SHAREHOLDERS AGREEMENT
OF
PRETZEL TIME, INC.
THIS SHAREHOLDERS AGREEMENT (this "Agreement") is entered into as of
the 2nd day of September, 1997, by and among Xxx. Xxxxxx' Holding Company, Inc.,
a Delaware corporation ("Fields") and Xxxxxx X. Xxxxxxxxx, an individual
resident in the State of Pennsylvania ("Xxxxxxxxx"; Xxxxxxxxx and Fields
collectively hereafter referred to as the "Shareholders" and each individually,
a "Shareholder"), and Pretzel Time, Inc., a Pennsylvania corporation (the
"Corporation").
W I T N E S S E T H:
WHEREAS, the entire authorized capital stock of the Corporation
consists of 1,500 shares, comprised of 1,000 shares of common stock ("Common
Stock"), and 500 shares of non-voting preferred stock ("Preferred Stock";
together with the Common Stock, the "Stock"); and
WHEREAS, the shareholders identified in this recital constitute all of
the owners of all of the currently issued and outstanding shares of Common Stock
of the Corporation, each owning the number of shares of Common Stock set forth
below;
Shareholder Number of Shares
Xxxxxxxxx 44
Fields 56
Total 100
WHEREAS, the parties believe that it is in the best interests of the
Shareholders and the Corporation to impose restrictions on the transfer or other
disposition of the capital stock of the Corporation and to grant options or
impose obligations to purchase or sell such stock upon the occurrence of certain
events; and
WHEREAS, the parties also desire to agree upon certain provisions
relating to the voting of Stock of the Corporation by the Shareholders, and to
certain significant corporate events of the Corporation.
NOW, THEREFORE, for and in consideration of the mutual covenants,
conditions, stipulations and agreements hereinafter contained, the parties have
agreed and do hereby agree as follows:
ARTICLE I
RESTRICTIONS ON TRANSFER
I.1 Restrictions on Transfer. No sale, assignment, transfer, pledge,
hypothecation or other disposition, whether voluntary, involuntary, by operation
of law (not including by merger or consolidation of the Corporation), by gift or
otherwise ("Transfer of Stock"), by any Shareholder of his Stock of the
Corporation, whether now owned or hereafter acquired, or of any right or
interest therein, including, without limitation, any community interest in such
shares of Stock attributable to the spouse of a Shareholder, any separately held
Stock of the spouse of a Shareholder, any Stock held by the minor child or minor
children of a Shareholder and any Stock held in trust for a Shareholder, his
spouse, minor child or minor children, shall be valid unless made in accordance
with the terms and provisions of this Agreement. Notwithstanding the foregoing,
a Shareholder may Transfer to a (i) revocable grantor trust created for the
benefit of the transferring Shareholder, or (ii) a trust for the benefit of the
lineal descendants of the Shareholder or the spouse of the Shareholder, or (iii)
other similar transfers for legitimate estate planning purposes (each, a
"Permitted Transferee"); provided, that, all shares of Stock transferred shall
be subject to all terms and conditions of this Agreement as if still owned by
the Shareholder who made the transfer, and subject to the provisions of Section
12.1 hereof.
I.2 Method of Transfer. None of the Shareholders of the Corporation
shall make any Transfer of Stock in the Corporation unless such Shareholder
shall have first obtained the written consent of all of the other Shareholders
or unless he shall have first offered all of his shares of Stock subject to
transfer to the Corporation and to all the other Shareholders in the manner and
to the extent hereinafter set forth:
(a) Notice of Third-Party Offer. Any Shareholder desiring to
effect a Transfer of Stock in the Corporation ("Offeror") shall send to
the Corporation and to the other Shareholders a notice (the "Offer
Notice") that includes a true copy of a bona fide written offer
("Offer") for the purchase of all or any portion of the Stock of the
Offeror, together with reasonable information requested by the
Corporation or the other Shareholders from which a judgment may be made
as to the ability of the prospective purchaser to so purchase and as to
the desirability of permitting the prospective purchaser to be a
shareholder of the Corporation.
(b) Fields Option. If Fields is not the Offeror, Fields shall
have a first option to purchase, and the Offeror shall have the
obligation to sell to Fields, all or any portion of his Stock subject
to the Offer at the same price per share and upon substantially the
same terms and conditions contained in such Offer. Fields shall
exercise such option by sending written notice thereof to the Offeror,
with a copy to the other Shareholders. The Fields option shall
otherwise expire thirty (30) days after the Offer Notice is received by
Fields and the other Shareholders.
(c) Xxxxxxxxx Option. If Fields is the Offeror of Stock in the
Corporation, and: i) Prior to the exercise of Fields "come along"
rights set forth in Section 1.2(f), below, or (ii) if Fields does not
exercise or is not entitled to exercise its "come along" rights set
forth in Section 1.2(f), Xxxxxxxxx shall have a first option to
purchase, and Fields shall have the obligation to sell to Xxxxxxxxx,
all or any portion of the shares of Stock held by Fields in the
Corporation subject to the Offer at the same price per share and upon
substantially the same terms and conditions contained in the Offer.
Xxxxxxxxx shall exercise his option by sending written notice thereof
to Fields, with a copy to the other Shareholders. The Xxxxxxxxx option
shall otherwise expire thirty (30) days after the Offer Notice is
received by Xxxxxxxxx and the other Shareholders. The right set forth
in this Section shall not apply in the event of an initial public
offering of the Stock of the Corporation, Fields, or any Affiliate of
Fields (i.e., Xxxxxxxxx shall not have the right to acquire Fields'
Stock in the Corporation, or in any Affiliate of Fields, in the event
of an initial public offering of the Stock of the Corporation, Fields,
or any Affiliate of Fields). For purposes of this Agreement, an
"Affiliate" of a person (including Fields) shall mean a person that
directly, or indirectly through one or more intermediaries, controls or
is controlled by, or is under common control with, the person
specified.
(d) Corporation and Shareholders' Option. Subject to Section
1.2(f), below, in the event that Fields or Xxxxxxxxx fails to exercise
its option to purchase all of the Stock subject to the Offer within the
30-day period referred to in Section 1.2(b) or 1.2(c), above, the
Shareholders (including Fields and Xxxxxxxxx) and the Corporation shall
have the option to purchase, and the Offeror shall have the obligation
to sell, all or any portion of any such Stock as Fields or Xxxxxxxxx
did not purchase, at the same price per share and upon substantially
the same terms and conditions contained in the Offer. Such Stock may be
purchased in such proportion as the Shareholders and the Corporation
may agree among themselves or, in the absence of an agreement, in the
same proportion in which the Stock owned by each of the Shareholders
bears to all of the issued and outstanding Stock held by all of the
Shareholders, excluding the Stock owned by the Offeror and any
non-purchasing Shareholders. In the event that all of the Shareholders
(including Fields and Xxxxxxxxx) desire to participate as described in
the previous sentence, resulting in their exercising the option to
purchase all of the Stock, the Corporation shall not participate in
purchasing the Stock. The Shareholders shall exercise their option to
so purchase by sending written notice thereof to the Offeror, the
Corporation and the other Shareholders within seventy (70) days after
the date the Offer Notice is received by the Corporation and the other
Shareholders.
(e) Right to Tag-Along. As an alternative to the rights of
first refusal set forth in this Section 1.2, a Shareholder shall have
the right to "tag along" and sell his Stock along with the Stock being
sold by the Offeror to a third party (including an Affiliate) as
described in Section 1.2(h) below. The preceding sentence shall not
apply to a tax free reorganization of a Shareholder with an Affiliate
or Affiliates of such Shareholder. Any Shareholder not exercising his
right of first refusal pursuant to Section 1.2(b) or 1.2(c) to acquire
some or all of the Stock of the Offeror subject to the Offer, may
alternatively give notice within eighty (80) days of the date of
receipt of the Offer Notice of his intention to sell his Stock if given
the opportunity pursuant to Section 1.2(h) below (such Shareholders are
hereafter referred to as the "Tag Along Shareholders").
(f) Obligation to Come Along. Subject to Section 1.2(c) above
(and the thirty (30) day time period set forth therein), in the event
that Fields is an Offeror with respect to any proposed Transfer of
Stock, then at Fields' election, notice of which shall be given as a
part of the Offer Notice, all other Shareholders (collectively, the
"Come-Along Shareholders") shall be required to "come along" with
Fields and sell, upon the terms of the Offer, their Stock along with
the Stock being sold by Fields to the prospective purchaser identified
in the Offer Notice; provided that Fields also delivers to the
Come-Along Shareholders an opinion that, based on the fair market value
of the Corporation (taking into account the Corporation's tangible and
intangible assets, including good will and the value of its brand as
well as the Corporation's liabilities), the Offer is fair to the
Come-Along Shareholders. The opinion shall be given by an independent
third party qualified to give such opinions, selected by agreement of
all of the Shareholders. If the Shareholders cannot agree upon the
selection of such third party within forty five (45) days of the date
of receipt of the Offer Notice by the Come-Along Shareholders, then the
Board of Directors of the Corporation shall select the appraiser within
sixty (60) days of the date the Offer Notice is received by the
Corporation and the Come-Along Shareholders. At least one (1) Fields
Director and one (1) Xxxxxxxxx Director (both as defined below) must
agree to the selected appraiser. The fairness opinion shall be
delivered within thirty (30) days after the appointment of the
appraiser required by this subsection and any costs associated with
procuring the opinion shall be paid by the Corporation. When issued,
the opinion shall be final and binding upon the Shareholders and the
Corporation. Fields shall have no right to make a come-along election
described in this Section 1.2(f) if the Offer is made by an Affiliate
of Fields.
(g) Delivery of Stock. In the event the Corporation and/or the
Shareholders purchase any or all of the Stock pursuant to this Article
I, the purchase price shall be paid upon substantially the same terms
and conditions as contained in the Offer within ten (10) days after the
expiration of the last date of any option to purchase. Upon receipt of
the purchase price, the holder thereof or his representative shall
assign and deliver such Stock to the appropriate party.
(h) Sale to Third Party. In the event that Stock has been
offered for sale under and pursuant to this Section 1.2, and the
Corporation and/or the other Shareholders have not collectively
exercised their options to purchase all of the Stock subject to the
Offer, then the Offeror may sell or dispose of any remaining Stock, but
only to the original prospective purchaser upon the terms and
conditions contained in the Offer; provided that if any Shareholder has
elected to become a Tag-Along Shareholder pursuant to Section 1.2(e)
above, then each such Tag-Along Shareholder shall have the right to
sell a designated portion of his Stock along with the Stock of the
Offeror on the terms described in the Offer Notice in accordance with
the procedures set forth in this Section 1.2(h). Upon the expiration of
the eighty (80) day period described in Section 1.2(e), if there
remains any Stock subject to the Offer that has not been purchased by
the Corporation or by the other Shareholders, the Offeror shall use his
best efforts to interest the prospective purchaser in purchasing all of
the remaining Offered Stock held by the Offeror subject to the Offer,
as well as all of the Stock designated by the Tag-Along Shareholders
(the total of all of these shares is hereafter offered to as the
"Available Stock"). If the prospective purchaser does not desire to
purchase the entire number of shares of Available Stock, then the
Offeror and each of the Tag-Along Shareholders shall be entitled to
sell to the prospective purchaser their pro rata portion of the Stock
to be purchased by the prospective purchaser ("Adjusted Stock"),
calculated for the Offeror and the Tag-Along Shareholders, in
accordance with the following formula for the Offeror and each
Tag-Along Shareholder:
Offeror's (or Tag Along
Shareholder's) shares of Stock Adjusted
______________________________ x Stock
Available Stock
Any sale or disposition under Section 1.2(h) must occur within sixty
(60) days after the expiration of the last date of any option or right
to purchase; provided, however, that such sale or disposition shall not
be in violation of any state or federal securities laws and, provided
further, that each purchaser who acquires the same shall agree in
writing to be bound by all of the terms and conditions of this
Agreement, shall hold the Stock subject to the terms and conditions of
this Agreement, and shall thereupon be considered a "Shareholder" as
that term is used and defined herein. Any shares of Stock that are not
sold or disposed of within such sixty (60) day period shall again
become fully subject to the terms of the Agreement.
I.3 Transfer Contrary to Agreement. Any purported transfer in violation
of any provisions of this Agreement shall be void and ineffectual, shall not
operate to transfer any interest or title in the purported transferee, and shall
give the Corporation and the other Shareholders an option to purchase such Stock
in the manner and on the terms and conditions provided for herein.
ARTICLE II
PURCHASE UPON DEATH
II.1 Redemption.
(a) On the death or permanent disability (as determined by a physician
selected by the Board of Directors of the Corporation with the
concurrence of one (1) Fields Director and one (1) Xxxxxxxxx Director)
of any Shareholder (each referred to herein as the "Deceased
Shareholder"), the Corporation will purchase from the Deceased
Shareholder, his estate or trustee of the trust referred to in Section
1.1 (the "Trustee") of the Deceased Shareholder, and the Deceased
Shareholder, his estate or the Trustee will sell to the Corporation
and/or Fields no less stock of the Deceased Shareholder at the purchase
price per share set forth in Section 2.3 and upon the terms and
conditions set forth in Section 2.3, than will result in the payment by
the Corporation of an aggregate amount equal to the maximum amount
which, to the Deceased Shareholder and his estate, may be treated as a
distribution in full payment in exchange for stock under Section 303 of
the Internal Revenue Code of 1986, as amended ("Code"). In addition,
the Corporation may elect to redeem the balance of the Deceased
Shareholder's stock in accordance with this Section 2.1(a). In the
event that subsequent to the redemption, there is an adjustment in the
federal estate taxes payable by the estate of the Deceased Shareholder,
which increases the amount of such taxes, then the Corporation will
redeem and the estate of the Deceased Shareholder will sell that number
of additional shares of Stock then owned by the estate of the Deceased
Shareholder, which may be treated as a distribution in full payment in
exchange for stock under Section 303 of the Code.
(b) Notwithstanding the provisions of Section 2.1(a), in the event that
the Deceased Shareholder is a Permitted Transferee of Xxxxxxxxx, then
the shares of Stock of such Deceased Shareholder may be transferred to
a Permitted Transferee of Xxxxxxxxx without triggering any first
refusal rights of the Corporation or the other Shareholders described
in this Agreement.
II.2 Remaining Shareholders' Obligation. To the extent that the
Corporation does not purchase all of the Stock of the Deceased Shareholder, the
remaining Shareholders shall purchase from the Deceased Shareholder or his
estate, and from the Permitted Transferees of the Deceased Shareholder, and the
Deceased Shareholder, his estate and the Permitted Transferee's thereof shall
sell to the remaining Shareholders, all shares of Stock held by them on the same
price and terms as were available to the Corporation in Section 2.1(a). Such
Stock may be purchased in such proportion as the Shareholders may agree among
themselves or, in the absence of an agreement, in the same proportion in which
the Stock owned by each of the Shareholders bears to all of the Stock held by
all of the Shareholders, excluding the Stock owned by the Deceased Shareholder,
his estate and the Permitted Transferees.
II.3 Payment of Purchase Price. With respect to any Stock of the
Deceased Shareholder being acquired by the Corporation, in accordance with
Section 2.1(a), the purchase price shall be paid in full in cash or cash
equivalent within one hundred twenty (120) days after the death (or
determination of permanent disability) of the Deceased Shareholder. With respect
to the Stock of the Deceased Shareholder and the Permitted Transferees of the
Deceased Shareholder being acquired by the remaining Shareholders pursuant to
Section 2.2, a minimum of fifty percent (50%) of the Purchase Price of the Stock
of the Deceased Shareholder and his Permitted Transferees being acquired shall
be paid by the purchaser thereof to the estate of the Deceased Shareholder and
the Permitted Transferees within one hundred twenty (120) days after the later
of: (i) the date of the death of the Deceased Shareholder, or (ii) the date of
the determination of the Purchase Price (the "Payment Date"). The remaining
portion of the Purchase Price, if any, shall be paid in five (5) equal
consecutive annual installments of principal together with interest thereon each
payable on the anniversary of the Payment Date, with such unpaid portion of the
Purchase Price bearing annual interest at the prime rate set forth in the Wall
Street Journal on the date of issuance of the promissory note described below.
Such obligation shall be evidenced by a promissory note to be delivered with the
initial payment.
II.4 Additional Terms of Promissory Note. The promissory note to be
delivered by the Corporation and/or any surviving Shareholder under Section 2.3
shall provide that the maker shall have the privilege of prepaying all or any
part thereof at any time with interest to the date of prepayment, that a default
in any payment when due shall cause the remaining unpaid balance to become due
and payable forthwith and shall further provide for the maker to pay all costs
and expenses of collection, including reasonable attorneys' fees. The
obligations of the maker under the note shall be secured by the Stock being
purchased.
II.5 Delivery of Stock. To the extent that the Purchase Price for the
Stock of the Deceased Shareholder has been paid in full in cash, the certificate
or certificates representing such Stock shall be delivered to the purchaser at
the closing of the purchase and sale. To the extent that such Stock serve as
security for payment of a promissory note, the certificate or certificates
representing such shares shall be delivered to the seller thereof, duly endorsed
in blank for transfer or accompanied by a duly executed stock power to be held
by such seller as security for the payment of the note until such time as the
note has been paid in full.
ARTICLE III
PURCHASE UPON TRANSFER BY OPERATION OF LAW
III.1 Purchase Upon Operation of Law. In the event a Transfer of Stock
of any Shareholder is effected (and is not void as otherwise provided in this
Agreement) by operation of law (other than death or divorce as specifically
provided for in this Agreement) including, but not limited to, any bankruptcy
proceedings or any appointment of a receiver of the assets of such Shareholder
("Transferring Shareholder"), which proceeding or appointment is not terminated
within ninety (90) days of the date of such commencement or appointment, the
Transferring Shareholder shall send to the Corporation and the other
Shareholders, within five (5) days after such transfer, notice of such transfer
("Transfer Notice") that includes the name and address of the transferee of such
Stock ("Transferee").
III.2 Fields Option. Fields shall have the option to purchase, and the
Transferring Shareholder and his legal representatives (including, but not
limited to, any receiver or trustee in bankruptcy) shall have the obligation to
sell to Fields, all or any portion of the Stock of the Transferring Shareholder
that were transferred ("Transferred Stock") to the Transferee under Section 3.1.
Such option shall be exercised by sending written notice to the Transferring
Shareholder (unless prohibited by applicable law, in which case such notice
shall be sent to the trustee of the bankruptcy estate or to such other party as
the bankruptcy court may direct) and to the Transferee, with a copy to the other
Shareholders, and shall expire ninety (90) days after the Transfer Notice is
received by the Corporation and the other Shareholders.
III.3 Corporation's and Shareholders' Option. Upon the failure of
Fields to exercise its option to purchase the Transferred Stock, the
Shareholders (including Fields) and the Corporation shall have the option to
purchase and the Transferring Shareholder and his legal representatives,
including, but not limited to, any receiver or trustee in bankruptcy, shall have
the obligation to sell, all or any portion of the Transferred Stock that Fields
did not purchase at the same price and terms available to Fields. Such Stock may
be purchased in such proportion as the Shareholders and the Corporation may
agree among themselves or, in the absence of an agreement, in the same
proportion in which the Stock owned by each of the Shareholders bears to all of
the issued and outstanding Stock owned by all of the Shareholders, excluding the
Stock owned by the Transferee and any non-purchasing Shareholders. In the event
that all of the Shareholders desire to participate as described in the previous
sentence, resulting in their exercising the option to purchase all of the Stock,
the Corporation shall not participate in purchasing the Stock. Such option shall
be exercised by sending written notice thereof to the Transferee and the
Corporation and shall expire one hundred and twenty (120) days after the
Transfer Notice is received by the Corporation and the Shareholders.
III.4 Determination of and Payment of Purchase Price. The Purchase
Price to be paid by Fields, the Corporation and/or the other Shareholders, as
the case may be, for the Transferred Stock acquired pursuant to this Article III
shall be determined and shall be paid as set forth in Article V hereof.
III.5 Expiration of Options. If the Corporation and/or the Shareholders
fail to exercise their options to purchase all (and not less than all) of the
Transferred Stock prior to the expiration of their respective options, then all
of the Transferred Stock shall be retained by the Transferee or his legal
representative subject to the terms and conditions of this Agreement and such
Transferee or his legal representative shall thereupon be considered a
"Shareholder" as that term is used and defined herein. Such Transferee shall
execute such documents as are reasonably requested by the Corporation or the
Shareholders to evidence the above.
ARTICLE IV
PURCHASE UPON DIVORCE
IV.1 Purchase Upon Divorce. In the event that all or any interest in
the Stock of the Corporation is awarded, granted or otherwise partitioned to the
spouse or former spouse of a Shareholder ("Former Spouse") pursuant to the terms
of a decree of divorce or any agreement between the parties pursuant to the
terms of a decree of divorce or property settlement, division, separation, or
divorce action (collectively, "Property Division"), the divorced Shareholder
("Divorced Shareholder") shall have the option to purchase, and such Former
Spouse shall have the obligation to sell, all or any portion of the Stock so
awarded to his Former Spouse. Such option shall be exercised by sending written
notice to the Former Spouse and shall expire sixty (60) days after the date of
the Property Division. The Purchase Price to be paid by the Divorced Shareholder
to the Former Spouse for such Stock shall be determined and paid as set forth in
Article V hereof. If the Divorced Shareholder fails to exercise his option to
purchase all of the Stock of the Former Spouse within the time period set forth
above or earlier elects not to make such purchase, the Divorced Shareholder
shall send to the Corporation and the other Shareholders notice of the Property
Division ("Divorce Notice"). Such Divorce Notice shall be sent within five (5)
days after the earlier of: (i) expiration of the option, or (ii) the election by
the Divorced Shareholder not to make such purchase.
IV.2 Fields Option. In the event that the Divorced Shareholder fails to
purchase all of the Stock awarded to the Former Spouse in the Property Division,
Fields shall have an option to purchase, and such Former Spouse shall have the
obligation to sell to Fields, all or any portion of such Stock as the Divorced
Shareholder failed to purchase at the same price and terms available to the
Divorced Shareholder. Fields shall exercise its option to so purchase by sending
written notice thereof to the Former Spouse and the Divorced Shareholder, with a
copy to the Corporation and the other Shareholders, and such option shall expire
thirty (30) days after the Divorce Notice is received by the Corporation and the
other Shareholders.
IV.3 Corporation and Shareholders' Option. In the event that the
Divorced Shareholder and Fields together fail to exercise their options to
purchase all of the Stock of the Former Spouse, the Shareholders (including
Fields) and the Corporation shall have the option to purchase, and such Former
Spouse shall have the obligation to sell, all or any portion of such Stock of
the Former Spouse as the Divorced Shareholder and Fields did not purchase
pursuant at the same price and terms available to the Divorced Shareholder and
Fields. Such Stock may be purchased in such proportion as the Shareholders and
the Corporation may agree among themselves or, in the absence of an agreement,
in the same proportion in which the Stock owned by each of the Shareholders
bears to all of the issued and outstanding Stock owned by all of the
Shareholders, excluding the Stock owned by the Former Spouse and the
non-purchasing Shareholders. In the event that all of the Shareholders desire to
participate as described in the previous sentence, resulting in their exercising
the option to purchase all of the Stock, the Corporation shall not participate
in purchasing the Stock. Such option shall be exercised by sending written
notice thereof to the Former Spouse, the Corporation and the Divorced
Shareholder and shall expire fifty (50) days after the Divorce Notice is
received by the Corporation and the other Shareholders.
IV.4 Determination of and Payment of Purchase Price. The Purchase Price
to be paid by Fields, the Corporation and/or the other Shareholders, as the case
may be, for the Stock of the Former Spouse acquired pursuant to this Article IV
shall be determined and paid as set forth in Article V hereof.
IV.5 Former Spouse Subject to this Agreement. If the Divorced
Shareholder, the Corporation and/or the other Shareholders fail to purchase all
(and not less than all) of the Stock of the Former Spouse prior to the
expiration of their respective options, then all of such Stock shall be retained
by the Former Spouse subject to the terms and conditions of this Agreement, and
such Former Spouse shall thereupon be considered a "Shareholder" as that term is
used and defined herein. The Former Spouse shall execute such documents as are
reasonably requested by the Corporation or the Shareholders to evidence the
above.
ARTICLE V
DETERMINATION AND PAYMENT OF PURCHASE PRICE
V.1 Determination of Purchase Price. The Corporation, the Shareholders,
the estate, the Trustee, or the Former Spouse, as the case may be, who desire or
who are obligated to purchase or sell Stock pursuant to Articles II, III, or IV
hereof shall attempt within thirty (30) days after the Option Expiration Date to
agree upon the purchase price (the "Purchase Price") per share to be paid. For
purposes of this Agreement, the "Option Expiration Date" shall mean the date on
which all options relating to Stock have been exercised in full (or, in the
event of partial option exercises, the date on which any remaining options
relating to such Stock have expired or the holders of such options have given
notice to all other parties hereto of their intent not to exercise such
options). If no such agreement is reached within such time period, then the
Purchase Price which the Corporation and/or the Shareholders shall pay for each
share of Stock which they purchase shall be determined by an appraiser selected
by the Board of Directors. Such appraiser shall be selected with the concurrence
of at least one (1) Fields Director and one (1) Xxxxxxxxx Director.
V.2 Payment. With respect to any Stock to be acquired by the
Corporation and/or the Shareholders under Articles III or IV hereof, the
Purchase Price for such Stock shall be paid as follows:
(a) Ten percent (10%) of the Purchase Price shall be paid in
cash within ninety (90) days after the Option Expiration Date (the
"Initial Payment Date").
(b) The remaining ninety percent (90%) of the Purchase Price
shall be paid in no more than five (5) equal consecutive annual
installments of principal together with interest thereon each payable
on the anniversary of the Initial Payment Date, with such unpaid
portion bearing interest at the prime rate plus one percent (1%) as
announced in the Wall Street Journal on the date of issuance of the
promissory note described below, commencing as of the Initial Payment
Date. Such obligation shall be evidenced by a promissory note to be
delivered by the applicable purchaser with the initial payment.
V.3 Terms of Promissory Note. The promissory note referred to in
Section 5.2 above shall provide that the maker shall have the privilege of
prepaying all or any part thereof at any time with interest to the date of
prepayment, that a default in any payment when due shall cause the remaining
unpaid balance to become due and payable forthwith and shall further provide for
the maker to pay all costs and expenses of collection, including reasonable
attorneys' fees. The obligations of the maker under the note shall be secured by
the Stock being purchased.
V.4 Delivery of Stock. To the extent that the Purchase Price for the
Stock being purchased under Articles III or IV hereof has been paid in full in
cash, the certificate or certificates representing such Stock shall be delivered
to the purchaser at the closing of the purchase and sale. To the extent that
such Stock serve as security for payment of a promissory note, the certificate
or certificates representing such Stock shall be delivered to the seller
thereof, duly endorsed in blank for transfer or accompanied by a duly executed
stock power, to be held by such seller as security for the payment of the note
until such time as the note has been paid in full.
ARTICLE VI
INSURANCE
VI.1 Life Insurance. The Board of Directors of the Corporation shall
from time to time consider the need to carry insurance on the lives of the
Shareholders in order to fund its obligation to purchase their Stock upon their
death and to the extent the resolution of the Board of Directors references that
such policies are acquired pursuant to this Agreement such policies shall be
governed by this Article VI.
VI.2 Incidents of Ownership. The Corporation shall be the beneficiary
of all life insurance policies on the Shareholder's lives and shall retain
possession of such policies. The Corporation shall be the sole owner of such
policies subject to this Agreement and it is intended that the Corporation shall
have all incidents of ownership therein. Accordingly, the Corporation shall have
the exclusive right to receive all dividends from said policies, the right to
borrow on said policies and the right to exercise any other privilege or option
accruing to the owner of such policies. However, it is expressly understood and
agreed that the Corporation shall not exercise its right to change the
beneficiary arrangements under such policies or borrow on any policy owned by it
without giving thirty (30) days' prior written notice thereof to the appropriate
Shareholder.
VI.3 Payment of Premiums. The Corporation shall pay all premiums
falling due on all policies subject to this Article VI and, to the extent that
such premiums exceed the annual increase in the cash surrender value, the
Corporation shall treat such payments as a corporate expense, and such expense
shall enter into the determination of the net profit or loss of the Corporation
as would any other corporate expense. In case any premium is not paid within
twenty (20) days after its due date, the appropriate Shareholder shall have the
option to pay such premium on behalf of the Corporation. Such payment shall be
considered a loan to the Corporation and the Shareholder shall be entitled to
recover such loan from the Corporation. If such Shareholder does not exercise
such option within said period, the remaining Shareholders, joint or severally,
shall have the option to pay such premium on behalf of the Corporation. Such
payment shall constitute a loan to the Corporation, and such Shareholder(s)
shall be entitled to recover such loan from the Corporation.
VI.4 Right to Purchase Policies. In the event that a Shareholder ceases
to be a party to this Agreement by selling or otherwise disposing of all of his
Stock, the former Shareholder shall have the right to purchase from the
Corporation the insurance policies on his life for a price equal to the cash
surrender value of the policies at the date of such termination. The price shall
be paid by the former Shareholder contemporaneously with the delivery by the
Corporation of the policies to such Shareholder, and the Corporation shall
execute all necessary instruments of transfer. In the event any policies of
insurance subject to the foregoing option are not so purchased, such policies
will cease to be subject to the terms of this Agreement.
ARTICLE VII
BOARD OF DIRECTORS; OFFICERS
VII.1 Number of Directors. The Shareholders agree that the number of
directors of the Corporation shall be five (5) and that such number may not be
increased or decreased without the affirmative vote of each Shareholder.
VII.2 Designated Directors. The Shareholders covenant and agree that
they shall vote their Stock in such a manner as to nominate and elect (i) two
persons designated by Fields (the "Fields Directors"), (ii) two persons
designated by Xxxxxxxxx (the "Xxxxxxxxx Directors"), and (iii) one person
recommended by the four chosen as aforesaid.
VII.3 Quorum of Directors. A majority of the directors shall constitute
a quorum at a meeting of the directors provided that one (1) Xxxxxxxxx Director
and one (1) Fields Director are present for purposes of determining quorum.
Business may be continued after withdrawal of enough directors to leave less
than a quorum present at any such meeting. The affirmative vote of a majority of
the directors at a meeting at which a quorum is present shall be the act of the
Board of Directors. This voting requirement shall apply to all matters before
the directors. Any action that may be taken at any meeting of the directors, may
be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing setting forth the action so taken is signed by
all of the directors.
VII.4 Appointment of Officers. The initial designated officers of the
Corporation, to serve until their successors have been duly elected and
qualified, shall be as follows:
President & CEO: Xxxxx X. Xxxxxx
Vice President: Xxx Xxxxxx
Treasurer: L. Xxx Xxxxxx
Vice President
and Secretary: Xxxxxxx X. Xxxx
Each of the officers shall have the respective duties and responsibilities set
forth in the Corporation's Amended and Restated Bylaws.
VII.5 Management. Certain management functions of the Corporation shall be
performed by Xxx. Xxxxxx' Original Cookies, Inc. ("MFOC"), pursuant to that
certain Management Agreement of even date by and between MFOC and the
Corporation. Fields shall cause MFOC, one of its affiliated companies, to enter
into the Management Agreement.
ARTICLE VIII
EXTRAORDINARY CORPORATE ACTIONS
VIII.1 The following actions of the Corporation shall require the
affirmative vote of at least one of the Xxxxxxxxx Directors and one of the
Fields Directors:
(a) The Corporation or any subsidiary obtaining or permitting
to exist, any loan, advance, or other borrowing, whether secured or
unsecured or in the ordinary course of business of the Corporation.
(b) The Corporation or any subsidiary creating any security
interest or lien against itself or any of its assets.
(c) The issuance or sale of any security of the Corporation or
any subsidiary including, without limitation, any share, option,
warrant, bond, note, debenture, or other instrument convertible into
any of the foregoing.
(d) Any amendment to the articles of incorporation, bylaws, or
other organizational documents of the Corporation or any subsidiary.
(e) The sale of all or substantially all of the assets of the
Corporation or any subsidiary, or the merger, consolidation, or other
corporate reorganization of the Corporation or any subsidiary of the
Corporation in any single or series of related transactions.
(f) The Corporation or any subsidiary thereof guaranteeing or
becoming liable in any way as a surety, endorser, or accommodation
endorser or otherwise for debts or obligations of any other person or
entity, other than in the ordinary course of business.
(g) The declaration or payment of any dividend either in cash,
stock of the Corporation or any subsidiary; or the redemption or
retirement or purchase of any shares of Stock, or any Subsidiary's
stock.
(h) The commencement of voluntary bankruptcy or insolvency
proceedings by the Corporation.
(i) Approval of the budgets of the Corporation.
(j) The dissolution, liquidation, cessation of business, or
winding up of the Corporation.
(k) The acquisition of the assets, stock or other equity of an
entity engaged in the selling or franchising of pretzels (whether
retail or wholesale).
VIII.2 In addition to the foregoing, the Corporation hereby grants to
each Shareholder a preemptive right to purchase additional shares of Stock or
other securities of the Corporation, prior to their issuance or sale to any
third party. Such right shall be senior to any other preemptive rights that may
be granted by the Corporation to any third party. To the extent that a
Shareholder does not elect to invoke his preemptive rights, the remaining
Shareholders shall be entitled to share pro rata in such Shareholder's
preemptive rights. This preemptive right shall terminate with respect to a
Shareholder when such Shareholder is no longer a shareholder of the Corporation.
ARTICLE IX
FIELDS AS FRANCHISOR
Fields hereby covenants and agrees on behalf of itself and its
Affiliates that it will only engage in the selling or franchising of pretzels
(whether retail or wholesale) through the Corporation. Notwithstanding the
forgoing, Fields and its Affiliates shall not be precluded from the continuation
of its pretzel franchise operations existing on or before the date of this
Agreement.
ARTICLE X
ADDITIONAL SHAREHOLDER MATTERS
X.1 Loan to the Corporation. If the Board of Directors determines,
pursuant to Section 8.1(k) to acquire all or substantially all of the assets,
stock, or other equity of a retail pretzel business, and determines that the
Corporation has insufficient funds available for such an acquisition, then
Fields and Xxxxxxxxx hereby agree to loan such funds to the Corporation for the
purpose of the acquisition, subject to the following conditions:
(a) To the extent that third party financing is unavailable as
determined by the Board of Directors, each of Fields and Xxxxxxxxx
shall loan (a "Fields Loan" or a "Xxxxxxxxx Loan") to the Corporation
such funds as are required to make the acquisition, in proportion to
their ownership of Stock in the Corporation;
(b) To the extent that Xxxxxxxxx lacks the financial resources to make
the Xxxxxxxxx Loan, as reasonably determined by the Board of Directors
pursuant to Section 8.1(k), then Fields shall make the Xxxxxxxxx Loan
to the Corporation; and
(c) With respect to Fields making the Xxxxxxxxx Loan to the
Corporation, interest thereon shall be payable to Fields on the
Xxxxxxxxx Loan at the prime rate as announced in the Wall Street
Journal on the date of the loan plus 7%; provided, that repayment of
the principal of the loan shall be paid to Fields from dividends
payable on his Stock, and from bonuses payable pursuant to his
Employment Agreement with the Corporation.
X.2 Acquisition of Stock from Xxxxxxxxx. Xxxxxxxxx and Fields hereby
covenant and agree that Fields shall acquire 4 shares of Stock held by Xxxxxxxxx
in the Corporation on or before January 9, 1998, but no earlier that January 2,
1998. The purchase price shall be $75,000 per share and shall be evidenced by a
Stock Purchase Agreement, in the form attached hereto as Exhibit X. Xxxxxxxxx
and Fields acknowledge that performance of their obligations hereunder
constitutes sufficient consideration for agreement of Xxxxxxxxx and Fields set
forth in this section.
ARTICLE XI
PRINCIPAL OFFICE
Principal Office. No later than October 2, 1997, the principal office
of the Corporation shall be relocated to 000 Xxxx Xxxxxxx Xxxxx, Xxxx Xxxx Xxxx,
XX, 00000, and the present office of the Corporation in Pennsylvania shall be
closed.
ARTICLE XII
MISCELLANEOUS
XII.1 Stock Acquired Under Agreement. So long as this Agreement is in
effect, any Stock acquired by any person shall be subject to the terms hereof,
and any party not presently a Shareholder receiving or purchasing Stock of the
Corporation shall be required, as a condition precedent to such receipt or
purchase, to agree in writing (by executing a counterpart of the document
attached hereto as Exhibit B) to be bound by all the terms of this Agreement in
the same manner and to the same extent as if he or she were a party hereto.
XII.2 Shareholder Representations. Xxxxxxxxx hereby represents and
warrants that: (i) he has delivered to Fields the resignations of all members of
the Board of Directors of the Corporation holding office immediately prior to
the execution hereof; (ii) the shares of Common Stock identified as issued and
outstanding in the second recital of this Agreement are the only shares of
Common Stock outstanding on the date hereof; (iii) there is not currently in
force any shareholders, co-sale, buy-sell or other similar agreement with
respect to capital stock of the Corporation (except for written agreements with
respect to Preferred Stock that have been made available to Fields); (iv) none
of the actions that the Corporation is authorized or required to take under this
Agreement shall, if taken by the Corporation, breach any agreement, contract,
regulation or law enforceable against Corporation, or its agents, successors or
assigns, by any third party, including, without limitation, any franchisee or
area developer of the Corporation. Each Shareholder hereby represents and
warrants that they have read and approved the Bylaws and Articles of
Incorporation of the Corporation, the Stock Acquisition Agreement entered into
among Lisiewski, Fields, and the Corporation dated September 2, 1997, and all
Related Transaction Documents identified therein.
XII.3 Share Certificates. There shall be included on the stock
certificates issued to each Shareholder (including any person who becomes a
Shareholder after the date hereof), in addition to any other legend required by
the Corporation, substantially the following provision:
The shares represented by this certificate are subject to certain
conditions and restrictions as to transfer under the terms of a
Shareholders Agreement entered into by this Corporation and its
shareholders, dated as of September 2, 1997, a true and correct copy of
which is on file at the principal place of business of the Corporation.
Thereafter, the certificates shall be delivered to the Shareholders, who shall,
subject to the terms of this Agreement, be entitled to exercise all rights of
ownership in such Stock. All Stock hereinafter issued to the Shareholders shall
bear the same legend.
XII.4 Termination. The terms and provisions of this Agreement shall
terminate upon the occurrence of any of the following events:
(a) Upon the receivership, bankruptcy or dissolution of the
Corporation;
(b) Upon the mutual written agreement of all parties who are
then subject to the terms hereof;
(c) With respect to any single Shareholder, upon the transfer
by such Shareholder of all of his Stock in accordance with the terms
and conditions of this Agreement such that he no longer owns directly
or indirectly any Stock in the Corporation that are subject to this
Agreement; or
(d) Upon the happening of the following events as contemplated
by that certain Exchange Agreement between Fields and Xxxxxxxxx of even
date herewith: an exchange of Xxxxxxxxx'x Common Stock in the
Corporation for securities of Fields or an Affiliate of Fields (the
"Exchange Shares"), which Exchange Shares shall be entitled to the
benefits of a Registration Rights Agreement between Fields and
Xxxxxxxxx of even date herewith.
In the event of the termination of this Agreement other than as set forth in
Section 8.3(c), the outstanding Stock of the Corporation shall be free of any
restrictions imposed by this Agreement. Each Shareholder shall surrender to the
Corporation the certificates for his Stock, and the Corporation shall issue to
him in lieu thereof new certificates for an equal number of Stock without the
legend set forth in Section 12.3.
XII.5 Benefit. This Agreement shall be binding upon and inure to the
benefit of the successors, assigns, personal representatives, heirs and legatees
of the respective parties hereto.
XII.6 Entire Agreement; Waiver. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and no
modification, amendment or change of any term or provision of this Agreement
shall be valid or binding unless the same is in writing and signed by all the
parties hereto. No waiver of any of the terms of this Agreement shall be valid
unless signed by the party against whom such waiver is asserted and a waiver at
any time of any of the terms of this Agreement shall not be construed as a
waiver at any subsequent time of the same terms.
XII.7 Notices. Any notice, demand, offer, or other written instrument
required or permitted to be given, made or sent hereunder shall be in writing
and may be sent by personal delivery, overnight courier, registered or certified
United States mail, postage prepaid, return receipt requested, to all required
parties simultaneously at the principal office of the Corporation and at their
respective addresses as set forth in the shareholder records of the Corporation.
Any notice required to be given, made or sent to the estate of any Deceased
Shareholder may be signed and sent, in like manner, to the address of such
Deceased Shareholder and the Trustee, (if applicable). Any person to receive a
notice hereunder shall have the right to change the place to which any such
notice shall be sent by a similar notice sent in like manner to all of the other
parties hereto. Except as otherwise provided herein, all notices sent in the
United States mail in the manner set forth above shall be deemed given or
received on the earlier of actual receipt or four (4) days after being placed in
the United States mail, or in the case of overnight courier, the day after
delivery to the courier service.
XII.8Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Pennsylvania.
XII.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one agreement.
XII.10 Severability. In the event any one (1) or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
XII.11 Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and other
disbursements in addition to any other relief to which such party may be
entitled.
XII.12 Terminology. With respect to terminology in this Agreement, each
number (singular or plural) will include all numbers and each gender (male,
female or neuter) will include all genders. The title of the Sections and the
Articles in this Agreement will have no effect and will neither limit nor
amplify the provisions hereof.
XII.13 Submission to Jurisdiction. Each of the parties submits to the
jurisdiction of any state or federal court sitting in Salt Lake City, Utah, in
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other party with respect thereto. Each
party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
XII.14 Arbitration. All disputes hereunder shall be resolved by binding
arbitration in Salt Lake City, Utah conducted in accordance with the terms of
this arbitration clause. Arbitrations conducted pursuant to this Agreement,
including selection of arbitrators, shall be administered by the American
Arbitration Association (the "Administrator") pursuant to the Commercial
Arbitration rules of the Administrator. Judgment upon any award rendered
hereunder may be entered in any court having jurisdiction. Any party who fails
to submit to binding arbitration following a lawful demand by the opposing party
shall bear all costs and expenses, including reasonable attorney's fees,
incurred by the opposing party in compelling arbitration of any dispute
hereunder.
IN WITNESS WHEREOF, the Corporation and the Shareholders have executed
this Agreement personally or has caused this Agreement to be executed by its
duly authorized representative.
PRETZEL TIME, INC.
By:/s/Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx, President
XXX. XXXXXX' HOLDING COMPANY, INC.,
/s/Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx, Manager
/s/Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx, Individually
EXHIBIT B
Pretzel Time, Inc.
Shareholders Agreement
The undersigned hereby agrees to all of the terms and conditions of the
be bound by the terms and conditions of the Shareholders Agreement of Pretzel
Time, Inc., a Pennsylvania corporation, dated as of September 2, 1997.
Individual Shareholder [OR] Entity Shareholder
Signature Signature
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