Merger Agreement [Amendment] - Noah's New York Bagels Inc. and Einstein Bros. Bagels Inc.
AMENDMENT TO MERGER AGREEMENT
This Amendment (the "Amendment") to Merger Agreement is
made and entered into this 1st day of February, 1996 by and
among Noah's New York Bagels, Inc., a California corporation
(the "Company"), the shareholders and optionholders of the
Company who have executed this Agreement, Einstein Bros.
Bagels, Inc., a Delaware corporation ("Einstein Bros."), and
NNYB Acquisition Corporation, a Delaware corporation
("Merger Sub").
RECITALS
Certain of the parties hereto are also parties,
together with other persons, to a Merger Agreement dated as
of January 22, 1996 (the "Merger Agreement"). Pursuant to
Section 11.1 of the Merger Agreement, the parties hereto
have the right to amend the Merger Agreement in the manner
set forth in this Amendment. The parties to this Amendment
who have not yet executed the Merger Agreement are becoming
parties hereto for the purpose of becoming a party to the
Merger Agreement as amended by this Amendment.
COVENANTS
In consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Sections 1.5 and 1.6 of the Merger Agreement are
hereby amended to read in their entirety as follows:
"1.5 TREATMENT OF SHARES OF THE COMPANY. At and as of
the Effective Time, each outstanding share of capital stock
of the Company shall be converted into the right to receive
an amount in cash (the "Per Share Merger Consideration")
equal to (a) $100,900,000, less the amounts paid to persons
identified in the first sentence of Section 11.2, plus the
aggregate exercise price of all Options (as defined in
Section 1.6) that have not been exercised prior to the
Effective Time, plus the aggregate exercise price received
by the Company upon the exercise of options after the
acceleration of vesting provided for in Section 1.6, divided
by (b) the total number of shares of capital stock of the
Company outstanding immediately prior to the Effective Time,
plus the total number of shares of capital stock subject to
all unexercised Options.
1.6 TREATMENT OF OPTIONEES. Subject to obtaining the
consent of the shareholders of the Company required under
Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), prior to the Effective Time the
Company shall accelerate the vesting of the options held by
the optionees identified in the Disclosure Schedule (other
than options to purchase 240,000 shares of Common Stock held
by Glenn Bacheller) (the "Options"). At the Effective Time,
(a) Options that have been exercised (and as to which the
exercise price has been received by the Company) shall be
ignored and the shares of Common Stock issued upon such
exercise shall be treated as provided in Section 1.5 and (b)
the Company shall pay to any optionee whose Options have not
been exercised, in cancellation and satisfaction of his or
her Options, an amount equal to (i) the total number of
shares subject to such optionee's Options, multiplied by the
Per Share Merger Consideration, less (b) the aggregate
exercise price of such optionee's Options.
2. Section 8.5 of the Merger Agreement is amended to
read in its entirety as follows:
8.5 AGREEMENTS WITH CERTAIN MEMBERS OF THE COMPANY'S
MANAGEMENT. Einstein Bros. shall have executed and
delivered to each of Jim Mizes, Bob Purcell, Nancy Hauge,
Bill Schrader, Doug Troy, Barbara Musante and Paul Soulier
agreements in the form set forth in Exhibit E.
3. Section 9.6 of the Merger Agreement is amended to
read in its entirety as follows:
9.6 RESTRICTIVE COVENANTS. Each of the Restricted
Shareholders acknowledges and agrees that Einstein Bros.
would be unable to protect the Confidential Information
against unauthorized use or disclosure and Einstein Bros.
would be unable to realize the benefit of this Agreement if
such Restricted Shareholder were permitted, directly or
indirectly, to engage in, hold interests in or perform
services for any entity which derives more than 15% of its
revenues from the business of selling, producing, marketing
or distributing bagels, other than Einstein Bros. and its
subsidiaries and franchisees (a "Competitive Business").
Each of the Restricted Shareholders further acknowledges and
understands that Einstein Bros. intends, and expects, to
expand its business throughout the United States. Each of
the Founder Restricted Shareholders therefore agrees that
for a period of three (3) years from the Closing Date, and
each of the Management Restricted Shareholders therefore
agrees that for a period of two (2) years from the Closing
Date, such Restricted Shareholder shall not, and shall not
permit such Restricted Shareholder's Affiliates, to directly
or indirectly, anywhere in the United States (including
without limitation every county in the State of California):
(i) have any interest as a record or beneficial owner in any
Competitive Business; PROVIDED, HOWEVER, the Restricted
Shareholders may have an interest in any Competitive
Business as passive investors in such Competitive Business
conducted by a company which has a class of securities which
is registered under Section 12 of the Securities Exchange
Act of 1934, as amended, or traded on a national securities
exchange provided that the interest consists solely of such
securities and the interest held by any Restricted
Shareholder, or any group of which any Restricted
Shareholder is a member that would be treated as a person
under Section 13(d)(3) of the Securities Exchange Act of
1934, shall in no event exceed five percent (5%) of the
total equity securities of such issuer; (ii) perform
services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for any
Competitive Business; or (iii) divert or attempt to divert
any business or any customers of Einstein Bros.' business to
any Competitive Business. For purposes of this Section 9.6,
the term "Founder Restricted Shareholders" means Noah Alper,
Dan Alper and Bill Hughson, the term "Management Restricted
Shareholders" means the persons identified in Section 8.5,
and the term "Restricted Shareholders" means all of the
Founder Restricted Shareholders and all of the Management
Restricted Shareholders.
4. The final sentence of Section 9.7.3 of the Merger
Agreement is amended to read in its entirety as follows:
""Covered Entity" shall mean (i) an entity in which BCI
holds (or has the right to acquire) at least 35% of the
equity or (ii) an entity in which BCI holds (or has the
right to acquire) an equity interest which would result in
BCI "controlling" such entity within the meaning of such
term as it is used in Rule 405 of the Securities Act."
5. The second sentence of Section 10.1 of the Merger
Agreement is amended by substituting the following
percentages for the percentages set forth in the Merger
Agreement: Starbucks: 28.88%; Rosewood Capital, L.P.:
28.78%; Noah Alper: 15.84%; Dan Alper: 6.35%; Robert Polsky:
11%; and Bill Hughson: 9.15%.
6. The portion of the second sentence of Section
10.1.7 of the Merger Agreement following the semi-colon is
amended to read as follows:
"PROVIDED THAT, in the event the Indemnifying
Shareholders shall fail to initiate a timely defense of a
claim, Einstein Bros. shall have the option to conduct the
defense of such claim as it may in its discretion and in
good faith deem proper, and the Indemnifying Shareholders
shall have the right to retain legal counsel and to
participate in the defense of such proceeding at their own
expense."
The portion of the last sentence of Section 10.1.7 of
the Merger Agreement following the semi-colon is amended to
read as follows:
"PROVIDED THAT, in the event Einstein Bros. shall fail
to initiate a timely defense of a claim, the Indemnifying
Shareholders shall have the option to conduct the defense of
such claim as they may in their discretion and in good faith
deem proper, and Einstein Bros. shall have the right to
retain legal counsel and to participate in the defense of
such proceeding at its own expense."
7. Section 11.2 of the Merger Agreement is amended to
read in its entirety as follows:
11.2 PAYMENT OF EXPENSES. The Shareholders shall pay
all fees and expenses incurred by the Company or them in
connection with this Agreement and the transactions
contemplated hereby, including without limitation all fees
and expenses payable to Alex. Brown & Sons Incorporated;
Cooley Godward Castro Huddleson & Tatum, counsel for the
Company; Preston Gates & Ellis, representing Starbucks; and
certain other professional advisors approved by the Company.
The Shareholders have requested that Einstein Bros. pay on
behalf of the Shareholders, from the consideration to be
delivered in the Merger, the sum of $1,202,000 to Alex.
Brown & Sons Incorporated and the sum of $298,000 to the
Cooley Godward Castro Huddleson & Tatum Trust Account, which
will be used to pay the professional advisors other than
Alex. Brown & Sons Incorporated. Other than the payments
described in the preceding sentence, Einstein Bros. or
Merger Sub shall have no responsibility for any fees and
expenses incurred by the Company or the Shareholders in
connection with this Agreement and the transactions
contemplated hereby. Einstein Bros. shall pay all of the
expenses incurred by it or Merger Sub in connection with
this Agreement, including without limitation their legal and
accounting fees and expenses, and the commissions, fees and
expenses of any person employed or retained by them to bring
about, or to represent them in, the transaction contemplated
hereby.
8. The Company has requested from Einstein Bros. and
Merger Sub and Einstein Bros. and Merger Sub have requested
from the Company and the Shareholders a waiver of the
respective conditions set forth in Sections 7.7 and 8.8 of
the Merger Agreement and each of the parties hereto hereby
agrees to waive such conditions.
9. The Company represents and warrants to Einstein
Bros. and Merger Sub that the shareholders of the Company
who have executed this Amendment own in the aggregate at
least 75% of the aggregate number of outstanding shares of
capital stock of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed on the day and year first
above written.
NOAH'S NEW YORK BAGELS, INC.
By: /s/ Glenn Bacheller
--------------------------
Title: CEO
EINSTEIN BROS. BAGELS, INC.
By: /s/ Paul A. Strasen
---------------------------
Title: Vice President
NNYB ACQUISITION CORPORATION
By: /s/ Paul A. Strasen
---------------------------
Title: President
SHAREHOLDERS:
/s/ Noah C. Alper /s/ Douglas Troy
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/s/ Daniel V. Alper /s/ Barbara Musante
--------------------------- ---------------------------
/s/ William B. Hughson /s/ Paul Soulier
--------------------------- ---------------------------
/s/ James Mizes /s/ William Schrader
--------------------------- ---------------------------
/s/ Robert Purcell
---------------------------
/s/ Nancy Hauge
---------------------------
/s/ Robert D. Polsky
----------------------------
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed on the day and year first
above written.
ROSEWOOD CAPITAL, L.P.
By: /s/ Chip Adams
---------------------------
Title: Principal
STARBUCKS CORPORATION
By: /s/ Martin M. Casey
-----------------------------------
Title: Senior Vice President
ALPER LIVING TRUST U/A/E 6/18/94
By: /s/ Noah C. Alper, Trustee
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WILLIAM B. HUGHSON and MARGARET A. HSIA REVOCABLE TRUST
By: /s/ William B. Hughson, Trustee
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