject Shares (the "Group Subject Shares") sold
under this Agreement and two similar agreements of even date herewith, made on
or after one year from the date of sale of the Subject Shares, shall file a
registration statement including the Group Subject Shares on one( 1) occasion
only. The Company shall pay all expenses in connection with the registration
statements, except that the Investor shall pay his own selling commissions and
discounts. The Company shall, at the rime of such registration(s), enter into a
customary registration rights agreement with the Investor relating to, among
other matters, indemnity and payment of expenses, etc.
SECTION 8. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender to the Company of certificates representing the Subject Shares, the
Company at its expense will issue in exchange therefor, and deliver to the
holder thereof, a new certificate or certificates, in such denomination or
denominations as may be requested by such holder. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
or any certificate representing any Subject Shares and in case of any such loss,
theft or destruction, upon delivery of an indemnity agreement satisfactory to
the Company, or in case of any such mutilation, upon surrender and cancellation
of such certificate, the Company at its expense will issue and deliver to the
4
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holder thereof a new certificate of like tenor, in lieu of such lost, stolen,
destroyed or mutilated instrument.
SECTION 9. Survival of Representations, Warranties and Agreements; etc. All
representations and warranties hereunder shall survive the Closing until the
third anniversary of the date hereof All statements contained in any certificate
or other instrument delivered by the Company pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement either at or
prior to the Closing, shall constitute representations and warranties by the
Company under this Agreement. All agreements contained herein shall survive
indefinitely until, by their respective terms they are no longer operative.
SECTION 10. Non-Solicitation. The Investor agrees that for a period of two
(2) years after termination of his employment or consultancy with the Company,
for any reason, he will not (a) solicit a business relationship with persons who
are franchisees or customers of the Company on the date of termination which is
directly or indirectly competitive with the business relationship of the Company
with such persons (i.e.; a business which features coffee and/or bagels), and
(b) solicit the services of persons who are employees of the Company on the date
of termination, or who were employed by the Company at any time within the
period of 180 days prior to such termination, except for employees of the
Company who were terminated by the Company.
SECTION 11. Non-Competition. The Investor agrees that for a period of two
(2) years after the termination of the Investor's employment or consultancy with
the Company, for any reason, he will not, directly or indirectly, within 50
miles of any location operated by the Company or a franchisee, conduct or have
an interest in, or consult for or have any other relationship with any business
competitive with the business engaged in by the Company or such franchisee
(i.e.; a business which features coffee and/or bagels). The parties hereto agree
that the duration and geographic scope of the non-competition provision set
forth in this Section 11 are reasonable. In the event that any court determines
that the duration or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the parties hereto agree that
the provision shall remain in full force and effect for the greatest time period
and in the greatest area that would not render it unenforceable. The parties
intend that this non-competition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. The parties agree that damages are an inadequate
remedy for any breach of Sections 10 and 11 and that the Company shall, whether
or not it is pursuing any potential remedies at law, be entitled to equitable
relief in the form of preliminary and permanent injunctions without bond or
other security upon
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any actual or threatened breach of such provisions.
SECTION 12. Resale of Stock. In the event that the Investor voluntarily
resigns his employment or consultancy with the Company, as distinct from his
death or disability (a "Resignation"), during the periods described below, he
shall be required to resell certain Subject Shares to the Company at his cost
therefor, as set forth herein, and the Company shall repurchase the same on such
terms, and a legend shall be placed on the certificates representing the Subject
Shares to the following effect: The shares represented hereby are subject, in
whole or in part, to sale to and repurchase by the Company, pursuant to the
terms of a Stock Purchase and Restrictive Covenant Agreement dated [the date
thereof]. If the Resignation occurs within twelve (12) months from the date of
the sale of the Subject Shares, all of the Subject Shares shall be sold and
repurchased as set forth above.
SECTION 13 Successors and Assigns. This Agreement shall be binding upon the
panics, their successors, legal representatives and assigns.
SECTION 14. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto or in connection with the
transactions contemplated hereby which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 15. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor listing all parties:
(i) If to the Company, to:
New World Coffee & Bagels, Inc.
379 West Broadway, 4th Floor
New York, New York 100 12
Attn: President
(ii) If to the Investor, to his address set forth as the Investor Signature
Page
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attached hereto.
All such notices, advices and communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery and
(b) in the case of mailing, on the third business day following the date of such
mailing.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one Agreement.
SECTION 17. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 18. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 19. Governing Law. This Agreement shall be governed by and
construed in accordance with, (a) the laws of the State of New York applicable
to contracts made and to be performed wholly therein, and (b) the laws of the
State of Delaware applicable to corporations organized under the laws of such
State.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first written above.
NEW WORLD COFFEE & BAGELS, INC.
By /s/ [illegible]
-----------------------------
Authorized Signature
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<PAGE>
INVESTOR SIGNATURE PAGE
NAME/ADDRESS/EIN
Andrew Gennusa
Name
Address
70 Middletown Rd.
City
Holmdel NJ 07733
EIN/SS
135-68-411
/s/ Andrew Gennusa
-----------------------------------
ANDREW GENNUSA
NUMBER OF SUBJECT SHARES
PURCHASED 280,000
PURCHASE PRICE $2,800.00
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<PAGE>
NEW WORLD COFFEE & BAGELS, [NC.
STOCK OPTION AGREEMENT
Andrew Gennusa
70 Middletwon Road
Holmdel, NJ 07733
I. NOTICE OF OPTION GRANT
Andrew Gennusa ("Optionee") has been granted an option ("Option") to purchase
common stock of the Company, subject to the terms and conditions of this Option
Agreement, as follows:
Vesting Commencement Date Effective Date
Exercise Price per Share 1.656
Number of Shares Granted 250,000
Term Expiration Date: Five Years after the Effective Date
Vesting Schedule:
This Option may be exercised, in whole or in part, following the
Vesting Commencement Date.
II. DEFINITIONS
As used in this Option Agreement, the following definitions shall apply:
(a) "Administrator" means the Board of Directors or any if its Committees
appointed to administer this Option Agreement, which shall be done in
accordance with Rule 16b-3 of the Securities Exchange Act of 1934.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee designated by the Board to administer
the Option Agreement, which Committee shall be constituted in
accordance with Rule 1 6b-3, and continue to serve its designated
capacity until otherwise directed by the Board.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means New World Coffee & Bagels, Inc., a Delaware
corporation.
<PAGE>
(g) "Consultant" means any person, including an advisor, who is engaged by
the Company or any Parent or Subsidiary to render services and is
compensated for such services.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case
of: (i) any leave of absence approved by the Company, including sick
leave, military leave, or (ii) transfers between locations of the
Company or between the Company, its Parent, it Subsidiaries or its
successor.
(i) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "Effective Date" means the date as defined in the Acquisition
Agreement between the Company and Manhattan Bagel Company, Inc.
(k) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company.
(1) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Optionee" means an Employee or Consultant who received an Option.
(n) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(0 of the Code.
III. AGREEMENT
1. Grant of Option. New World Coffee & Bagels, Inc., a Delaware corporation
(the "Company"), hereby grants to the Optionee the Option to purchase a total
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
"Exercise Price") subject to the terms, definitions and provisions set forth
herein. This Option Agreement~ shall become effective upon the Effective Date.
2. Exercise of Option. This Option shall be exercisable during its term in
accordance with the Exercise Schedule set out in the Notice of Grant as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a share.
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(b) In no event may this Option be exercised after the date of
expiration of the term of this option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election
to exercise the Option, the number of Shares in respect of which the option
is being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of this
Agreement.
Such written notice shall be signed by the Optionee and shall be delivered
in person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option shall
be deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Method of Payment. Payment of the Exercise Price shall be by any of the
following or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of Common Stock options of the Company which have a
fair market value on the date of surrender equal to the Exercise Price of
the Shares as- to which the Option is being exercised; or
(iv) surrender of other shares of Common stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a fair market value on the date of
surrender equal to the Exercise Price of the Shares as to which the Option
is being exercised; or
(v) delivery of a properly executed exercise notice together' with
such other documentation as the Administrator and the broker, if
applicable, shall require to effect and
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<PAGE>
(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect and exercise the Option and delivery to the Company
of the sale proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon which exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates "For Cause", Optionee shall
forfeit, as of the date of such termination (the "Termination Date"), all rights
under this Option Agreement, including any rights to exercise any and all
Options whether vested or not. "For Cause" shall mean termination by the Company
of Optionee's employment by the Company by reason of Optionee's fraud,
embezzlement, or misappropriation, notice of which shall be accompanied by the
written evidence, or a summary of the other evidence, on which the Company
relied in giving such notice.
7. Non-transferability of Option. This Option may not be transferred in any
manner otherwise than by will or trust or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option. Death of Optionee shall not vitiate
terms of this Agreement.
9. Increase in Total Number of Shares Granted. The period from the date
hereof to the third anniversary of such date is referred to as the Subject
Period. Unless, during the Subject Period, the Market Price, as defined below,
of the Common Stock, as presently constituted, closes in excess of $9.656 per
share of Common Stock for a minimum of five days, an additional Number Of Shares
Granted, not to exceed 125,000 additional shares, shall, on one occasion only,
be added to the terms of this Agreement as follows:
Additional Option Shares = (A-(B-1.656))/A multiplied by C, where
A=$8.00 (per share, adjusted for combinations, splits and reorganizations)
B=The average of the five highest closing prices during the Subject Period
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C=The number of Option Shares stated in this Agreement
The closing price for a day shall be the last reported sale price or, in case no
such reported sale took place on such day, the average of the last reported bid
and asked prices, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") on such day, or if, on any day in
question, the Common Stock shall not be quoted on the NASDAQ, then such price
shall be equal to the last reported bid and asked prices on such day as reported
by any similar reputable quotation and reporting service.
NEW WORLD COFFEE & BAGELS, INC.
a Delaware Corporation
By: /s/ [illegible]
----------------------------
Title:
-------------------------
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN
THE COMPANY'S STOCK OPTION PLAN, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of this Option and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof Optionee has reviewed
this Option in its entirety, has had an opportunity to obtain the advise of
counsel prior to executing this Option and fully understands all provisions of
the Option.
Dated: 7/28/98 Optionee: /s/ [illegible]
---------------------
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<PAGE>
EXHIBIT A
EXERCISE NOTICE
New World Coffee & Bagels, Inc.
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ______________ , 19__ the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
________________ shares of the Common Stock (the "Shares") of New World Coffee &
Bagels, Inc., (the "Company") under and pursuant to the Optionee's Stock Option
Agreement ("Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and agrees to abide by and be
bound by its terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the optioned Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised.
4. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS
ARE BINDING ON TRANSFEREES OF THESE SHARES.
<PAGE>
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer
on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
5. Successors and Assigns. The Company will assign its rights, but shall
remain liable hereunder, under this Agreement to single or multiple assignees,
and this Agreement shall inure to the benefit of the successors and assigns of
the Company, in connection with the sale of all or substantially all of its
assets. Subject to the restrictions on transfer hereunder set forth, this
Agreement shall be binding upon optionee and his or her heirs, executors,
administrators, successors and assigns.
6. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
7. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
8. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement
9. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
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10. Entire Agreement. The Notice of Grant/Option Agreement is incorporated
herein by reference. This Agreement, the Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof and is governed by state
law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
New World Coffee & Bagels, Inc.
By:
--------------------------------
Title:
- ---------------------------------- -----------------------------
Address: Address:
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: NEW WORLD COFFEE & BAGELS, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for Investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection Optionee understands
that in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statues, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee understands that the certificate evidencing
the securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under applicable state securities laws.
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance permit limited public
resale of restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited broker's transactions or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(c), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than one year, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, Optionee shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period following the effective date of a registration statement of
the Company filed under the 1933 Act; provided, however, that such restriction
shall only apply to the first registration statement of the Company to become
effective under the 1933 Act which include securities to be sold on behalf of
the Company to the public in an underwritten public offering under the 1933 Act.
The Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
rules 144 or 701 will
-2-
<PAGE>
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk, Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
------------------------------
Date:
-------------------------
-3-
OKIN, HOLLANDER & DeLUCA, LLP
One Parker Plaza
Fort Lee, New Jersey 07024
Counsel to Debtors
GIBBONS, DEL DEO, DOLAN,
GRIFFINGER & VECCHIONE
A Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102-5497
(973) 596-4500
PD 9779
Special Counsel to Debtors
KASOWITZ, BENSON, TORRES
& FRIEDMAN, LLP
1301 Avenue of Americas
New York, New York 10019
Counsel to New World Coffee & Bagels Inc.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
- --------------------------------------
IN RE: | CHAPTER 11
|
MANHATTAN BAGEL COMPANY, INC., | Case No. 97-53360
and I. & J. BAGEL, INC., | 97-55054
|
Debtors. |
- --------------------------------------
MODIFICATION TO DEBTORS' FIRST AMENDED JOINT PLAN OF
REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
<PAGE>
Manhattan Bagel Company ("MBC") and I & J Bagels, Inc. ("I & J") (sometimes
collectively "Debtors" and individually each a "Debtor") and New World Coffee &
Bagels, Inc. ("NWC") (together with MBC and I & J sometimes collectively
"Proponents") hereby propose the following Modification to the First Amended
Joint Plan of Reorganization pursuant to section 1121(a) of the Bankruptcy Code.
ARTICLE 1
DEFINITIONS
As used in the Plan, the following terms shall have the respective meanings
specified below (such meanings to be equally applicable to the singular and
plural, and the masculine, feminine and neuter forms of the terms defined).
Acquisition Agreement means the agreement between Debtors and New World
Coffee and Bagels, Inc. ("NWC") pursuant to which NWC shall purchase 100 shares,
representing one hundred percent (100%) of the New Common Stock of MBC, which
shall occur only after MBC has acquired the New Common Stock of I & J.
Administrative Expense Claim means a Claim for payment of any costs or
expenses of administration of the Case incurred after the commencement of the
Case allowable under section 503(b) or 507(a)(1) of the Bankruptcy Code,
including, without limitation: (a) the actual and necessary expenses of
preserving the estates of the Debtors; (b) the actual and necessary expenses of
operating the business of the Debtor (such as wages, salaries or commissions for
services rendered); (c) indebtedness or obligations incurred or assumed by the
Debtors in connection with the conduct of its business, the acquisition or lease
of property, or the rendition of services to the Debtors; (d) allowances of
compensation for legal and other services and reimbursement of expenses awarded
pursuant to sections 330(a), 331 and 503(b) of the Bankruptcy Code, (e) any
amounts necessary to cure defaults under assumed leases pursuant to ss.
363(b)(1)(A), of the Bankruptcy Code and (f) all fees or charges assessed
against the estates of the Debtors under section 1930, title 28, United States
Code; provided, however, that an Exempt Tax shall not be an Administrative
Claim. Costs and expenses incurred by the Debtors after the Effective Date shall
be paid in the ordinary course.
Administrative Operating Expense Claim means all Administrative Expense
Claims other than Administrative Claims of Professionals and fees and charges
assessed under 28 U.S.C. ss. 1930.
Allowed, when used as an adjective preceding the words "Claim" or
"Interest," means any Claim against or Interest in the Debtors: (a) proof or
application for allowance of which was (i) Filed on or before the date
designated by the Bankruptcy Court as the last date for Filing a Proof of Claim
against or Proof of Interest in the Debtors, (ii) later Filed with Bankruptcy
Court leave after notice and a hearing, or (iii) if no Proof of Claim or Proof
of Interest or application for allowance was Filed, which Claim or Interest has
been or hereafter is listed by the Debtors in the Schedules as liquidated in
amount and not disputed or contingent; and (b) which (i) is due and payable and
as to which no objection to the allowance thereof has
<PAGE>
been interposed within the applicable period of limitation fixed by the Plan,
the Bankruptcy Code, the Bankruptcy Rules, the Local Rules or the Bankruptcy
Court or (ii) as to which any objection has been determined by Final Order of
the Bankruptcy Court to the extent such objection has been resolved in favor of
the Holder of such Claim or Interest.
Area Developer Agreements means an agreement between MBC and a third party
providing for, among other things, the grant of an exclusive territory to the
non-debtor party to develop MBC franchises.
Assets means all property of the Estate of the Debtors.
Avoiding Power Causes of Action means rights and remedies accruing to the
Debtors pursuant to 11 U.S.C. ss.ss. 544(b), 547, 548, 549, 550, 553(b).
Ballots means the ballots accompanying the Disclosure Statement and the
Plan upon which impaired Creditors shall have indicated their acceptance or
rejection of the Plan.
Bankruptcy Code means the Bankruptcy Reform Act of 1978, as amended, and as
codified in title 11 of the United States Code.
Bankruptcy Court means the United States Bankruptcy Court for the District
of New Jersey or any court having competent jurisdiction to hear appeals or
certiorari proceedings therefrom, or any successor thereto that may be
established by act of Congress or otherwise, and that has competent jurisdiction
over the Case.
Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure, as
amended from time to time, as applicable to the Case.
Bar Date is the last date for filing Claims as fixed by the Court.
Business Day means any day except Saturday, Sunday or a "legal holiday," as
such term is defined in Bankruptcy Rule 9006(a).
Case means the above-captioned cases under Chapter 11 of the Bankruptcy
Code in which MBC and I & J are the Debtors.
Causes of Action means all legal and equitable claims, demands, or causes
of action held by the Debtors against any entity, other than Avoiding Power
Causes of Action.
Cash means cash and cash equivalents held by the Debtors.
Claim shall mean a "claim" within the meaning of section 101(5) of the
Bankruptcy Code.
Class means a class of Claims or Interests as classified in the Plan.
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<PAGE>
Closing means the meeting of the parties at which the papers, instruments
and documents required to be executed and delivered pursuant to the Acquisition
Agreement shall be exchanged.
Collateral means any property of the Estate that secures an Allowed Secured
Claim.
Committee means the official committee of general unsecured Creditors which
was appointed in the MBC Case pursuant to section 1102 of the Bankruptcy Code.
Confirmation Date means the date the Clerk of the Bankruptcy Court enters
the Confirmation Order on the docket of the Bankruptcy Court.
Confirmation Hearing means the hearing before the Bankruptcy Court to
consider confirmation of the Plan.
Confirmation Order means an order of the Bankruptcy Court confirming the
Plan in accordance with the provisions of Chapter 11 of the Bankruptcy Code.
Consideration means the funds, Note, NWC Stock and other things of value to
be paid or provided by NWC under the Acquisition Agreement.
Creditor means any Entity that has a Claim against the Debtor that arose on
or before the Petition Date or a Claim against the Estate of any kind specified
in section 502(g), 502(h) or 502(i) of the Bankruptcy Code.
Debtors means MBC in Case No. 97-53360, and I & J in Case No. 97-55054.
Disbursing Agent means the Debtors.
Disclosure Statement means the written disclosure statement and its
appendices, as they may be amended, supplemented or further modified from time
to time, filed by Proponents, with respect to the Plan.
Disputed Claim means a Claim which is not an Allowed Claim.
Effective Date means a Business Day determined by the Proponents and upon
which (a) no stay of the Confirmation Order is in effect and (b) the conditions
to the Effective Date set forth in section 7.02 of the Plan have been satisfied
or waived.
Entity means an "entity" within the meaning of section 101(15) of the
Bankruptcy Code.
3
<PAGE>
Estate means the estate created upon the commencement of each Case as to
each Debtor by section 541 of the Bankruptcy Code.
Exempt Tax means any stamp, recording or similar tax or charge (including
any penalties, interest or additions thereto) within the meaning of section
1146(c) of the Bankruptcy Code which may be imposed by the laws of any state
upon the transactions contemplated under, or necessary for the success of, the
Plan, including without limitation, any mortgage recording, securities transfer,
deed transfer, documentary transfer or gains taxes.
File, Filed, Filing or Files shall mean file, filed, filing or files,
respectively, with the Bankruptcy Court in the Case.
Final Order means an order or judgment of the Bankruptcy Court or other
court of competent jurisdiction, as entered on the docket of such court, that
has not been reversed or stayed, and as to which: (a) the time to appeal or
petition for certiorari has expired and no timely-filed appeal or petition for
certiorari is pending, or (b) any appeal taken or petition for certiorari filed
has been resolved by the highest court to which the order or judgment was
appealed or from which certiorari was sought.
First Union means First Union National Bank.
First Union Cause of Action means all rights and claims of the Debtors
against First Union.
Franchisee Lenders means Atlantic Financial Services, Inc. and STI Credit
Corporation.
Franchise Agreement means any agreement between MBC and a third party for
among other things, the development and operation of an MBC franchise; provided,
however, that such term shall not include Area Developer Agreements or Master
Franchise Agreements.
General Unsecured Claim means any Claim against the Debtors which arose or
which is deemed by the Bankruptcy Code to have arisen prior to the Petition
Date, and which is not a Claim or an interest in any other Class.
Holder means any entity holding a Claim or Interest, and includes the
beneficial Holder of such Claim or Interest.
Interest means any and all rights arising out of the ownership of Old
Common Stock, including all Claims against the Debtor resulting from the
rescission of a purchase or sale of Old Common Stock, for damages arising from
the purchase or sale of Common Stock or for reimbursement or contribution
allowed under section 502 on account of such a claim, and all rights arising out
of contracts, options or warrants to purchase or sell Old Common Stock.
4
<PAGE>
Local Rules means the Local Bankruptcy Rules of the District of New Jersey,
as applicable to the Case.
Master Franchise Agreement means an agreement between MBC and a third party
providing, among other things, for sub-franchising of the Debtors trademarks,
tradenames, and other intellectual property by the non-debtor party to such
contract.
NWC Stock means not less than 750,000 shares of the NWC Common Stock having
a value of not less than $2,250,000, determined in accordance with the
Acquisition Agreement, constituting part of the Consideration.
New Common Stock shall mean the new common stock of the Debtors issued
pursuant to the Plan.
Note means NWC's interest bearing promissory note in the amount of $5.5
million to be issued to the Unsecured Creditor Trust pursuant to the Acquisition
Agreement.
Old Common Stock shall mean the common stock of MBC and I & J issued and
outstanding prior to the Petition Date, and includes any options or warrants
with the right to acquire Old Common Stock.
Petition Date means November 19, 1997, the date of Filing of the voluntary
petition for relief commencing the MBC Case, and December 31, 1997, the date of
filing of the voluntary petition for relief commencing the I & J Case.
Plan means this Plan of Reorganization proposed by the Debtors. Any
appendices to the Plan are incorporated into and made a part hereof as if fully
set forth herein.
Priority Claim means any Claim to the extent entitled to priority in
payment under sections 507(a)(2)-(7) or (9) of the Bankruptcy Code.
Priority Tax Claim means any Claim to the extent entitled to priority in
payment under section 507(a)(8) of the Bankruptcy Code.
Professionals means Entities whose Administrative Claims must be Allowed by
Final Order of the Bankruptcy Court under section 330 of the Bankruptcy Code
prior to payment.
Proof of Claim or Proof of Interest means a Filed Proof of Claim or Proof
of Interest.
Reclamation Claim means a valid claim based upon a statutory or common law
right of a seller of goods that has sold goods to the Debtor in the ordinary
course of such seller's business to reclaim such goods.
5
<PAGE>
Record Date means the date on which Creditors entitled to vote on the Plan
are determined by their record ownership of Claims, which date shall be the date
of Filing of the Plan.
Reorganized Debtor means the Debtors after the Confirmation Order has been
entered.
Schedules means the Schedules of Assets and Liabilities and Statements of
Executory Contracts and Financial Affairs, Filed by the Debtors in accordance
with the Bankruptcy Rules, which have been amended and may be further amended
upon prior notice to NWC.
Secured Claim means a Claim against the Debtors which is deemed by the
Bankruptcy Code to have arisen prior to the Petition Date and which is (i)
secured by a valid lien, security interest, or other encumbrance on Collateral,
or (ii) subject to setoff under section 553 of the Bankruptcy Code, but only to
the extent of the value of the Collateral, or to the extent of the amount
subject to setoff, determined in accordance with section 506(a) of the
Bankruptcy Code, as modified by section 1111(b) of the Bankruptcy Code.
Subordinated Claims means Claims against any of the Debtors which are
junior in priority to General Unsecured Claims by virtue of contract, applicable
law, or Final Order of the Bankruptcy Court.
Trustee means the entity which will serve as trustee of the Unsecured
Creditor Trust.
Unclaimed Distribution means, in respect of any Class of Claims, all Cash
or other property deemed to be "Unclaimed Distributions" pursuant to the Plan.
Unliquidated, Disputed or Contingent Claim means any Claim, the amount of
which is undetermined or the liability for which is not proven or is contingent,
or disputed, as reflected in either the Schedules or the Proof of Claim Filed by
any Creditor.
Unsecured Creditor Trust means the trust to be established on the Effective
Date to receive the portion of the Consideration allocable to General Unsecured
Claims.
Document References. All references to documents shall include all addenda,
exhibits and schedules attached thereto or referred to therein.
Other Definitions. A term used and not defined herein, but that is defined
in the Bankruptcy Code, shall have the meaning set forth therein. The words
"herein," "hereof," "hereto," "hereunder," and others of similar import refer to
the Plan as a whole and not to any particular section, subsection, or clause
contained in the Plan. The word "including" shall mean "including, without
limitation." The singular shall include the plural and vice versa unless the
context otherwise requires.
6
<PAGE>
ARTICLE 2
ADMINISTRATIVE AND PRIORITY TAX CLAIMS
2.01 Administrative Expense Claims Except as set forth in section 2.03
below, Administrative Expense Claims (other than Claims for compensation and
reimbursement of expenses of Professionals) will be paid in full, in Cash, on
the Effective Date, or, if such Claim becomes Allowed after the Effective Date,
within five (5) days after such Claim becomes Allowed. Any fees due and owing to
the United States Trustee shall be paid in full on the Effective Date, or as
soon thereafter as practicable. All requests by Professionals for final
allowance of compensation and reimbursement of expenses accrued as of the
Confirmation Date must be Filed with the Court within sixty (60) days of the
Confirmation Date and will be paid within five (5) days after such Claims become
Allowed. All other requests for payment of an Administrative Expense Claim must
be Filed on or before the date of the Confirmation Hearing or will be forever
barred. The estimated amount of unpaid fees and expenses of Professionals as of
the Confirmation Hearing will be deposited in a segregated account upon
Confirmation of the Plan, and will be used to pay Allowed Claims of
Professionals. Such escrowed funds shall be used solely to pay Allowed
Administrative Claims of Professionals and any excess after making all such
payments shall revest in the reorganized Debtor.
2.02 Bar Date for Administrative Expense Claims
(a) In General. Unless otherwise ordered by the Bankruptcy Court, and other
than Administrative Expense Claims of Professionals, requests for payment of
Administrative Expense Claims must be Filed and served on the Debtors no later
than thirty (30) days after the Effective Date. Any Entity that is required to
File and serve a request for payment of an Administrative Expense Claim and that
fails to timely File and serve such request, shall be forever barred, estopped
and enjoined from asserting such Claim against the Debtors, the Estate of the
Debtors or their respective property.
(b) Professionals. Professionals or other Entities requesting compensation
or reimbursement of expenses pursuant to sections 327, 328, 330, 331, 503(b) and
1103 of the Bankruptcy Code for services rendered before the Confirmation Date
shall File an application for final allowance of compensation and reimbursement
of expenses no later than sixty (60) days after the Effective Date. Objections
to applications of professionals or other Entities for compensation or
reimbursement of expenses must be Filed no later than ninety (90) days after the
Effective Date. Counsel for the Debtors as of the Effective Date shall be deemed
relieved from any obligation or duty to represent or advise the Debtors as of
the first business day after the Effective Date.
2.03 Ordinary Course Liabilities. Holders of Administrative Operating
Expense Claims shall not be required to File any request for payment of such
Claims. All Administrative Operating Expense Claims which are not due and
payable by their terms as of
7
<PAGE>
Confirmation Date shall be assumed by the Reorganized Debtor, and paid in
accordance with their terms, subject to all applicable offsets and defenses
which the Debtors may hold to payment of such Claims.
2.04 Priority Tax Claims At the option of the Debtors, each holder of an
Allowed Priority Tax Claim shall be paid the full amount of such Allowed
Priority Tax Claim, (i) in Cash, on the later of (a) the Effective Date (or as
soon thereafter as is practicable), or (b) the first Business Day after such
Claim becomes an Allowed Claim (or as soon thereafter as is practicable); or
(ii) in equal quarterly installments of principal and interest at the applicable
legal rate over a period not to exceed six (6) years from the date of assessment
of such Tax Claim. In the event the Debtors elect to pay any Allowed Priority
Tax Claim in accordance with ss.2.04 (ii) of this Plan, the Holder of such Claim
shall be enjoined and restrained from seeking to collect such claim from any
responsible person other than the Debtors, so long as the Debtors are not in
default on such payments.
ARTICLE 3
CLASSIFICATION OF CLAIMS AND INTERESTS
3.01 Class 1 - Priority Claims Class 1 consists of all Allowed Priority
Claims against any Debtor. Class 1 is not impaired.
3.02 Class 2 - Secured Claims of First Union Class 2 consists of all
Allowed Secured Claims of First Union. Class 2 is impaired.
3.03 Class 3 - Other Secured Claims Class 3 consists of all Allowed Secured
Claims other than First Union. Class 3 may be unimpaired depending upon the
treatment option selected by the Proponents.
3.04 Class 4 - Reclamation Claims Class 4 consists of all Allowed
Reclamation Claims. Class 4 is impaired.
3.05 Class 5 - General Unsecured Claims Against MBC and I & J Class 5,
which is impaired, consists of all Allowed General Unsecured Claims against MBC
and I & J.
3.06 Class 6 - Disputed General Unsecured Claims of Franchisee Lenders
Class 6 consists of all Disputed General Unsecured Claims of Franchisee Lenders.
Class 6 is impaired.
3.07 Class 7 - Subordinated Claims Against MBC and I & J Class 7 consists
of all Allowed Subordinated Claims against MBC and I & J. Class 7 is impaired.
3.08 Class 8 - Old Common Stock and Interests and Claims Relating Thereto
Class 8 consists of all Old Common Stock Interests in the Debtors. Class 8 is
impaired.
8
<PAGE>
3.09 Classification Rules A Claim is in a particular Class only to the
extent that the Claim qualifies within the description of Claims of that Class,
and such Claim is in a different Class to the extent that the remainder of the
Claim qualifies within the description of the different Class. Pursuant to
section 1123(a)(4) of the Bankruptcy Code, all Allowed Claims of a particular
Class shall receive the same treatment unless the Holder of a particular Allowed
Claim agrees to a less favorable treatment for such Allowed Claim. For purposes
of the Plan, and pursuant to section 510(a) of the Bankruptcy Code, the Plan
shall give effect to subordination agreements which are enforceable under
applicable nonbankruptcy law, except to the extent the beneficiary or
beneficiaries thereof agree to less favorable treatment. The Plan shall also
give effect to the subordination rules of sections 510(b) and (c) of the
Bankruptcy Code. The inclusion of a Creditor by name in any Class is for
purposes of general description only, and includes all Entities claiming as
beneficial interest holders, assignees, heirs, devisees, transferees or
successors in interest of any kind of the Creditor named.
3.10 Inter-Company Claims. Claims by any Debtor against any other Debtor
shall be cancelled and extinguished.
ARTICLE 4
TREATMENT OF CLASSES UNDER THE PLAN
4.01 Class 1 - Priority Claims Each holder of an Allowed Priority Claim
shall be paid the Allowed amount of such Claim, including all applicable
interest and other charges to which the Holder of such Allowed Priority Claim
may be entitled under applicable law or contract, to the extent permitted under
the applicable provision of section 507(a), in Cash, on the later of: (a) the
Effective Date (or as soon thereafter as is practicable) and (b) the first
Business Day after such Claim becomes an Allowed Claim (or as soon thereafter as
is practicable).
4.02 Class 2 - Secured Claims of First Union The Allowed Secured Claims of
First Union shall be treated as follows:
(a) The Allowed Amount of such claims shall be paid in full, in Cash on or
before the Effective Date, and all documents, instruments, liens, security
interests and mortgages evidencing and securing such claims shall be deemed
cancelled, discharged, defeased and terminated.
(b) As of the Effective Date First Union shall hold no further Claims
against or Interests in the Debtors, and all of the documents and instruments
evidencing, giving rise to, or securing any of First Union's Claims shall be
either cancelled and terminated.
4.03 Class 3 - Other Secured Claims Holders of Allowed Secured Claims,
other than First Union, at the option of the Proponents, shall either (i) be
paid in full in Cash the Allowed Amount of such Secured Claim in full
satisfaction and discharge of such Creditor's lien, (ii) receive deferred Cash
payments totalling the Allowed amount of such Claim of a value as of the
Effective Date at least equal to the value of such Creditor's interest in the
Debtor's property
9
<PAGE>
securing such Claim, and shall retain the lien securing such Claim and all
rights under any instrument evidencing such Claim until paid as provided herein,
(iii) will receive, pursuant to abandonment by the Debtor, possession of and the
right to foreclose its lien on the collateral securing such Claim, or (iv) will
be treated in accordance with an agreement between the Proponents and the Holder
of such Claim. In the event the treatment provided in subparagraphs (i) or (iii)
above results in payment to such Creditor of less than the Allowed amount of its
Claim, it shall be entitled to assert a General Unsecured Claim against its
obligor for any deficiency.
4.04 Reclamation Claims Holders of Allowed Reclamation Claims shall be paid
in full, in Cash, on the Effective Date.
4.05 Class 5 - General Unsecured Claims Against MBC and I &J Holders of
Allowed General Unsecured Claims shall share pari passu and pro rata in the
corpus of the Unsecured Creditor Trust.
4.06 Class 6 - Disputed General Unsecured Claims of Franchisee Lenders
Holders of Disputed General Unsecured Claims in Class 6 shall receive the
treatment set forth on Schedule 4.06 of this Plan, with respect to the Disputed
portion of their Claims.
4.07 Class 7 - Subordinated Claims Against MBC and I & J Holders of Allowed
Claims in this Class shall receive no distribution in respect of their Claims,
unless all Classes of Creditors of the Debtor having priority over Claims in
this Class have been paid in full. Once prior Classes have been paid in full,
members of this Class shall share pari passu and pro rata in all remaining
property in the Unsecured Creditors Trust until their Claims have been paid in
full.
4.08 Class 8 - Old Common Stock and Interests Holders of Old Common Stock
and Interests in the Debtors shall receive no distribution under the Plan unless
all prior Classes of Creditors have been paid the full Allowed Amount of the
Claims in such Classes. Once prior Classes have been paid in full, members of
this Class shall share pari passu and pro rata in all remaining property in The
Unsecured Creditor Trust. The Old Common Stock shall be cancelled, extinguished
and of no further force and effect as of the Effective Date, except to the
extent it evidences the rights of a Holder to participate in distributions, if
any, from the Unsecured Creditor Trust.
4.09 Controversy Concerning Impairment In the event of a controversy as to
whether any Creditor or Holder of an Interest or Class of Creditors or Class of
Holders of Interests is impaired under the Plan, the Bankruptcy Court shall,
after notice and a hearing, determine such controversy.
10
<PAGE>
ARTICLE 5
ACCEPTANCE OR REJECTION OF THE PLAN
5.01 Impaired Classes Entitled To Vote Classes 2 through 8 are impaired
under the Plan. Each Holder of an Allowed Claim in Classes 2 through 7 shall be
entitled to vote to accept or reject the Plan.
5.02 Acceptance by an Impaired Class of Claims A Class of Creditors shall
have accepted the Plan if Creditors holding at least two-thirds in the aggregate
dollar amount and more than one-half in number of the Allowed Claims of such
Class that have accepted or rejected the Plan vote to accept the Plan.
5.03 Presumed Acceptance of Plan by Unimpaired Classes Class 1 is
unimpaired under the Plan, and, therefore, is conclusively presumed to accept
the Plan pursuant to section 1126(f) of the Bankruptcy Code and they do not have
a right to vote on the Plan.
5.04 Presumed Rejection Class 8 is presumed to have rejected the Plan
pursuant to section 1126(g) of the Bankruptcy Code.
ARTICLE 6
MEANS FOR implementation OF THE PLAN
6.01 First Union's Allowed Secured Claim has been or will be paid from the
proceeds of its collateral or, to the extent unpaid as of the Effective Date,
from the Consideration.
6.02 On the Effective Date, the Closing under the Acquisition Agreement
will occur. The Acquisition Agreement will provide that on the Effective Date,
NWC will acquire 100% of the New Common Stock of MBC, in exchange for the
Consideration. On the Effective Date, MBC will pay $1,000 for all of the New
Common Stock in I & J.
6.03 On or before the Effective Date, the Unsecured Creditor Trust will be
formed. The Trustee will be selected by the Committee. Reasonable expenses of
the Trustee will be paid by the Reorganized Debtors.
6.04 On the Effective Date, the portion of the consideration allocable to
General Unsecured Creditors will be deposited in the Unsecured Creditor Trust.
6.05. Fifty percent (50%) of any reduction, net of the associated costs,
from $3,500,000 in First Union's Allowed Secured Claim, and fifty percent (50)
of any recovery net of the associated costs of any recovery from prosecution of
the First Union Cause of Action shall be paid by the reorganized Debtor to the
Unsecured Creditor Trust, as and when received. Nothing contained herein shall
obligate the Reorganized Debtor to prosecute The First Union Cause of Action.
11
<PAGE>
ARTICLE 7
CONDITIONS PRECEDENT
7.01 Conditions Precedent to Confirmation Date. The occurrence of the
Confirmation Date of the Plan is subject to satisfaction or waiver of each of
the following conditions:
(a) the Bankruptcy Court has entered the Confirmation Order in form and
substance satisfactory to the Proponents;
(b) the Debtors have been authorized to assume all leases and executory
contracts which they may seek to assume;
(c) the Debtors have received the consent of any third parties or
governmental units whose consent is required for confirmation;
(d) the estimated unpaid fees and expenses of Professionals have been
deposited in a segregated account;
(e) The Acquisition Agreement has not been terminated.
7.02 Conditions to Effective Date The occurrence of the following shall be
separate conditions to the Effective Date of the Plan:
(a) the Confirmation Order has become a Final Order;
(b) the NWC Guaranty has been delivered to the Franchisee Lenders.
7.03 Waiver of Conditions The Proponents shall have the right to waive any
of the foregoing conditions to Confirmation Date, or to the Effective Date,
except for 7.01(a) and 7.02(b). Without limiting the foregoing, the Effective
Date may occur notwithstanding the pendency of an appeal of the Confirmation
Order or any order related thereto so long as there is no stay in effect. The
Effective Date may occur before the expiration of time to take an appeal or to
seek reconsideration of the Confirmation Order without the giving of any notice
to any objecting party. In the event of any such appeal, the Proponents may seek
the dismissal of such appeal as moot following the Effective Date of the Plan.
ARTICLE 8
DISTRIBUTIONS UNDER THE PLAN
8.01 Distributions All distributions under the Plan to Administrative
Expense Claims, Priority Tax Claims, Priority Claims, and Classes 1, 2, 3, 4 and
6 shall be made by the
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Disbursing Agent. All distributions under the Plan to Classes 5, 7, or 8 shall
be made by the Trustee.
8.02 Method of Payment Any Cash payment made by the Disbursing Agent
pursuant to the Plan shall be in U.S. dollars, either by check drawn on a
domestic bank or wire transfer therefrom.
8.03 Timing of Payment Any payment or distribution required to be made
under the Plan on a day other than a Business Day shall be due on the next
succeeding Business Day.
8.04 Setoff Nothing contained herein shall be deemed to waive the Debtor's
statutory or common law right of setoff.
8.05 De Minimis Distributions The Disbursing Agent or Trustee shall not be
required to distribute Cash to any Creditor if the amount of Cash to be
distributed to such Creditor is less than $5.00.
8.06 Unclaimed Distributions to Creditors
(a) Non-Negotiated Checks If the Holder of an Allowed Claim fails to
present for payment a check issued to such Holder pursuant to the Plan within
ninety (90) days of the date such check was issued, or if any distributions
returned to the Disbursing Agent or Trustee due to an incorrect or incomplete
address for which the Debtors or Trustee have not received a correct address,
then the amount of Cash attributable to such check or distribution shall be
deemed to be Unclaimed Distributions in respect of such Holder's Class of Claims
and the payee of such check or distribution shall be deemed to have no further
Claim in respect of such check or distribution, and shall not be entitled to
participate in any further distributions under the Plan.
(b) Revesting of Unclaimed Distributions All Unclaimed Distributions shall
revest in the Debtors, except that Unclaimed Distributions made to Classes 5, 7
or 8 shall revest in the Holders of Allowed Claims in those Classes as to which
such Unclaimed Distributions relate.
8.07 Treatment of Disputed Claims Disputed Claims shall be treated as
follows under the Plan:
(a) Objections to Claims Except as otherwise provided by the Bankruptcy
Court or in the Plan, all objections to Claims shall be Filed and served on the
Holders of such Claims on or before the later of (i) sixty (60) days after the
Confirmation Date, (ii) sixty (60) days after a particular Proof of Claim is
Filed, except that such Claim shall not be deemed an Allowed Claim until after
the sixty (60) day period lapses, and (iii) such additional date as the
Bankruptcy Court may fix upon application of the Debtor; provided, however, that
no party in interest shall be required to File an objection to any Claim listed
in the Schedules as disputed, contingent, unliquidated or undetermined and for
which no Proof of Claim was Filed, which Claim shall be
13
<PAGE>
barred and disallowed in its entirety. The Trustee shall be deemed a
party-in-interest for the purposes of Filing and prosecuting objections to
Claims.
(b) No Distributions Pending Allowance Notwithstanding any other provision
of the Plan to the contrary, no distribution shall be made to the Holder of a
Disputed Claim or the Holder of a Claim who is the subject of a proceeding
against it by the Debtor, unless and until such Disputed Claim becomes an
Allowed Claim or such proceeding is resolved.
(c) Distributions After Allowance Once a Disputed Claim becomes an Allowed
Claim, distribution on account of such Claim shall be made in accordance with
the provisions of the Plan governing the Class of Claims to which the respective
Claim belongs.
8.08 Estimation of Claims At any time prior to the Effective Date, or
within sixty (60) days thereafter, the Debtor or Committee may seek the
estimation of a Disputed Claim in accordance with the applicable provisions of
the Bankruptcy Code and Bankruptcy Rules. The estimated amount of a Disputed
Claim shall be fixed by Final Order, which shall be deemed the amount of such
Claim for all purposes under the Plan.
ARTICLE 9
EXECUTORY CONTRACTS
9.01 Assumption or Rejection of Executory Contracts and Unexpired Leases
(a) Executory Contracts Subject to Section 9.01(d), all executory contracts
that exist between the Debtor and any Entity which have not been assumed or
rejected prior to the Effective Date shall be deemed rejected as of the
Effective Date, except for any executory contract that has been assumed pursuant
to an order of the Bankruptcy Court entered at or prior to the Effective Date,
or which is subject to a pending application to assume or extend time to assume.
Nothing contained herein shall constitute a waiver of any claim, right or cause
of action that the Debtor may hold against any party to any executory contract
with the Debtor, including the insurer under any policy of insurance.
(b) Options. Any options, warrants or other equity interests representing
the right to acquire Old Common Stock shall be canceled as of the Effective
Date. All Claims arising under such warrants or options shall be classified in
Class 8.
(c) Unexpired Leases. All unexpired leases that exist between the Debtor
and any Entity, except for leases on non-residential real property entered into
by MBC in connection with any Franchise Agreement, which have not been assumed
or rejected prior to the Effective Date shall be deemed rejected as of the
Effective Date, except for any unexpired lease that has been assumed pursuant to
an order of the Bankruptcy Court entered at or prior to the Effective Date, or
which is subject to a pending application to assume or extend time to assume.
Existing and unexpired leases on non-residential real property entered into by
the Debtor which relate to any property occupied by the non-debtor party to any
Franchise
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Agreement, shall on the Effective Date be assumed by the Debtor and assigned to
the non-debtor party to the Franchise Agreement which is in possession of such
property, provided, however, that if the Debtors are unable to obtain
authorization to assign such a lease, they will assume it. Nothing contained
herein shall constitute a waiver of any claim, right or cause of action that the
Debtor may hold against any lessor.
(d) Franchise Agreements. All Franchise Agreements in force and effect as
of the Effective Date shall be assumed by MBC as of the Effective Date. NWC
shall guarantee the Reorganized Debtor's performance of all assumed Franchise
Agreements after the Effective Date.
(e) Approval of Assumption Rejection or Assumption and Assignment of Leases
and Contracts Entry of the Confirmation Order shall constitute the approval,
pursuant to section 365(a) of the Bankruptcy Code, of the assumption rejection,
or assumption and assignment of the executory contracts and unexpired leases to
be assumed, rejected or assumed and assigned pursuant to the Plan. Notice of the
hearing on Confirmation of this Plan shall constitute notice to any non-debtor
party to an executory contract or unexpired lease, which is to be assumed or
rejected under this Plan, of the Debtors' intent to assume, reject or assume and
assign such contract or lease.
(f) Bar Date for Filing Proofs of Claim Relating to Executory Contracts and
Unexpired Leases Rejected Pursuant to the Plan Any and all Proofs of Claim
arising out of the rejection of an executory contract or unexpired lease
pursuant to this Article 9 must be Filed within thirty (30) days after the
Effective Date. Any Holder of a Claim arising out of the rejection of an
executory contract or unexpired lease who fails to File a Proof of Claim within
such time shall be forever barred, estopped and enjoined from asserting such
Claim against the Debtor or the Estate. Unless otherwise ordered by the
Bankruptcy Court, all Claims arising from the rejection of executory contracts
and unexpired leases shall be treated as General Unsecured Claims under the
Plan. Nothing contained herein shall extend the time for Filing a Proof of Claim
for rejection of any contract or lease rejected prior to the Confirmation Date.
ARTICLE 10
EFFECTS OF PLAN UPON CONFIRMATION
10.01 Revesting of Assets Except as otherwise set forth herein, subject to
the provisions of and for the purposes of distributions in accordance with the
Plan, all property of the Estates, including all Causes of Action, shall revest
in the Reorganized Debtors on the Confirmation Date. Such revested property
shall be free and clear of all liens, claims, encumbrances and interests, except
as otherwise provided in the Plan.
10.02 Avoiding Power Causes of Action. On the Effective Date, all Avoiding
Power Causes of Action shall be vested in the Trustee, and the net proceeds of
such actions, if any, shall be deposited in the Unsecured Creditor Trust. The
Trustee shall be deemed the representative of the estates for purposes of
prosecuting all Avoiding Power Causes of Action.
15
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10.03 Discharge and Injunction. Pursuant to section 1141 of the Bankruptcy
Code, all Claims against or Interests in the Debtors will be discharged and
deemed satisfied upon entry of the Confirmation Order. As of the Effective Date,
all Entities that have held, currently hold or may hold a Claim or other debt or
liability against the Debtors affected by the Plan are enjoined from taking any
actions to collect or recover in any manner on account of any such Claims, debts
or liabilities from any or all of the Assets, except as otherwise provided in
the Plan. In addition, all Creditors who accept the Plan are deemed to have
released any Persons who are officers or directors of the Debtors and NWC, as of
Confirmation Date, from any and all Claims, demands and causes of action arising
at any time prior to the Effective Date.
10.04 Retention of Jurisdiction The Bankruptcy Court shall retain and have
jurisdiction over the Case for the following purposes:
(a) to adjudicate all controversies concerning the classification or
allowance of any Claims or Interests;
(b) to liquidate any Claims which are disputed, contingent or unliquidated;
(c) to determine any and all objections to the allowance of Claims or
Interests, or counterclaims to any Claim;
(d) to determine any and all applications for allowance of compensation and
reimbursement of expenses and any other fees and expenses authorized to be paid
or reimbursed under the Bankruptcy Code or the Plan;
(e) to determine any applications pending on the Effective Date for the
rejection or assumption of executory contracts or unexpired leases or for the
assumption and assignment, as the case may be, of executory contracts or
unexpired leases to which the Debtor is a party or with respect to which it may
be liable, and to hear and determine, and if need be to liquidate, any and all
Claims arising therefrom;
(f) to adjudicate any actions brought by the Debtor or the Trustee for any
Causes of Action or Avoiding Power Causes of Action, at any time prior to
expiration of the relevant statute of limitations;
(g) to determine any and all applications, adversary proceedings and
contested or litigated matters that may be pending on the last date for
objections to Claims including, but not limited to, those adversary proceedings
and contested or litigated matters in which one or more of the Bagel Brothers
entities are parties;
(h) to consider any modifications of the Plan, remedy any defect or
omission or reconcile any inconsistency in any order of the Bankruptcy Court,
including the Confirmation Order, to the extent authorized by the Bankruptcy
Court;
16
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(i) to determine all controversies, suits and disputes that may arise in
connection with the interpretation, enforcement or consummation of the Plan;
(j) to consider and act on the compromise and settlement of any Claim or
cause of action by or against the Estate;
(k) to issue orders in aid of execution of the Plan to the extent
authorized by section 1142 of the Bankruptcy Code; and
(l) to determine such other matters as may be set forth in the Confirmation
Order or which may arise in connection with the Plan or the Confirmation Order.
(m) to determine any pending applications by the Bagel Brothers debtors to
reject their Franchise Agreements.
10.05 Preservation of Subordination Rights The classification and treatment
of all Claims and Interests under the Plan does not adversely affect any
contractual, legal and equitable subordination rights, whether arising under
general principles of equitable subordination, section 510(c) of the Bankruptcy
Code or otherwise, that a Holder of a Claim or Interest or the Debtor may have
against other Claim Holders with respect to any distribution made pursuant to
the Plan.
10.06 Effectuating Documents; Further Transactions; Timing The Debtors are
authorized to execute, deliver, file or record such contracts, instruments,
releases and other agreements or documents and to take such actions as may be
necessary or appropriate to effectuate and further evidence the terms and
conditions of the Plan. All transactions that are required to occur on the
Effective Date under the terms of the Plan shall be deemed to have occurred
simultaneously.
10.07 Ratification of Actions Taken Entry of the Confirmation Order shall
ratify all transactions effected by the Debtors from and including the Filing of
the Case through the Confirmation Date. Entry of the Confirmation Order shall
constitute a finding that the transactions set forth in the Acquisition
Agreement are fair and reasonable, that NWC is a good faith purchaser under ss.
363(m) of the Bankruptcy Code and is entitled to the protections thereunder, and
that the Consideration is adequate in all respects. After entry of the
Confirmation Order, all Creditors and Interest Holders shall be enjoined and
restrained from commencing or continuing any action or proceeding arising out of
or related to the consummation of the transactions contemplated by the Plan and
the Acquisition Agreement.
10.08 Modification of the Plan The Proponents reserve the right, in
accordance with the Bankruptcy Code, and the Acquisition Agreement, to amend or
modify the Plan and related documents in any manner prior to the entry of the
Confirmation Order. After entry of the
17
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Confirmation Order, the Proponents may, upon order of the Bankruptcy Court,
amend or modify the Plan and related documents in accordance with, and to the
extent permitted by, Section 1127(b) of the Bankruptcy Code, and remedy any
defect or omission, or reconcile any inconsistency in the Plan in such manner as
may be necessary to carry out the purpose and intent of the Plan. Every
amendment or modification of the Plan shall supersede and render null and void
all prior versions of the Plan.
ARTICLE 11
MANAGEMENT AFTER CONFIRMATION
11.01 General Upon the Effective Date, the management, control and
operation of the Debtor shall become the responsibility of NWC in accordance
with the Acquisition Agreement.
11.02 Board of Directors The board of directors of the Debtor after the
Effective Date shall be identified at the Confirmation Hearing.
11.03 Officers The officers of the Debtor after the Effective Date shall be
identified at the Confirmation Hearing.
11.04 No Corporate Action Required As of the Effective Date, the
distribution of Cash, the adoption, execution, delivery and implementation of
all contracts, leases, documents, instruments, and other agreements related to
or contemplated by the Plan, and the other matters provided for, under or in
furtherance of the Plan involving action to be taken by or required of the
Debtors shall be deemed to have occurred and be effective as provided herein,
and shall be authorized and approved in all respects without further order of
the Bankruptcy Court or any requirement of further action by stockholders or
directors of the Debtor. All documents or instruments which must be executed and
delivered by the Debtors under this Plan shall be deemed appropriately executed
if signed by either of the President, Chief Executive Officer, Executive Vice
President, any Vice President, or Chairman of the Debtors.
11.05 Powers and Duties of the Debtor Except for Avoiding Power Causes of
Action, from and after the Confirmation Date, the Debtor shall have the powers
and exercise the duties, as set forth in section 1123(b)(3) of the Bankruptcy
Code, to retain, enforce, settle and prosecute all Causes of Action. The Trustee
shall have the powers and exercise the duties to retain, enforce, settle and
prosecute Avoiding Power Causes of Action.
18
<PAGE>
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.01 Exemption from Transfer Taxes Pursuant to section 1146(c) of the
Bankruptcy Code, the issuance, transfer or exchange of securities or other
property under the Plan; the creation, transfer, filing or recording of any
mortgage, deed of trust, financing statement or other security interest; or the
making, delivery, filing or recording of any deed or other instrument of
transfer under, in furtherance of or in connection with the Plan, shall not be
subject to any stamp tax, real estate tax, conveyance, filing or transfer fees,
mortgage, recording or other similar tax or other government assessment. All
recording officers and other entities whose duties include recordation of
documents lodged for recording shall record, file and accept such documents
delivered under the Plan without the imposition of any charge, fee, governmental
assessment or tax.
12.02 Exculpation Neither the Debtor, the Committee, nor NWC, nor any of
their officers, directors, members, employees, advisors, consultants, attorneys,
affiliates, or agents shall have or incur any liability to any Holder of a Claim
or Interest or to NWC for any act or omission in connection with, or arising out
of, the Chapter 11 case, the proposed confirmation or consummation of the Plan
or the transactions contemplated by the Acquisition Agreement or the
administration of the Case or Plan or the property to be distributed under the
Plan, except for willful misconduct or gross negligence, and in all respects
shall be entitled to rely upon the advice of counsel with respect to their
duties and responsibilities under the Plan. Neither the Debtor, the Committee,
nor NWC shall have any liability or responsibility for the assets in the
Unsecured Creditor Trust.
12.03 Permanent Injunction Except as otherwise set forth in the Plan, on
and after the Effective Date all persons and entities that have held, hold or
may hold (a) any Claim against or Interest in the Debtors or Debtors in
Possession shall be permanently enjoined from and against (i) commencing or
continuing in any manner any suit, action or other proceeding of any kind
against the Debtors, the Debtors in Possession or the Estates with respect to
any such Claim or Interest (ii) the enforcement, attachment, collection or
recovery by any manner or means of any judgment, award, decree or order against
the Debtors, the Debtors in Possession or the Estate, (iii) creating, perfecting
or enforcing any lien or encumbrance of any kind against the Debtors, the
Debtors in Possession or the Estate or against any of their properties or
interests in property with respect to such Claim or Interest and (iv) asserting
any right of setoff, subrogation or recoupment of any kind against any
obligation due from the Debtors or the Debtors in Possession or against any
property or interest in property of the Debtors or Debtors in Possession with
respect to any such Claim or Interest and (b) any Claim, right, action, Cause of
Action against or Interest in the Debtors or Debtors in Possession or the
Estates shall be permanently enjoined from and against commencing or continuing
any suit, action or proceeding against, asserting or attempting to recover any
Claim against or Interest in, or otherwise affecting the Debtors, the
19
<PAGE>
Debtors in Possession or the Estate with respect to any matter that is the
subject of the Plan or the Acquisition Agreement.
12.04 Modifications The Plan may not be altered, amended or modified by the
Proponents before or after the Confirmation Date, other than as provided in
section 1127 of the Bankruptcy Code. The Plan as modified shall become the Plan
for all purposes hereunder.
12.05 Revocation or Withdrawal of the Plan The Proponents reserve the right
to revoke or withdraw the Plan at any time prior to the Effective Date. If the
Proponents revoke or withdraw the Plan, then the Plan shall be deemed null and
void.
12.06 Binding Effect The Plan shall be binding upon, and shall inure to the
benefit of, the Debtor, the Holders of all Claims and Interests and their
respective successors and assigns. Confirmation of the Plan binds each of the
Holders of Claims and Interests to the terms and conditions of the Plan, whether
or not such Creditor or Interest Holder has accepted the Plan.
12.07 Construction The rules of construction set forth in section 102 of
the Bankruptcy Code shall apply to construction of the Plan.
12.08 Time In computing any period of time prescribed or allowed by the
Plan, unless otherwise set forth herein, the provisions of Bankruptcy Rule 9006
shall apply.
12.09 Headings The headings used in the Plan are inserted for convenience
only and neither constitute a portion of the Plan nor are intended in any manner
to affect any interpretation of the provisions of the Plan.
12.10 Governing Law Except to the extent that the Bankruptcy Code or other
federal law is applicable, the rights, duties and obligations of any Entity
arising under the Plan shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of New Jersey, without regard to
New Jersey choice of law provisions.
12.11 Existence of Committee The Committee shall continue in existence
until the Unsecured Creditor Trust has been liquidated, upon which the Committee
shall disband. Prior to the Confirmation Date, the Committee shall identify the
Trustee who shall enter into the Unsecured Creditor Trust Agreement.
12.12 Benefit Programs As of the Confirmation Date, all programs or plans
maintained by the Debtor for the benefit of present or former employees and
dated on or before the Petition Date which have not been previously terminated
shall be deemed to be terminated. Any Entity with a Claim arising from such
termination shall be treated as a Holder of a General Unsecured Claim.
20
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12.13 Retiree Benefits Except as otherwise provided in the Plan, any
obligations of the Debtor to any Entity for the purpose of providing or
reimbursing payments for retired employees and their spouses and dependents for
medical, surgical, or hospital care benefits, or benefits in the event of
sickness, accident, disability, or death under any plan, fund or program
(through the purchase of insurance or otherwise) maintained or established in
whole or in part by the Debtor prior to the Petition Date, if any, shall be
continued.
12.14 Payment of Statutory Fees No later than the Effective Date, the
Debtors shall have paid all fees due to the United States Trustee through the
Effective Date. Such fees which accrue after the Effective Date and until the
Cases are closed shall be payable by the Reorganized Debtor.
12.15 Cramdown At the Confirmation Hearing, the Proponents may seek
Confirmation of this Plan notwithstanding the rejection of the Plan by any
impaired Class of Creditors or Interest Holders.
12.16 Execution of Plan Documents Upon application by the Debtor or
Committee, the Court may issue an order directing any necessary party to
execute, deliver, or to join in the execution or delivery of an instrument or
document, and to perform any act necessary for the consummation of this Plan.
12.17 Post Confirmation Fees and Expenses The Debtors shall be authorized
to pay the fees and expenses of any professional retained by the Debtors
accruing after the Confirmation Date in accordance with the terms of engagement
of such professional, and without the need for a hearing or Bankruptcy Court
order. The Reorganized Debtors shall pay the reasonable expenses of the Trustee.
21
<PAGE>
12.18 Closing of Cases Unless otherwise ordered by the Bankruptcy Court,
the Cases shall be deemed closed six months after the Effective Date. Closing of
the Cases shall not affect the pendency of any adversary proceeding or contested
matter filed before the Cases are closed.
MANHATTAN BAGEL COMPANY
By:/s/ JAMES J. O'CONNOR
-------------------------------
Name: James J. O'Connor
Title: Chief Financial Officer
I & J BAGELS, INC.
By:/s/ JAMES J. O'CONNOR
-------------------------------
Name: James J. O'Connor
Title: Chief Financial Officer
NEW WORLD COFFEE AND BAGELS INC.
BY:/s/ R. RAMIN KAMFAR
-------------------------------
Name: R. Ramin Kamfar
Title: CEO
22
<PAGE>
SCHEDULE 4.06
Treatment of Class 6 - Disputed General Unsecured Claims of Franchisee
Lenders
NWC agrees to provide a limited guaranty to the Franchisee Lenders,
Atlantic Financial Services, Inc. ("Atlantic") and STI Credit Corporation ("Sun
Trust") for the payment of unpaid monies owing to Atlantic and Sun Trust by any
franchisee who defaults in its obligations to Atlantic or Sun Trust subsequent
to the Confirmation Date of this Plan of Reorganization, up to the total amount
of $1,500,000. NWC's guaranty obligations shall be evidenced by the delivery of
a written guaranty to Atlantic and Sun Trust in form reasonably satisfactory to
them prior to the Effective Date of this Plan, and delivery of the guaranty
shall be a condition to this Plan becoming effective.
Until Sun Trust has been paid all of its franchisee loans in full, Atlantic
will not be entitled to receive more than $800,000 under the NWC guaranty (the
"Atlantic Maximum Amount"). In the event Sun Trust has been paid all of its
franchisee loans and Sun Trust has obtained payment of less than $700,000 (the
"Sun Trust Maximum Amount") under the NWC guaranty, the Atlantic Maximum Amount
shall be increased to include the difference between the Sun Trust Maximum
Amount and the amount paid to Sun Trust under the NWC guaranty. The Sun Trust
Maximum Amount shall also have been increased after Atlantic has received
payment of all franchisee loans.
23
OKIN HOLLANDER & DELUCA, LLP
One Parker Plaza
Fort Lee, New Jersey 07024
(201) 947-7500
Counsel to Debtors
GIBBONS, DEL DEO, DOLAN,
GRIFFINGER & VECCHIONE
A Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102-5497
(973) 596-4500
Special Counsel to Debtors
KASOWITZ, BENSON, TORRES
& FRIEDMAN, LLP
1301 Avenue of the Americas
New York, New York 10019
Counsel to New World Coffee & Bagels, Inc.
(212) 506-1700
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
- --------------------------------------------------------------------------------
IN RE: Chapter 11
MANHATTAN BAGEL COMPANY, INC., Case No. 97-53360 (WHG)
and I. & J. BAGEL, INC., 97-55054 (WHG)
Debtors. Hearing Date: November 20, 1998
at 10:00 a.m.
- --------------------------------------------------------------------------------
ORDER CONFIRMING DEBTORS' FIRST AMENDED
JOINT PLAN OF REORGANIZATION UNDER CHAPTER
11 OF THE BANKRUPTCY CODE, AS MODIFIED
Manhattan Bagel Company ("MBC") and I & J Bagels, Inc. ("I&J"), debtors and
debtors-in-possession herein (collectively, the "Debtors"), and New World Coffee
& Bagels,
<PAGE>
Inc. ("NWC" and, together with the Debtors, the "Proponents"), having filed with
the Court the Debtors' First Amended Joint Plan of Reorganization Under Chapter
11 of the Bankruptcy Code on October 13, 1998; and on November 20, 1998, the
Debtors' First Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, as Modified (the "Plan"), having been filed to incorporate,
among other things, the Settlement Agreement with First Union National Bank
("FUNB") approved by the Court on November 19, 1998 (the "FUNB Settlement
Agreement"), and the Disclosure Statement Pursuant to Section 1125 of the
Bankruptcy Code with respect to the Plan having been approved on October 14,
1998 by the Order Approving First Amended Disclosure Statement and Fixing Time
for Filing Acceptances or Rejections of Plan, Combined With Notice Thereof (the
"Disclosure Order"); and November 20, 1998 at 10:00 a.m. having been fixed by
the Disclosure Order as the date and time of the hearing (the "Confirmation
Hearing") to consider final approval of the Disclosure Statement and
confirmation of the Plan pursuant to Bankruptcy Code sections 1125, 1128 and
1129, and Rule 3017 of the Federal Rules of Bankruptcy Procedure ("Bankruptcy
Rules"); and it appearing from the 2 separately filed Certifications of Service
of Logan & Company, Inc., that due notice of the Confirmation Hearing having
been given by mail to all known holders of Claims against or Interests in the
Debtors, and all franchisees and nondebtor parties to executory contracts and
nonresidential real property leases (except as otherwise noted on the record at
the Confirmation Hearing), in accordance with the Disclosure Order, and
applicable law, and that the solicitation of acceptances or rejections from
holders of Claims against or Interests in the Debtor having been made in the
manner required under the Disclosure Order and by applicable law; and upon the
filed Certification of Logan and Company with respect to
<PAGE>
the tabulation of ballots cast in favor of and in opposition to the Plan,
pursuant to D.N.J. LBR 3018; and any objections to confirmation of the Plan
having been settled, adjourned or otherwise overruled; and after hearing the
arguments of counsel and upon the record of all proceedings held herein; and
after due deliberation and good and sufficient cause appearing therefor;
IT IS, on this _____ day of November, 1998;
FOUND that:
(A) The Plan complies with the applicable provisions of the Bankruptcy
Code.
(B) The Plan, as modified, does not adversely change the treatment of the
claim of any impaired class of creditors who has not accepted the terms of the
modification.
(C) The Plan, as modified, shall become the plan of reorganization for the
Debtors.
(D) The Debtors and NWC, as the co-proponents of the Plan, have complied
with the applicable provisions of the Bankruptcy Code.
(E) The Plan has been proposed in good faith and not by any means forbidden
by law, and NWC has acted in good faith and is entitled to the protections of
section 363(m) of the Bankruptcy Code.
(F) The Debtors and NWC have disclosed to the Court any payments made or
promised for services or for costs and expenses in connection with this case or
the Plan and such payments have been approved by, or are subject to the approval
of, the Court as reasonable.
<PAGE>
(G) The Debtors have disclosed in the Disclosure Statement and at the
Confirmation Hearing the identity of the officers and directors of the Debtors
post-Effective Date, and the services of such persons is in accordance with the
interests of creditors.
(H) The provisions of Bankruptcy Code section 1129(a)(6) are inapplicable
to this case.
(I) With respect to each impaired class of Claims or Interests under the
Plan, each Holder of a Claim or Interest of such class (i) has either accepted
the Plan, or (ii) will receive or retain under the Plan on account of such Claim
or Interest property of a value, as of the Effective Date, that is not less than
the amount that such Holder would receive or retain if the Debtor were
liquidated under chapter 7 of the Bankruptcy Code on such date.
(J) The treatment of Administrative Expense Claims and Priority Claims
under the Plan complies with the provisions of Bankruptcy Code section
1129(a)(9).
(K) At least one impaired Class of Claims has accepted the Plan, as
determined without including any acceptance of the Plan by any insider holding a
Claim in such Class. Class 2 under the Plan is impaired and, by virtue of the
FUNB Settlement Agreement, said Class has duly accepted the Plan by a vote of
100% in amount of Claims and 100% in number of claimants in said Class. For
cause shown, FUNB is authorized to withdraw its rejection of the Plan and is
deemed to have accepted the Plan. Class 3 under the Plan is impaired and said
Class has duly accepted the Plan by a vote of 100% in amount of Claims and 100%
in number of claimants in said Class. Class 4 under the Plan is impaired and
said Class has duly accepted the Plan by a vote of 100% in amount of Claims and
100% in number of claimants in said Class. Class 5 under the Plan is impaired
and said Class has duly accepted the Plan by a vote of
<PAGE>
98.05% in amount of Claims and 92.86% in number of claimants in said Class.
Class 6 under the Plan is impaired and said Class has duly accepted the Plan by
a vote of 100% in amount of Claims and 100% in number of claimants in said
Class.
(L) The Plan is a plan of reorganization and the provisions of Bankruptcy
Code section 1129(a)(11) are satisfied.
(M) All fees payable under section 1930 of title 28 of the United States
Code have been paid or the Plan provides for the payment of all such fees on the
Effective Date or as soon as practicable thereafter.
(N) The Plan provides that all obligations for the payment of retiree
benefits shall continue, in compliance with Bankruptcy Code section 1129(a)(13).
(O) Classes 7 and 8 under the Plan are impaired; because the Plan provides
that the Claims and Interests of Classes 7 and 8 do not entitle the Holders of
such Claims and Interests to receive or retain any property under the Plan on
account thereof, Classes 7 and 8 are deemed not to have accepted the Plan. With
respect to Classes 7 and 8 under the Plan, the Plan meets the requirements of
section 1129(b) of the Bankruptcy Code, insofar as the Plan does not
discriminate unfairly, and is fair and equitable, with respect to each of such
Classes.
(P) The procedures by which the Ballots were tabulated were fair, properly
conducted, and complied with the applicable law.
(Q) The Debtor shall act as Disbursing Agent solely for the payment of
Allowed Administrative Claims, Priority Tax Claims, Allowed Priority Claims and
Classes 1, 2, 3, 4 and 6 Claims. The Trustee of the Unsecured Creditor Trust
will serve as Disbursing Agent for payment of all Claims in Classes 5, 7 and 8.
<PAGE>
(R) Pursuant to 28 U.S.C. ss. 157(b)(3), the Confirmation Hearing and all
matters adjudged and decreed in this Order shall be deemed to be core
proceedings under 28 U.S.C. ss. 157(b)(2)(L).
(S) The transactions set forth in the Amended Acquisition Agreement are
fair and reasonable, NWC is a good faith purchaser under section 363(m) of the
Bankruptcy Code and is entitled to the protections thereunder, and the
Consideration is adequate in all respects.
ORDERED, ADJUDGED AND DECREED that:
1. The Plan, as modified, is deemed accepted by all claimants who have
previously accepted the Plan.
2. The Plan, a copy of which is annexed hereto as Exhibit A, constitutes
the plan of reorganization for the Debtors.
3. The Plan be, and hereby is, confirmed, in each and every respect
pursuant to the provisions of section 1129 of the Bankruptcy Code, provided,
however, that if there is any conflict between the terms of the Plan and the
terms of this Confirmation Order, the terms of this Confirmation Order shall
control. Except as otherwise provided on the record at the Confirmation Hearing,
all objections and responses to, and statements and comments in response to, the
Plan, other than those withdrawn with prejudice in their entirety prior to or on
the record at the Confirmation Hearing shall be, and hereby are, expressly
overruled.
4. No additional disclosure of the Plan, as modified, is required under
section 1125 of the Bankruptcy Code.
5. The Debtors and Reorganized Debtors and their officers and directors be,
and they hereby are, authorized and directed to execute, deliver, file or record
all documents and
<PAGE>
instruments, including but not limited to the Amended Acquisition Agreement
annexed hereto as Exhibit B, and to take all action necessary or appropriate to
implement, effectuate and consummate the Plan, without further application to or
order of this Court and without further action or approval of the Board of
Directors or shareholders of the Debtors. Any officer of the Debtors is hereby
authorized to execute and deliver any and all documents and instruments
necessary or appropriate to consummate the Amended Acquisition Agreement and the
Plan.
6. The Debtors and the Reorganized Debtors and their officers and directors
be, and they hereby are, authorized and directed to enter into, and to do and
perform all acts, to make, execute and deliver all instruments and documents and
to pay all fees, costs, expenses and other amounts, which may be required to
implement and effectuate the Plan and the Amended Acquisition Agreement.
7. The Plan and its provisions shall be binding upon the Debtors, any
entity acquiring property under the Plan, and any holder of a Claim against or
Interest in the Debtors, whether or not the Claim or the Interest of such
creditor or equity security holder is impaired under the Plan and whether or not
such creditor or equity security holder has voted, or is deemed to have voted
for or against the Plan.
8. The motion seeking approval of the FUNB Settlement Agreement, a copy of
which is annexed as Exhibit A to the Plan (which Plan is annexed hereto as
Exhibit A), is hereby granted in all respects.
9. Pursuant to Fed.R.Bankr.P. 9019, the FUNB Settlement Agreement is hereby
approved in all respects. The Debtors and the Official Committee of Unsecured
Creditors of
<PAGE>
MBC (the "Committee"), are hereby authorized and empowered to take any and all
action necessary and appropriate to consummate the FUNB Settlement Agreement.
10. Pursuant to Fed.R.Bankr.P. 3018(a), FUNB's prior rejection of the Plan
is hereby withdrawn and FUNB is hereby deemed to have accepted the Plan, as
modified, to incorporate the Settlement Agreement, and FUNB shall be deemed to
have filed an amended ballot reflecting its acceptance of the Plan as modified.
11. Pursuant to section 1141 of the Bankruptcy Code, all Claims against or
Interest in the Debtors shall be forever barred and discharged and deemed
satisfied upon entry of the within Confirmation Order. As of the Effective Date,
all Entities that have held, currently hold or may hold a Claim or other debt or
liability, or any interest against, the Debtors affected by the Plan and the
Amended Acquisition Agreement are enjoined from taking any actions to collect or
recover in any manner on account of any such Claims, debts, liabilities or
interests, from any or all of the Assets, or against the Debtors, the
Reorganized Debtors and NWC, except as otherwise provided in the Plan and the
Amended Acquisition Agreement.
12. The issuance of all securities under the Amended Acquisition Agreement
and the Plan, including the Promissory Note, Warrants and Note issued to the
senior lender, and NWC Common Stock, be, and hereby are, exempt from
registration requirements pursuant to section 1145 of the Bankruptcy Code.
13. Pursuant to the Plan and section 1146(c) of the Bankruptcy Code, (i)
the issuance, transfer, or exchange of securities or other property under the
Plan, (ii) the making, delivery, filing or recording of any deed or other
instrument of transfer under the Plan, and (iii) the creation, transfer, filing
or recording of any mortgage, deed of trust, financing statement,
<PAGE>
other security interest or document of instrument of transfer under, in
furtherance of, or in connection with the Plan, shall not be taxed under any
state or local law imposing a stamp tax or similar tax, real estate tax,
conveyance, filing or transfer fees, mortgage, recording or other similar tax or
other governmental assessment. All recording offices and other entities whose
duties include recordation of documents lodged for recording shall record, file
and accept such documents delivered under the Plan and Amended Acquisition
Agreement without the imposition of any charge, fee, governmental assessment or
tax.
14. Pursuant to the Amended Acquisition Agreement and the Plan, all Old
Common Stock Interests in the Debtors, as well as any Claims arising from
rescission of a purchase or sale of a security of the Debtors or an affiliate of
the Debtors, for damages arising from the purchase or sale of such a security,
or the reimbursement or contribution allowed on account of such claim and all
options and warrants to purchase Old Common Stock shall be extinguished,
terminated and otherwise cancelled on the Effective Date.
15. All applications pursuant to sections 330 and 503(b) of the Bankruptcy
Code for final allowance of compensation for services rendered and reimbursement
of expenses incurred through the Confirmation Date shall be filed with the Court
and served upon the Debtors, counsel for the Debtors, Okin, Hollander & DeLuca,
LLP, One Parker Plaza, Fort Lee, New Jersey 07024, Attn: Paul S. Hollander,
Esq.; and counsel for New World Coffee & Bagels, Inc., Kasowitz, Benson, Torres
& Friedman, LLP, 1301 Avenue of the Americas, New York, New York 10019, Attn:
David S. Rosner, Esq., no later than 60 days after the Confirmation Date of the
Plan. The Debtors shall mail to all professionals retained by the Debtors and
the Committee pursuant to section 327 of the Bankruptcy Code, and to all parties
who have filed
<PAGE>
with the Court and served upon counsel for the Debtors a notice of appearance in
this case, a conformed copy of this Order within 14 days from the date of this
Order as notice of the deadline for filing fee applications set forth in this
decretal paragraph, which shall be and is hereby deemed to be good and
sufficient notice thereof. The Debtors shall deposit in a segregated account
within 5 days of this Order the estimated amount of unpaid fees and expenses of
Professionals as of the date of the Confirmation Hearing, which funds shall be
used solely to pay Allowed Administrative Claims of Professionals with any
excess after making such payments to revest in the Reorganized Debtor. Promptly
upon the allowance of compensation and reimbursement of expenses to such
professionals, payment shall be made by the Debtors. Notwithstanding anything
contained in this Confirmation Order, fees incurred up through the Confirmation
Order shall be paid in accordance with the Administrative Order filed on March
9, 1998.
16. Except as to certain Franchise Agreements which are subject to a motion
pending as of the Confirmation Hearing to reject said Franchise Agreements, all
Franchise Agreements in force and effect as of the Confirmation Date, shall be
assumed by MBC as of the Effective Date, which assumption is hereby approved.
17. Confirmation of the Plan shall not act as the assumption of any
franchisee agreement which is subject to a motion pending as of the Confirmation
Date to reject that franchise agreement.
18. Pursuant to the Plan and section 365 of the Bankruptcy Code, all
existing and unexpired leases of nonresidential real property entered into by
the Debtors which relate to any property occupied by the nondebtor party to any
Franchise Agreement, are authorized to be
<PAGE>
assumed by the Debtors or assumed and assigned by the Debtors to the to the
nondebtor party to the Franchise Agreement which is in possession of the leased
premises as of the Effective Date, as set forth on Exhibit C annexed hereto.
19. That the assumption and, in some cases, assignment of the unassumed
executory contracts and leases, as more particularly described on Exhibit D
annexed hereto, be, and the same hereby is, approved as of the Effective Date,
including, without limitation, those executory contracts set forth on Exhibit D
annexed hereto.
20. The rejection of all other unexpired leases or executory contracts to
be rejected in accordance with the Plan is hereby approved as of the Effective
Date, including, without limitation,, those executory contracts set forth on
Exhibit E annexed hereto.
21. All proofs of claim with respect to Claims arising from the rejection
of executory contracts or unexpired leases pursuant to the Plan shall be filed
with the Court and served upon counsel for the Debtors at the address listed
above and counsel for the Committee, Shanley & Fisher, PC 131 Madison Avenue,
Morristown, NJ 07962 attn. Robert Malone, Esq., so as to be received no later
than 30 days after the Effective Date, or such Claims shall be forever barred.
22. All of the Debtors' rights to any security deposits under any assigned
lease of nonresidential real property shall be, and hereby are, assigned to the
respective franchisees only to the extent that a franchisee has placed a deposit
in an equal amount with the Debtors and the Debtors' liability to said
franchisees is hereby extinguished in the same amount. The assignment of any
lease on nonresidential real property hereunder shall (i) merge the
<PAGE>
subtenant's rights under any sublease with the Debtors, and (ii) release the
Debtors from any further obligations with respect to any such sublease.
23. The Court shall retain jurisdiction (i) over the Debtors' chapter 11
cases in accordance with the provisions of the Plan and section 1142 of the
Bankruptcy Code, (ii) over the Unsecured Creditor Trust and the Trustee, and
(iii) to determine any and all proceedings and contested matters in this case
whether or not pending as of the Effective Date.
24. In accordance with the provisions of D.N.J. LBR 3022, these cases shall
be closed within six (6) months of the date hereof.
25. The Bankruptcy Court shall retain jurisdiction over all adversary
proceedings, motions or contested matters arising from these Cases or which are
filed pursuant to the Plan.
26. FUNB shall cooperate with the Debtors and NWC to effectuate the terms
of this Order and the FUNB Settlement Agreement. Upon FUNB's receipt of payment,
in full, of the amounts set forth in paragraph 1A of the FUNB Settlement
Agreement, FUNB shall terminate and otherwise release (through the filing of
UCC-3 statements and otherwise) any and all liens and security interests in and
to the assets of the Debtors.
27. Notice of the entry of the within Order and the Effective Date shall be
published by the Debtors one (1) time in the National Edition of The New York
Times within 14 days of the Effective Date, substantially in the form annexed
hereto as Exhibit E, which notice is hereby approved and shall be deemed
sufficient for all purposes.
28. The Debtors shall serve copies of the within Confirmation Order on each
party that has filed a notice of appearance in these Cases and on each party who
filed an objection or response to the Plan, no later than 14 days after entry of
the within Confirmation Order.
<PAGE>
29. Within 10 days of the Effective Date, the Debtors shall serve a copy of
the notice substantially in the form attached hereto as Exhibit F ("Creditor
Notice"), upon all of the Debtors' creditors, which notice is hereby approved
and shall be deemed sufficient for all purposes. In addition to the Creditor
Notice, the Debtors shall also serve upon the nondebtor parties to
nonresidential real property leases and executory contracts, within 10 days
after the Effective Date, the schedules of assumed, assumed and assigned or
rejected contracts and leases, which notice shall be deemed good and sufficient
notice of the Debtors' assumption, assumption and assignment or rejection of
said contract or lease and the deadline for filing proofs of claim with respect
to said rejected contracts and leases.
30. All transactions, including the Amended Acquisition Agreement, effected
by the Debtors from and including the Filing of the Cases through the
Confirmation Date are hereby ratified.
31. The transactions set forth in the Amended Acquisition Agreement are
fair and reasonable, NWC is a good faith purchaser under section 363(m) of the
Bankruptcy Code and is entitled to the protections thereunder, and the
Consideration is adequate in all respects. After entry of the Confirmation
Order, all creditors and interest holders shall be enjoined and restrained from
commencing or continuing any action or proceeding arising out of or related to
the consummation of the transactions contemplated by the Plan, the FUNB
Settlement Agreement and the Amended Acquisition Agreement.
32. Upon the liquidation of the Unsecured Creditors Trust, the Committee
shall disband.
<PAGE>
33. Notwithstanding the provisions of the Plan, the Unsecured Creditors
Trust Agreement shall be created of said Unsecured Creditors Trust Agreement
shall be created and the Trustee of the Unsecured Creditor Trust shall be
designated and approved by the Bankruptcy Court no later than 30 days after the
Effective Date and Shanley & Fisher, as attorneys for the Committee, shall act
as Escrow Agent for purposes of holding the stock and other Consideration
allocable to General Unsecured Claims under the Plan.
34. Neither the Debtors, the Committee, nor any of their officers,
directors, members, employees, advisors, consultants, attorneys, affiliates or
agents shall have or incur any liability to any Holder of a Claim or Interest or
to NWC for any act or omission in connection with, or arising out of, the cases,
the confirmation or consummation of the Plan or the transactions contemplated by
the Amended Acquisition Agreement or the administration of the Case or Plan or
the property to be distributed under the Plan, except for willful misconduct or
gross negligence, and in all respects shall be entitled to rely upon the advice
of counsel with respect to their duties and responsibilities under the Plan.
Neither the Debtors, the Committee, nor NWC shall have any liability or
responsibility for the assets in the Unsecured Creditor Trust.
35. If the Effective Date does not occur by January 31, 1999, the Debtors
or Committee may apply to vacate this Confirmation Order. If this Order is
vacated, the Debtors shall be restored to debtors-in-possession under Chapter
11. If this Order is vacated, the Debtors shall have (i) the exclusive right to
file a plan of reorganization for a period of 30 days after entry of an order
vacating this Confirmation Order, without prejudice to apply for further
extensions, (ii) the exclusive right to solicit acceptances of any such plan,
and (iii) the time
<PAGE>
within which the Debtors may assume or reject unexpired leases and executory
contracts shall be extended for 30 days after of any such order.
36. This is a final, appealable order and Bankruptcy Rule 7062 shall not be
deemed effective to in any way delay or stay the effectiveness and
enforceability of this Order as of the date of its entry.
------------------------------
HONORABLE WILLIAM H. GINDIN
UNITED STATES BANKRUPTCY JUDGE
<PAGE>
ANNEX A
TERM SHEET
1. First Union and MBC will stipulate to the allowed amounts of principal
and interest due on the EDA Loan and the Revolver (collectively the
"Indebtedness") as of June 30, 1998 as follows:
EDA Loan
Principal: $2,888,101.00
Interest: -0-
Revolver
Principal $576,211.00
Interest [TBS]
The following amounts have been calculated at the respective contract rates of
interest and are subject to audit to verify that MBC has received proper credit
for all payments received by First Union from third parties which represent the
proceeds of collateral. First Union will agree waive any right to assert default
rates of interest, late charges, attorneys fees and expenses or other costs of
collection through the date of the stipulation and thereafter may only seek to
assert default rates of interest, late charges, attorneys fees and expenses or
after costs of collection in the event of a subsequent default in the terms of
loan documents as modified by the stipulation.
2. MBC and I&J will agree that as of the date of the stipulation they have
no defenses, offsets, set-offs, claims or counterclaims to the Indebtedness and
to the extent such defenses, offsets, claims or counterclaims may exist they
shall be waived,
<PAGE>
released and discharged, such release to extend to First Union, its
shareholders, directors, officers, employees, attorneys, accountants or agents.
3. First Union will, agree that as of the date of the stipulation, except
for its right to be repaid the Indebtedness in accordance with the terms of the
pre-petition loan documents as modified by the stipulation, it has no other
claims or causes of action against MBC or I&J, their respective shareholders,
directors, officers, employees, attorneys, accountants, consultants or agents
and to the extent such claims or causes of action may exist they shall be
waived, released and discharged.
4. MBC and I&J will stipulate to the validity and extent of First Union's
liens with respect to the collateral (the "Collateral") described in the
applicable pre-petition loan documents as follows:
(i) all collateral where perfection is dependent upon the filing of a
UCC-1 financing statement and as of the respective petition dates
First Union filed appropriate UCC-1. financing statements;
(ii) all collateral where perfection is dependent upon a recording
with a local recorder of deeds or other instruments affecting
real estate and as of the respective petition dates First Union
filed the appropriate instruments; and
(iii) all collateral where perfection is dependent upon First Union
taking possession thereof and as of the respective petition dates
First Union had physical possession of such collateral.
2
<PAGE>
5. MBC will agree that as of the petition date in the MBC case and
continuing through the date of the stipulation, the value of the Collateral in
which First Union holds a valid lien was greater than the Indebtedness and that
First Union's claim with respect to the Indebtedness is a fully secured allowed
claim in MBC Chapter 11 case. I&J will stipulate that First Union's claim in its
Chapter 11 case is valid secured claim to the extent of the value of the
collateral therefor and is a valid unsecured claim for any amounts in excess of
the value of the collateral.
6. The EDA loan shall be reinstated in all respects except that its
maturity date may be accelerated as hereinafter provided. The interest rate and
payment terms shall continue as set forth in the EDA loan documents except that
so long as First Union is the holder of the EDA Bonds it shall have the right to
accelerate the maturity date of the Bonds to the earlier of (i) June 30, 2000;
or (ii) twelve (12) months after the effective date of an MBC plan of
reorganization. To the extent the original EDA loan documents or any amendments
thereto contain financial, affirmative or negative covenants or default
provisions which are presently violated or otherwise inconsistent with MBC and
I&J's status as Chapter 11. debtors they will be revised so that upon entry of
the stipulation there will not exist any event which, with or without the
passage of time or the giving of notice, will cause MBC to be in default under
the EDA Bonds. Any arrearages in payments due under the sinking fund for the EDA
Bonds shall be brought current immediately upon approval of the stipulation by
the Court. The EDA
3
<PAGE>
Bonds shall be repayable at any time without any penalty or premium. First Union
will consent to and cooperate with MBC in the remarketing of the EDA Bonds to an
entity designated by MBC so long as the purchase price to be paid to FUNB is
equal to the principal balance due on the EDA Bonds plus accrued interest to the
date of transfer.
7. Upon approval of the stipulation by the Court, $476,665.00 of the
proceeds received by First Union from the settlement of the Ranch One note
pursuant to the Order Approving Stipulation and Agreement of Settlement dated
March 19, 1998 shall be readvanced to MBC as additional cash collateral
available for use by MBC and I&J and the principal balance of the Revolver, as
set forth in paragraph 1 above shall, as of the date such amount is advanced to
MBC, be increased to reflect much advance.
8. MBC will pay, on a monthly basis, interest in arrears at the contract
rate on the unpaid principal balance of the Revolver. Any arrearages in the
payment of interest due on the Revolver shall be brought current immediately
upon approval of the stipulation by the Court. So long as First Union is the
holder of the Revolver indebtedness it shall have the right to (i) accelerate
the maturity of the Revolver to the earlier of (y) June 30, 2000; or (z) twelve
(12) months after the effective date of an MBC plan of reorganization; and (ii)
to require that the principal amount of the Revolver, if not sooner paid, be
reduced as follows:
by June 30, 1999 to no more than $750,000.00
by Dec. 31, 2000 to no more than $500,000.00
by March 31, 2000 to no more than $250,000.00
4
<PAGE>
To the extent that the Revolver loan documents or any amendments thereto contain
financial, affirmative or negative covenants or default provisions which are
presently violated or otherwise inconsistent with MBC and I&J's status as
Chapter 11 debtors they will be revised so that upon entry of the stipulation
there will not exist any event which, with or without the passage of time or the
giving of notice, will cause MBC to be in default under the Revolver.
9. First Union will consent to MBC and I&J's continued use of cash
collateral in their Chapter 11 cases consistent with MBC business plans as the
same may be amended from time to time. First Union will be granted a replacement
lien to the same extent and in the same priority as First Union's pre-petition
liens on the Collateral. So long as MBC is not in default of its obligation
under the stipulation First Union agrees not to oppose the Debtors pending or
future requests for extensions of its exclusive periods.
10. Commencing as of July 1, 1998 the proceeds from sales of First Union's
Collateral or other assets of MBC or I&J (other than a sale of substantially all
of the assets of MBC which shall be governed by paragraph 11 below) shall be
applied first to reimburse all third party expenses (a "Third Party Expense")
incurred in connection with the sale and thereafter as follows: (i) the first
One Million 00/100 ($l,000,000.00) Dollars in proceeds will be divided one-half
(1/2) to First Union and one-half (1/2) to MBC; (ii) proceeds in excess of One
Million 00/100 ($1,000,000.00) Dollars shall go to First Union until the
principal amount of the Revolver
5
<PAGE>
and any accrued but unpaid interest on the Revolver has been paid in full and
thereafter such proceeds shall be paid to MBC except for any net proceeds from
the sale of MBC's Eatontown manufacturing facility which shall be applied to
reduce the EDA loan. Except for a sale of substantially all of the assets of
MBC, First Union agrees to consent to the sale of portions of its Collateral and
to not oppose the sale of other assets of the MBC and I&J pursuant to 11 U.S.C.
363(f), free and clear of First Union's liens with the proceeds thereof to be
allocated as set forth above.
11. Notwithstanding the provisions of paragraph 10 above, MBC agrees that
in the event of a sale of substantially all of its assets all of the net
proceeds thereof shall be applied to reduce the Indebtedness.
12. Notwithstanding the provisions of paragraphs 10 and 11 above the
following provisions will apply with respect to the $6,000,000.00 in promissory
notes ( collectively the "Gershberg Notes") executed and delivered to MBC
pursuant to the loan agreement between Bagel Bros. Bakery & Deli, Inc., ("Bagel
Bros.") et al., as borrower and MBC, as lender, dated as of June 28, 1996. In
the event, MBC recovers money on account of its claims under the Gershberg Notes
or on account of that portion of MBC's claims in the Chapter 11 case of Bagel
Bros., et al. which are allocable to the Gershberg Notes the net proceeds
recovered on account thereof shall be allocated in accordance with the
provisions of paragraph 10 above. In the event, the final resolution of the
claims which MBC is pursuing on account of the Gershberg Notes results in MBC
6
<PAGE>
taking back any of the collateral for the Gershberg Notes or becoming the owner
of the corporate stock which secures the Gershberg Notes, the cash and non cash
proceeds (i.e. notes taken back from subsequent third party purchasers of the
collateral) of the liquidation of the collateral for the Gershberg Notes shall
be allocated as between MBC and First Union as set forth in paragraph 10 above
as if the cash and non cash proceeds of the collateral for the Gershberg Notes
were part of First Union's Collateral. In the event the resolution of MBC's
claims under the Gershberg Notes results in a settlement pursuant to which MBC
or a third party designated by MBC pays the obligors of the Gershberg Notes or
their affiliates value to acquire the collateral securing the Gershberg Notes,
or the corporate stock of the makers thereof, such payment shall be reimbursed
to the party advancing same from the proceeds of the sale of the collateral for
the Gershberg Notes as a Third Party Expense as provided for in paragraph 10
above.
13. MBC and I&J agree that any plan of reorganization that they file will
incorporate the terms and conditions of the stipulation to be entered by the
Court. MBC agrees that it will not attempt to further restructure the
Indebtedness beyond the restructuring contemplated hereby. In the event MBC
exclusive period to file a plan is hereafter terminated and an entity other than
MBC files a plan, First Union will have the right to accelerate the maturity
dates of the EDA loan and the Revolver to the date on which such third party
plan is confirmed. First Union shall also have the right to accelerate the
maturity dates of the
7
<PAGE>
EDA loan and the Revolver if MBC case is converted to Chapter 7.
14. Provided any plan of reorganization filed by MBC or I&J, jointly or
with a plan proponent, proposes to pay the Indebtedness in accordance with the
terms and conditions of the stipulation First Union agrees to accept and vote
for such plan.
15. The stipulation will be binding upon MBC, I&J, First Union and any
trustee appointed in Chapter 11 or in a conversion to Chapter 7.
16. Each party to bear its own legal expenses except in the event of a
future default in which event the non-defaulting party will be entitled to
receive their legal fees.
17. Pending the entry of an order approving the stipulation, and such order
becoming final, First Union agrees that MBC and I&J's time to object to its
claims as provided for in the Order Approving Stipulation and Agreement dated
March 13, 1998 shall be extended until (i) the order approving the stipulation
becomes final; or (ii) if the stipulation is not approved by the Bankruptcy
Court or any court authorized to hear appeals therefrom then for a period of ten
(10) days after the order disapproving the stipulation becomes final.
18. This Term Sheet constitutes a settlement proposal and any discussions
in furtherance thereof are made pursuant to Fed. R. Civ. P. 408 and as such
shall not be admissible into evidence or otherwise offered or referred to in any
pending or future proceeding between MBC and I&J and First Union.
8
