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Exhibit 10.9
MODIFICATION AND SETTLEMENT AGREEMENT
This Modification and Settlement Agreement (this "Agreement") is made
and entered into as of the 12th day of August, 1996, by and between (i) All
American Food Group, Inc., a New Jersey corporation previously known as
"Jutland Food Group, Inc." ("All American"), on the one hand, and, on the other
hand, (ii) Howard Goldberg ("Goldberg"), Howberg Bakery Equipment Co., Inc., a
New Jersey corporation, Bagels of New Milford, Inc. and Goldberg's Famous
Bagels of Orangeburg, NY (the corporations named in this clause (ii) being
sometimes referred to collectively as the "Goldberg Entities" and Goldberg and
the Goldberg Entities being sometimes referred to collectively as the "Goldberg
Parties");
W I T N E S E T H:
WHEREAS, All American and one or more of the Goldberg Parties are
parties to (i) that certain Agreement dated October 20, 1993 for the sale and
purchase of a bagel business and the assets related thereto (the "1993 Purchase
Agreement"); (ii) that certain Consulting Agreement dated October 20, 1993
relating to the performance of certain services by Goldberg on behalf of All
American and related matters (the "1993 Consulting Agreement"); (iii) an
amendment to the 1993 Purchase Agreement dated September 29, 1994 (the "1994
Purchase Agreement Amendment"); (iv) an amendment to the 1993 Consulting
Agreement dated September 29, 1994, (the "1994 Consulting Agreement
Amendment"); (v) a Settlement and Modification Agreement dated as of October 6,
1995 (the "1995 Modification Agreement"); (vi) a Franchise Agreement relating
to that certain bagel store located at 10331 River Road, New Milford, New
Jersey (the "Bagel Store"), as amended, dated as of October 6, 1995 (the
"Franchise Agreement"); (vi) a Consulting Agreement, dated as of October 6,
1995 amending the 1993 Consulting Agreement, as amended; and (vii) various
ancillary documents and agreements (the agreements enumerated or referred to in
clauses (i) through (vii) above being referred to collectively as the
"Predecessor Agreements"); and
WHEREAS, Goldberg is the controlling person of each of the Goldberg
Entities; and
WHEREAS, on October 20, 1993, All American issued to Goldberg, for
good and valuable consideration, 120,000 shares of its Series A Preferred
Stock, par value $5.00 per share, and, thereafter, issued to Goldberg, for good
and valuable consideration, any additional 70,000 such shares; and
WHEREAS, Goldberg transferred 10,000 shares of the Series A Preferred
Stock issued to him and continues to hold the remaining 180,000 shares (the
"Series A Shares"); and
WHEREAS, All American is obligated to redeem, at a price of $5.00 per
share, 40,000 shares of the Series A Preferred Stock held by Goldberg within 30
days following the completion of an underwritten initial public offering of the
common stock, no par value, of All American ("Common Stock") yielding net
proceeds to All American of more than $2 million, which redemption obligation
is reflected in the Certificate of Designations covering the Series A Preferred
Stock (the "Certificate of Designations"); and
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WHEREAS, on May 3, 1996, All American filed with the Securities and
Exchange Commission a Registration Statement on Form SB-2 covering the sale, in
an initial public offering (the "IPO"), of 600,000 shares of Common Stock at a
contemplated initial public offering price per share of $6.00, which initial
public offering, if completed, would trigger All American's redemption
obligation; and
WHEREAS, All American and the Goldberg Parties believe it to be in
their respective business interests to arrive at a final settlement of the
matters set forth in the Predecessor Agreements;
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged by each of the parties hereto, such parties agree as follows.
SECTION 1. DISPOSITION OF THE SERIES A PREFERRED SHARES.
A. CONVERSION OF SHARES. On or before the 5th business day after
the closing of the IPO, Goldberg shall submit to All American for conversion
and All American thereafter shall convert 65,000 shares of Series A Preferred
Stock into an equal number of shares of Common Stock, all in accordance with
the Certificate of Designations.
B. SURRENDER OF SHARES AND PAYMENT THEREFORE. On or before the
5th business day after the closing of the IPO, Goldberg shall deliver, transfer
and surrender to All American for cancellation share certificates representing
the remaining 115,000 shares of Series A Preferred Stock currently held by
Goldberg, together with fully executed stock powers relating thereto.
Contemporaneously with such surrender, All American shall pay to Goldberg the
amount of $25,000, which amount shall represent payment in full for the shares
surrendered for cancellation.
SECTION 2. COVENANT NOT TO COMPETE AND RELATED MATTERS
A. USE OF NAME, TRADE DRESS, ETC.
(1) PROHIBITION ON USE BY THE GOLDBERG PARTIES.
From and after the Closing Date (as that term is defined in Section 5 of this
Agreement), the Goldberg Parties shall not employ the "Goldberg" name, or the
distinctive logos, colors, trade names, trade dress or other distinctive
identifying marks (collectively "Trade Dress") currently in use by All American
in connection with its "Goldberg's Old World Bagels" and "Goldberg's New York
Bagels" stores and franchises, or any Trade Dress reasonably similar thereto,
in any business, whether or not in competition, directly or indirectly, with
All American and its franchisees. In the event that, in the future, All
American should adopt new, different or additional Trade Dress in connection
with its "Goldberg Old World Bagels" and "Goldberg's New York Bagels" stores
and franchises, the Goldberg Parties shall not employ any such Trade Dress or
any Trade Dress reasonably similar thereto, in any such business.
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(2) TRANSFER OF RIGHTS BY THE GOLDBERG PARTIES.
Effective on and as of the Closing Date, the Goldberg Parties assign, transfer
and set over to All American all of their right, title and interest in the
"Goldberg" name, family history and existing Trade Dress for use in the retail
bagel business or the bagel bakery equipment business.
(3) LIMITATION ON ADOPTION AND USE BY ALL AMERICAN. From
and after the Closing Date, All American shall not adopt any Trade Dress
reasonably similar to any Trade Dress then in use by the Goldberg Parties,
provided that such Trade Dress then in use, and the use thereof, by the
Goldberg Parties is not in violation of this Agreement.
B. COVENANT NOT TO COMPETE.
(1) SCOPE OF LIMITATION. From and after the Closing Date,
and for a period ending on the third (3rd) anniversary of the Closing Date,
none of the Goldberg Parties shall, directly or indirectly, solely or jointly
with any other person or entity, as an employee, employer, consultant,
franchiser, franchisee, agent, principal, partner, joint venturer, shareholder,
corporate officer, director, investor, lender or in any other individual,
representative or corporate capacity whatsoever, form, engage in, furnish aid
assistance or service of any kind or otherwise participate in any business
engaged in the licensing or franchising of retail establishments engaged in the
sale of bagels and related foodstuffs.
(2) ACTIVITIES SPECIFICALLY PERMITTED. The covenant not
to compete set forth herein shall not be deemed to prohibit the Goldberg
Parties, directly or indirectly, from establishing, owning and/or operating one
or more retail establishments engaged in the sale of bagels and related
foodstuffs and/or bagel bakery equipment businesses; provided, however, that
the Goldberg Parties in no event shall be permitted to engage in activities
otherwise prohibited by Section 2.A.(1) hereof.
(3) REASONABLENESS OF COVENANT. The Goldberg Parties
acknowledge that All American is engaged in the development of a nationwide
franchise system of bagel stores, that All American has given valuable
consideration for the Trade Dress and other intangible assets acquired thereby
from the Goldberg Parties and that, consequently, the limitations contained in
the covenant not to compete and related provisions set forth herein are
reasonable for the protection of All American's legitimate business interests,
are not unduly burdensome to the Goldberg Parties and otherwise are reasonable
in light of all of the circumstances.
(4) REPLACEMENT OF PRIOR COVENANTS AND RESTRICTIONS. The
covenant not to compete and related provisions set forth herein shall be deemed
to replace any and all covenants not to compete and noncompetition agreements
heretofore entered into by Goldberg and All American.
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3. ADDITIONAL AGREEMENTS
A. NONINTERFERENCE. Each of All American and the Goldberg
Parties agree that, as and after the date of execution hereof, neither shall
take any action including, without limitation, solicitation of employees,
suppliers, franchisees or customers, the reasonably foreseeable result of which
would be to interfere with, impede or disrupt the business of the other.
B. TERMINATION OF FRANCHISE AGREEMENT. Effective on and as of the
Closing Date, the Franchise Agreement shall terminate, Goldberg shall be
released from all obligations thereunder including, without limitation, any
obligations with respect to payments claimed to be due thereunder and the Bagel
Store shall have no further affiliation or identification with All American. In
connection with such termination, Goldberg shall remove the name "Goldberg" and
any Trade Dress subject to the provisions of Section 2.A. hereof no later than
the Closing Date.
C. MUTUAL RELEASE. This Agreement shall serve as a general
release between All American and the Goldberg Parties. By execution of this
Agreement the parties release and relinquish (i) all obligations imposed on
each other party pursuant to any of the Predecessor Agreements and (ii) all
claims and rights that any party may have against any other party pursuant to
any of the Predecessor Agreements or otherwise and arising out of the acts or
omissions of any party prior to the execution hereof.
D. INDEMNIFICATION WITH RESPECT TO LARRY KOSTERICH. All American
shall indemnify and hold harmless each of the Goldberg Parties in respect of
any and all losses, claims, damages, liabilities and expenses (including,
without limitation, reasonable attorneys' fees and expenses actually incurred)
for which any of the Goldberg Parties may become liable as a consequence of any
action brought by Larry Kosterich ("Kosterich") or any permitted successor in
interest thereto or permitted assignee thereof, against All American in which
any of the Goldberg Parties is named as a defendant with respect to any monies
alleged to be owed by All American to Kosterich or any action brought directly
by Kosterich against any of the Goldberg Parties seeking to revive or enforce
that certain promissory note originally issued by Goldberg in favor of
Kosterich and later replaced by a note issued by All American in Kosterich's
favor.
E. ASSIGNMENT OF CLAIMS AGAINST BENSONHURST BAGELS. Effective
on and as of the Closing Date, All American assigns, transfers and sets over to
Goldberg any claim which it may have against Bensonhurst Bagels relating to
payment for bagel bakery equipment sold thereto.
F. TRANSFERABILITY OF COMMON STOCK. All American shall impose no
restrictions on the ability of Goldberg to sell his 65,000 shares of Common
Stock. In addition, All American shall exert its best efforts to ensure that
such shares are not subject to lock-up by the underwriter in connection with
the IPO, (which lock-up presently is proposed to be limited to shares of
directors and executive officers).
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SECTION 4. REPRESENTATIONS AND WARRANTIES
A. OF ALL AMERICAN. All American represents and warrants to the
Goldberg Parties as follows:
(1) All American is, and on the Closing Date will be, a
corporation validly existing and in good standing under the laws of the State
of New Jersey and has and will have all of the corporate power and authority to
execute, deliver and perform this Agreement.
(2) This Agreement has been duly authorized, executed and
delivered by All American and constitutes the valid and binding agreement of
All American in accordance with its terms.
(3) The execution and delivery of this Agreement by All
American and its consummation of the transactions contemplated hereby will not
violate any agreement or any law, judgment, writ, injunction, order or decree
to which All American is a party, to which it is subject or by which it is
bound.
(4) There is no action, suit, proceeding or claim pending
or, to the best of its knowledge, threatened, against All American which would
affect the ability of All American to perform its obligations hereunder.
(5) All American acknowledges that, following
consummation of the transactions contemplated by Sections 1 and 5 hereof,
Goldberg will be the registered and beneficial owner of a total of 65,000
shares of All American's Common Stock, and that each and every such share shall
be duly authorized and validly issued as fully paid and non-assessable shares.
(6) No consent, approval, authorization or order of any
court, governmental agency or body, or financial institution is required in
connection with the performance, by All American, of its obligations hereunder.
B. OF THE GOLDBERG PARTIES. Goldberg and each of the Goldberg
Entities represents and warrants to All American as follows:
(1) Each of the Goldberg Entities is, and on the Closing
Date will be, a corporation validly existing and in good standing under the
laws of its jurisdiction of incorporation and has and will have all of the
corporate power and authority to execute, deliver and perform this Agreement.
(2) This Agreement has been duly executed and delivered
by Goldberg and duly authorized, executed and delivered by each of the Goldberg
Entities and constitutes the valid and binding agreement of each of the
Goldberg Parties in accordance with its terms.
(3) The execution and delivery of this Agreement by each
of the Goldberg Parties and their consummation of the transactions contemplated
hereby will not violate any
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agreement or any law, judgment, writ, injunction, order or decree to which any
of the Goldberg Parties is a party, to which it is subject or by which it is
bound.
(4) There is no action, suit, proceeding or claim pending
or, to the best of the knowledge of any of the Goldberg Parties, threatened,
against any of the Goldberg Parties which would affect the ability of any of
such Goldberg Parties to perform its obligations hereunder.
(5) Goldberg acknowledges (i) that he is knowingly and
willingly relinquishing all of his right, title and interest in and to 115,000
shares of Series A Preferred Stock on the Closing Date pursuant to the terms of
this Agreement; (ii) that following consummation of the transactions
contemplated by Sections 1 and 5 hereof, Goldberg will be the registered and
beneficial owner of a total of 65,000 shares of All American's Common Stock;
and (iii) that the 180,000 shares of Series A Preferred Stock to be converted
or relinquished in accordance with the terms of this Agreement represent all of
the shares of capital stock of All American, of any kind or character, which
currently are owned by the Goldberg Parties or in or as to which any of the
Goldberg Parties has any ownership claim or interest.
(6) No consent, approval, authorization or order of any
court, governmental agency or body, or financial institution is required in
connection with the performance, by any of the Goldberg Parties, of their
respective obligations hereunder.
SECTION 5. CLOSING.
A. CLOSING DATE. The closing of the transactions contemplated
hereby shall occur at 10 o'clock in the morning, local time, at the offices of
Venable, Baetjer, Howard & Civiletti, LLP, 1201 New York Avenue, NW, Washington
DC 20005 no later than the fifth (5th) business day following the closing of
the IPO or on such other date, at such other time, or at such other location as
shall mutually be agreed upon by the parties (the "Closing Date").
B. CONDITIONS PRECEDENT TO ALL AMERICAN'S OBLIGATIONS. All
obligations of All American pursuant to this Agreement are subject to the
satisfaction, by the Goldberg Parties, of the following conditions on or prior
to the Closing Date:
(1) All representations and warranties of the Goldberg
Parties shall be true on the Closing Date, as if made at that time.
(2) Goldberg shall have removed from the Bagel Store all
Trade Dress subject to Section 2.A.(1) hereof.
C. CONDITIONS PRECEDENT TO THE GOLDBERG PARTIES' OBLIGATIONS. All
obligations of the Goldberg Parties pursuant to this Agreement are subject to
the satisfaction, by All American, of the following conditions, on or prior to
the Closing Date:
(1) All representations and warranties of All American
shall be true on the Closing Dates, as if made at that time;
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(2) The 65,000 shares of Common Stock to be held by
Goldberg immediately subsequent to the completion of the transactions
contemplated by Sections 1 and 5 hereof shall not be subject to lock-up by the
underwriter in connection with the IPO; provided, however, that Goldberg, in
his sole and absolute discretion, may agree to a lock-up on such terms as he
shall deem acceptable. In the event that Goldberg elects to agree to a lock-up,
this condition shall be deemed to have been satisfied.
D. CONDUCT OF THE CLOSING. On or prior to the Closing Date,
Goldberg shall effect the conversion of 65,000 shares of his Series A Preferred
Stock theretofore delivered by Goldberg to All American for such conversion to
an equal number of shares of Common Stock and Goldberg shall deliver, transfer
and surrender to All American for cancellation certificates representing the
remaining 115,000 shares of Series A Preferred Stock held by Goldberg, together
will fully executed stock powers relating thereto. Contemporaneously with the
conversion of Series A Preferred Stock to Common Stock and the delivery to All
American of certificates representing Series A Preferred Stock and executed
stock powers as contemplated hereby, All American shall pay to Goldberg the sum
of $25,000 by bank or certified check. It is the expectation of the parties
that the closing shall be conducted "on the papers," and that the physical
presence of the parties shall not be required. The parties expressly agree that
facsimile signature pages shall be acceptable for purposes of the closing.
SECTION 6. NOTICES.
Notices or other communication required or contemplated hereby or in
connection herewith shall be deemed adequately given if in writing and
delivered in person or by courier or facsimile transmission (in each case
notice to be deemed received on the date following the date of dispatch) or if
sent via United States first class mail, postage prepaid and return receipt
requested (such notice to be deemed received on the earlier of the date of
actual receipt or the third (3rd) business day following dispatch) as follows:
ALL AMERICAN:
All American Food Group, Inc.
9 Law Drive
Fairfield, New Jersey 07006
Facsimile No. (201) 244-9350
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WITH COPIES TO:
David J. Levenson, Esquire
Venable, Baetjer, Howard & Civiletti, LLP
1201 New York Avenue, NW
Washington, DC 20005
Facsimile No. (202) 962-8300
THE GOLDBERG PARTIES:
Howard Goldberg
Care of Leonard R. Glass, Esquire
Cole, Schotz, Meisel, Forman & Leonard, P.A.
25 Main Street
Post Office Box 800
Hackensack, New Jersey 07602-0800
Facsimile No. (201) 489-5647
WITH COPIES TO:
Leonard R. Glass, Esquire
Cole, Schotz, Meisel, Forman & Leonard, P.A.
25 Main Street
Post Office Box 800
Hackensack, New Jersey 07602-0800
Facsimile No. (201) 489-5647
Any party hereto may change the address to which notices are to be
addressed pursuant hereto by notice given to each other party in the manner
provided above.
SECTION 7. TERMINATION
In the event that the closing of the IPO has not occurred on or before
December 15, 1996, this Agreement shall be terminable at the election of either
All American or Goldberg by the delivery of a notice of such election to
terminate in accordance with the terms of Section 6 hereof.
SECTION 8. MISCELLANEOUS PROVISIONS
A. FURTHER ASSURANCES. From and after the date of this Agreement,
each of the parties hereto agrees to execute and deliver such further documents
and take such further actions as the other party may deem to be reasonably
necessary or desirable in order to effect the intent of this Agreement,
including, without limitation, documents and actions relating to the assignment
of Trade Dress pursuant to Section 2.A.(3) hereof and of claims against
Bensonhurst Bagels pursuant to Section 3.E. hereof.
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B. ENTIRE AGREEMENT. This Agreement, including the introductory
clauses hereto, which clauses are incorporated herein by reference and made a
part hereof, represents the entire understanding of the parties pertaining to
the subject matter hereof, and supersedes any and all prior agreements,
understandings, negotiations and discussions, whether written or oral, between
the parties with respect to such subject matter including, without limitation,
each of the Predecessor Agreements.
C. SEVERABILITY. In the event that any one or more of the
provisions contained in this Agreement, or the application thereof to any
person(s) or in any circumstance(s), shall, for any reason, be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, (i) the
remaining provisions of this Agreement shall be unimpaired and shall remain in
full force and effect and (ii) each invalid, illegal or unenforceable provision
shall be limited in such a way as to be valid and enforceable or replaced by
one that is valid and enforceable, in either event so that such limited or
replacement provision as closely as possible effectuates the original intent of
the parties with respect to such invalid, illegal or unenforceable provision(s)
or, if such replacement is not possible, such invalid, illegal or unenforceable
provision be deleted from this Agreement as if never included herein.
D. BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and shall inure to the benefit of, the heirs, successors, assigns
or legal representatives of each of the parties hereto.
E. WAIVER; AMENDMENT. No supplement, amendment, modification,
waiver, termination, rescission, discharge or cancellation of this Agreement or
any provision hereof (including, without limitation, any waiver of any required
performance or default hereunder) shall be binding unless in writing and
executed by the party or parties against whom enforcement is sought. No waiver
of any provision hereof or any default hereunder shall be deemed to be, or
shall constitute, a waiver of any other such provision or default (whether or
not similar) and no such waiver shall constitute a continuing waiver unless
expressly so provided
F. CAPTIONS AND HEADINGS. Captions to and headings of the various
provisions hereof are solely for the convenience of the parties, are not a part
of this agreement, and shall not be used for the interpretation of or
determination of the validity of this Agreement or any term or provision
hereof.
G. GENDER AND NUMBER. As required by the context, all words used
herein in the singular shall extend to and include the plural; all words used
in the plural shall extend to and include the singular, and all words used in
either gender or in the neuter shall extend to all genders or be neutral.
H. GOVERNING LAW. This Agreement and the legality, validity and
performance of the terms hereof shall be governed by and enforced, determined
and construed in accordance with the laws of the State of New Jersey, without
regard to the conflict of laws provisions thereof.
I. COSTS OF ENFORCEMENT. In the event that any party hereto
brings an action in connection with, or to enforce any of the provisions of,
this Agreement, the unsuccessful party to such action shall
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pay to the successful party all costs and expenses of such litigation,
including, without limitation, reasonable attorneys' fees.
I. COUNTERPARTS. This Agreement may be executed by facsimile and
in counterparts, each of which shall be deemed an original but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
ALL AMERICAN FOOD GROUP, INC. .
By:
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Andrew Thorburn
Chairman, President and Chief Executive
Officer
HOWARD GOLDBERG:
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HOWBERG BAKERY EQUIPMENT CO. INC.
By:
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Howard Goldberg
Title:
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BAGELS OF NEW MILFORD, INC.,
By:
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Howard Goldberg
Title:
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GOLDBERG'S FAMOUS BAGELS OF ORANGEBURG, NY
By:
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Howard Goldberg
Title:
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APPROVED AS TO FORM:
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Leonard R. Glass
Attorney for the Goldberg Parties
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David J. Levenson
Attorney for All American
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