UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission only
(as permitted by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 140-11(c) or Rule 240-2
NEW WORLD RESTAURANT GROUP, INC.
(Name of Registrant Specified in its Charter)
NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
(Former Name of Registrant)
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:__________
2) Aggregate Number of securities to which transaction applies:_____________
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[ ] Fee paid previously with preliminary materials.
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_________
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4) Date Filed:___________
NEW WORLD RESTAURANT GROUP, INC.
246 Industrial Way West
Eatontown, New Jersey 07724
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of the stockholders of New World Restaurant Group, Inc,
a Delaware corporation, will be held on December 19, 2001 commencing at 10:30
a.m. at the Company's offices located at 246 Industrial Way West, Eatontown, New
Jersey 07724. The meeting is called for the following purposes:
1. Election of two Class II directors to serve until the Annual Meeting
in 2004;
2. Ratification of the selection of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending January 1, 2002;
3. To transact such other business as may properly come before the annual
meeting or any adjournments thereof.
Stockholders of record at the close of business on October 24, 2001 are
entitled to notice of, and to vote at the Annual Meeting of Stockholders. The
accompanying form of proxy is solicited by the Board of Directors of the
Company. Reference is made to the enclosed proxy statement for further
information with respect to the business to be transacted at the Annual Meeting
of Stockholders.
If you do not expect to attend the Annual Meeting of Stockholders in
person, please sign and date the enclosed proxy and mail it promptly in the
enclosed envelope. Sending in your proxy will not prevent your attending and
voting at the meeting in person should you later decide to do so.
By order of the Board of Directors.
Jerold E. Novack, Secretary
Dated: November 19, 2001
NEW WORLD RESTAURANT GROUP, INC.
246 Industrial Way West
Eatontown, New Jersey 07724
PROXY STATEMENT
November 19, 2001
This proxy statement is being mailed to stockholders of record as of
October 24, 2001 and is furnished in connection with the solicitation of proxies
by the Board of Directors of New World Restaurant Group, Inc. (the "Company")
for use at the Annual Meeting of Stockholders (the "Annual Meeting") of the
Company to be held on December 19, 2001, commencing at 10:30 a.m. at the offices
of the Company at 246 Industrial Way West, Eatontown, New Jersey 07724. Proxies
will be voted in accordance with directions specified thereon and otherwise in
accordance with the judgment of the persons designated as proxy voters. Any
proxy on which no direction is specified will be voted in favor of the action
described in the proxy statement.
A proxy in the enclosed form may be revoked at any time, prior to it being
voted at the Annual Meeting by sending a subsequently dated proxy or by giving
written notice to the Company, in each case to the attention of Jerold E.
Novack, Secretary, at the address set forth above. Stockholders who attend the
Annual Meeting may withdraw their proxies at any time before their shares are
voted by notifying the Company at the meeting and voting their shares in person.
The expense of the solicitation of proxies for the Annual Meeting,
including the cost of preparing, assembling and mailing the notice, proxy and
proxy statement, the handling and tabulation of proxies received and the charges
of brokerage houses and other institutions, nominees or fiduciaries in
forwarding such documents of the proxy material to beneficial owners, will be
paid by the Company. In addition to the mailing of the proxy material, such
solicitation may be made in person or by telephone and telegraph by directors,
officers or regular employees of the Company. The total cost of proxy
solicitations by the Company are not anticipated to exceed $7,500.
The matters to be considered at the Annual Meeting include: (1) election of
two Class II directors to serve until the Annual Meeting in 2004; (2)
ratification of Arthur Andersen LLP as the Company's independent auditors for
the fiscal year ending January 1, 2002; and (3) to transact such other business
as may properly come before the Annual Meeting or any adjournments thereof. The
Company is aware of no other matters to be presented for action at the Annual
Meeting.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
Holders of Common Stock at the close of business on October 24, 2001 will
be entitled to vote. Each share of Common Stock entitles the holder to one (1)
vote on each matter to be voted upon. On the record date, there were 17,391,450
outstanding shares of Common Stock (excluding any treasury shares), which is the
only class of voting stock outstanding.
MATTERS TO BE VOTED UPON
1. ELECTION OF DIRECTORS
The Company's bylaws provide that the Board of Directors is divided into
three classes, denominated Class I (present term expiring in 2002), Class II
(present term expiring in 2001), and Class III (present term expiring in 2003).
There are presently two Class II directors. At the Annual Meeting, two
individuals will be elected as Class II directors for a three-year term ending
in 2004 and until their successors are elected and qualified. Unless otherwise
directed, the persons named in this Proxy Statement as nominees have advised
management that it is their intention to vote for the election of the directors
set forth in this Proxy Statement.
In addition to the Company's five classified directors (Class I-2, Class
II-2 and Class III-1) the Board of Directors has appointed a sixth and seventh
director pursuant to an agreement, as amended (the "Stockholders Agreement")
entered into by the Company with BET Associates, L.P., Halpern Denny III, L.P,
and Brookwood New World Investors, LLC (see "Principal Stockholders"), referred
to below as "Agreement Directors." The Agreement Directors shall serve for the
period provided in the Stockholders Agreement. William Nimmo and Eve Trkla were
appointed as directors pursuant to the Stockholders Agreement. In addition,
Anthony D. Wedo, an eighth director, was appointed as a director of the Company
pursuant to the terms of his employment agreement.
The following table sets forth certain information with respect to the
nominee for the election of two (2) Class II directors.
Year Term Expires
Name Age Position if Elected
- ---- --- -------- ----------
Keith F. Barket 40 Director 2004
Edward McCabe 63 Director 2004
Each of the nominees for election as a director has advised the Company of
his willingness to serve as a director and management believes that each nominee
will be able to serve. If any nominee becomes unavailable, proxies may be voted
for the election of such person or persons who may be designated by the Board of
Directors.
Officers and Directors
The executive officers and directors of the Company and their ages as of
October 24, 2001 are as follows:
Name Age Position with the Company
- ---- --- -------------------------
R. Ramin Kamfar (2) 38 Chairman and Director (Class I)
Anthony D. Wedo 42 Chief Executive Officer and Director
William Rianhard 44 President
Jerold E. Novack 45 Executive Vice President, Chief
Financial Officer, Secretary and Treasurer
Karen Hogan (1) 39 Director (Class I)
Keith F. Barket (1)(2) 40 Director (Class II)
Edward McCabe (1) 63 Director (Class II)
Leonard Tannenbaum 29 Director (Class III)
Eve Trkla 38 Director (Agreement)
William Nimmo (2) 46 Director (Agreement)
(1) Member of Audit Committee
(2) Member of Compensation Committee
R. Ramin Kamfar. Mr. Kamfar has served as a Director since founding the
Company and as Chairman since December 1998. From May 1996 until July 2001, Mr.
Kamfar served as Chief Executive Officer of the Company and from May 1996 to
December 1998, he also served as President. Between October 1993 and May 1996,
Mr. Kamfar served in a number of functions, including Co-President and Co-Chief
Executive Officer of the Company. Between 1988 and 1993, he worked in the
Investment Banking Division of Lehman Brothers Inc., New York, NY, most recently
as a Vice President in the firm's Private Placement Group. Mr. Kamfar is a
director of Vsource, Inc. Mr. Kamfar has a B.S. degree with distinction in
Finance from the University of Maryland and an M.B.A. degree with distinction in
Finance from The Wharton School at the University of Pennsylvania.
Anthony D. Wedo. Mr. Wedo joined the Company as Chief Executive Officer in
July, 2001 and was appointed as a Director in August 2001. From 1998 to July
2001, Mr. Wedo served as chief executive officer and managing partner of
Atlantic Restaurant Group, a venture group focused on acquiring high-growth
restaurant concepts. From 1994 through 1997, he served as president and chief
executive officer of Mid-Atlantic Restaurant Systems, a Boston Market
franchisee. From 1988 through 1993, Mr. Wedo was employed by Pepsico Inc.'s KFC
division, most recently as a vice president. Mr. Wedo has a B.S. degree in
Marketing and Finance from Pennsylvania State University.
William Rianhard. Mr. Rianhard became President of the Company in May 2000.
From October 1995 to April 2000, Mr. Rianhard was employed by Sara Lee
Corporation as the President and Chief Operating Officer of Quikava, Inc.,
Hingham, MA. From 1976 to October 1995, Mr. Rianhard was employed by Allied
Domecq U.S. Retailing, Randolph, MA. the parent company of Dunkin' Donuts, in
various operations and development positions, serving the last four years as the
Director of Concept Development. Mr. Rianhard has a B.A. degree from Ulster
County College.
Jerold E. Novack. Mr. Novack joined the Company as Vice President-Finance
in June 1994 and has served as Executive Vice President, Chief Financial
Officer, Treasurer and Secretary since July 2000 and Chief Financial Officer,
Treasurer and Secretary since January 1999. From 1991 to 1994, he served as Vice
President/Controller of The Outdoor Furniture Store, Inc., Woodridge, NJ a
specialty retail chain. From 1988 to 1991, he served as Controller for Richmond
Ceramic Tile, Inc., New York, NY a retailer and distributor of ceramic tile.
From 1985 to 1988, Mr. Novack served as Assistant Controller for Brooks Fashion
Stores, Inc., New York, NY a specialty retail chain. Prior to 1985, Mr. Novack
served as Import Division Controller for Mercantile Stores Company, Inc., New
York, NY a department store chain. Mr. Novack has a B.S. degree in Accounting
from Brooklyn College, City University of New York.
Karen Hogan. Ms. Hogan has served as a director of the Company since
December 1997. From 1992 to 1997, Ms. Hogan served as Senior Vice President,
Preferred Stock Product Management at Lehman Brothers, Inc., New York, NY. From
1985 to 1992, Ms. Hogan served as Vice President, New Product Development Group
at Lehman Brothers, Inc., New York, NY. Ms. Hogan has a B.S. degree from the
State University of New York at Albany and an M.B.A. degree in Finance and
Economics from Princeton University.
Keith F. Barket. Mr. Barket has served as a director of the Company since
June 1995. Mr. Barket is the Managing Director--Real Estate for Angelo, Gordon &
Co., New York, NY. From 1988 to 1997, Mr. Barket was a Managing Director of
Amerimar Enterprises Inc., New York, NY, a real estate investment and
development company during which time he was involved in a variety of office,
retail, residential and hotel projects. From 1984 to 1986, he worked as a senior
tax accountant with Arthur Andersen & Co., New York, NY. Mr. Barket has a B.A.
degree from Georgetown University and an M.B.A. degree from The Wharton School
at the University of Pennsylvania.
Edward McCabe. Mr. McCabe has served as director of the Company since
February 1997. Mr. McCabe has served as a marketing and investment banking
consultant since 1998. From 1991 to 1998, Mr. McCabe was Chief Executive Officer
of McCabe & Company, New York, NY, an advertising and communications company.
From 1967 to 1986 he served in various capacities, most recently as President
and Worldwide Creative Director, at Scali, McCabe, Sloves, Inc., New York, NY,
an advertising agency he co-founded. He also serves on the advisory board of
ThinkTanksWorldwide.com.
Leonard Tannenbaum. Leonard Tannenbaum, C.F.A., has served as a director of
the Company since March 1999. Mr. Tannenbaum is currently the Managing Partner
at MYFM Capital LLC, a boutique investment banking firm, and a partner at BET
Associates LP, a venture capital fund (see "Principal Holders of Voting Stock").
Mr. Tannenbaum is a holder of the Chartered Financial Analyst designation and is
a member of AIMR. Mr. Tannenbaum currently serves on the board of directors of
the following companies: Corteq, General Devices, Timesys, an embedded Linux
company, and Transcentives.com, an Internet holding company. Previously, Mr.
Tannenbaum was the president of on-line auction company CollectingNation.com, a
partner in a hedge fund, an assistant portfolio manager at Pilgrim Baxter, and
an Assistant Vice President in the small company group of Merrill Lynch. Mr.
Tannenbaum has an M.B.A in Finance and Bachelors of Science in Management from
the Wharton School at the University of Pennsylvania.
Eve Trkla. Ms. Trkla is a controlling person of Brookwood Financial
Partners, L.P., an affiliate of Brookwood New World Investors, LLC, (see
"Principal Holders of Voting Stock"). Ms. Trkla has been, since May 1993, the
Chief Financial Officer of Brookwood Financial Partners, L.P. Ms. Trkla's prior
experience in the financial services field includes eight years as a lender at
The First National Bank of Boston and one year as the Senior Credit Officer at
The First National Bank of Ipswich. Ms. Trkla also serves as a director of
UbiquiTel, Inc., a Sprint PCS affiliate. Ms. Trkla is a cum laude graduate of
Princeton University.
William Nimmo. Mr. Nimmo is a partner at Halpern, Denny & Co. a private
equity investment firm (see "Principal Holders of Voting Stock"). From 1989 to
1997, Mr. Nimmo was a partner at Cornerstone Equity Investors, L.L.C. and its
predecessor firm, Prudential Equity Investors, Inc. Prior to joining Prudential
Equity Investors in 1989; he spent ten years with J.P. Morgan & Company. Mr.
Nimmo is a graduate of Dartmouth College and received an M.B.A. from the Amos
Tuck School of Business Administration at Dartmouth. Mr. Nimmo serves on the
Boards of a number of private companies.
Directorships whose term expires in a calendar year are filled at the
Annual Meeting held in such calendar year. Officers are elected annually and
serve at the discretion of the Board of Directors. There are no family
relationships between any of the directors or executive officers of the Company.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
It is important to note that the Compensation Committee of the Board of
Directors (the "Compensation Committee"), established in 1996, assumes
responsibility for formulating compensation decisions and presenting them to the
Board of Directors. The Compensation Committee is composed of two independent
outside directors, Keith F. Barket and William Nimmo, and the Company's
Chairman, Ramin Kamfar.
Compensation Committee
During 2000, the Compensation Committee met three times. In 2001, the
Compensation Committee has met one time to carry out its responsibilities
including the development and administration of policies governing compensation
for senior executives of the Company.
In developing and administering these policies, the Compensation Committee
has focused on compensating Company executives:
(1) on a competitive basis with other comparably sized and managed
companies;
(2) in a manner consistent and supportive of overall Company objectives;
and
(3) balancing the long-term and short-term strategic initiatives of the
Company.
The Company's compensation for executive officers generally consists of a
fixed base salary, incentive compensation, and severance arrangements. In
addition, Company executives are able to participate in various benefit plans
generally available to other full-time employees of the Company.
Audit Committee
In 1996, the Company formed an Audit Committee, currently comprised of
independent directors Karen Hogan, Keith F. Barket, and Edward McCabe. The
function of the Audit Committee is to recommend annually to the Board of
Directors the appointment of the independent auditors of the Company, review the
results and scope of the audit and other services provided by the Company's
independent auditors, review the adequacy of the financial organization of the
Company and review management's procedures and policies relative to the adequacy
of the Company's internal accounting controls. In 2000, the Audit Committee met
two times, and in 2001, the Audit Committee has met one time. As part of
fulfilling its responsibilities, the Audit Committee reviewed and discussed the
audited consolidated financial statements for fiscal 2000 with management and
discussed those matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees) with the Company's
independent auditors. Based upon the Audit Committee's review of the audited
consolidated financial statements and its discussions with management and the
Company's independent auditors, the Audit Committee recommended that the Board
of Directors include the audited consolidated financial statements for the
fiscal year ended December 31, 2000 in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on April 16, 2001. The Audit
Committee operates pursuant to a written charter, a copy of the charter of the
Audit Committee is annexed hereto as Appendix A.
SUMMARY COMPENSATION TABLE
Summary Compensation
The following table provides certain information concerning the
compensation earned by the Company's Chief Executive Officer for services
rendered in all capacities to the Company during 2000, and any executive
officers of the Company who received compensation in excess of $100,000 during
1998, 1999 and 2000 ("Named Executive Officers").
SUMMARY COMPENSATION TABLE
Fiscal Year ended December 31, 2000
Annual Compensation Restricted Stock Grants
------------------- ----------------------- Securities
Name and Principal Other Annual Underlying
Position Salary ($) Bonus ($) Compensation ($) Shares (#) Stock Value ($) Options/SARs (#)
---------- --------- ---------------- ---------- --------------- ----------------
R. Ramin Kamfar, Chairman and $300,000 $105,000 $24,000 (1) -- -- 250,000
Chief Executive Officer
William Rianhard, President $98,923 $25,000 $12,000 (1) -- -- 60,000
and Chief Operating Officer
Jerold E. Novack, Chief $154,808 $77,500 $12,000 (1) 100,00 $125,625 200,000
Financial Officer
Fiscal Year ended December 26, 1999
-----------------------------------
R. Ramin Kamfar, Chairman and $175,000 $87,500 $24,000 (1) -- -- 250,000
Chief Executive Officer
Jerold E. Novack, Chief $150,000 $37,500 $12,000 (1) -- -- 125,000
Financial Officer
Fiscal Year ended December 27, 1998
-----------------------------------
R. Ramin Kamfar, Chairman and $137,500 $68,750 $24,000 (1) -- -- --
Chief Executive Officer
Jerold E. Novack, Chief $118,462 $100,000 $12,000 (1) -- -- --
Financial Officer
<FN>
(1) Represents car and commuting allowances for the respective individuals.
</FN>
Stock Option Grants
Set forth below is information on grants of stock options for the Named
Executive Officers for the period December 27, 1999 to December 31, 2000.
OPTION GRANTS IN 2000
Number of Percentage of
Securities Total Options Potential Realizable Value
Underlying Granted to At Assumed Annual Rates
Options Employees in Exercise Price Expiration of Stock Price Appreciation
Granted Fiscal Year ($ per Share) Date for Option Term (1)
------- ----------- ------------- ---- -------------------
Jerold Novack 200,000 30.9% $2.00 10/01/2010 $139,490 $459,048
R. Ramin Kamfar 250,000 38.6% $2.00 10/01/2010 $174,362 $573,809
William Rianhard 60,000 9.3% $2.63 05/15/2010 $4,347 $100,214
<FN>
(1) The potential realizable value is calculated based on the term of the
option at the time of grant (ten years). Assumed stock price appreciation
of 5% and 10% is based on the fair value at the time of grant.
</FN>
Fiscal Year-End Option Values
The following table sets forth certain information with respect to the
stock options held at December 31, 2000 by the Company's Named Executive
Officers.
2000 OPTION VALUES
Number of Securities Underlying Value of Unexercised In-the-Money Options
Unexercised Options At Year End at Year End ($) (1)
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
R. Ramin Kamfar 684,367 -- -- --
Jerold E. Novack 421,662 -- -- --
William Rianhard 15,000 45,000 -- --
<FN>
(1) Calculated based on an assumed share price of $1.125 per share, less the
exercise price payable for such shares.
</FN>
Employment Contracts
Ramin Kamfar
In September 2000, the Company entered into a new employment agreement with
Mr. Kamfar, then the Company's Chairman and Chief Executive Officer. The
agreement expires on December 31, 2001 but is automatically renewed for
additional one-year periods commencing each January 1 unless either party gives
written notice to the other of its desire not to renew such term, which notice
must be given no later than ninety (90) days prior to the end of each term on
any such renewal. The agreement provides for a compensation package of $300,000
per year, and an annual performance bonus of between 35% and 100% of the base
salary for calendar year 2000 and any subsequent calendar year. Each bonus is
based on the attainment of certain corporate and individual goals. Pursuant to
the agreement, Mr. Kamfar has agreed to maintain the confidentiality of any
confidential or proprietary information of the Company.
In the event that the Company terminates Mr. Kamfar's employment upon a
change in control or terminates Mr. Kamfar's employment other than for cause, he
will be paid severance compensation equal to three times his annual base salary
(at the rate payable at the time of such termination) plus an amount equal to
the greater of three times the amount of his bonus for the calendar year
preceding such termination or 35% of his base salary. For a period of one year
following Mr. Kamfar's voluntary termination or termination for cause, Mr.
Kamfar cannot perform services for, have an equity interest (except for an
interest of 10% or less in an entity whose securities are listed on a national
securities exchange) in any business (other than the Company) or participate in
the financing, operation, management or control of, any firm, corporation or
business (other than the Company) that engages in the marketing or sale of
specialty coffee as its principal business.
Mr. Kamfar's employment agreement defines a "change of control" as: 1) the
acquisition of more than 40% of the voting stock of the Company by a single
person or group; 2) a change in the majority of the Board of Directors as a
result of a cash tender offer, merger, sale of assets or contested election; 3)
the approval by shareholders of the Company of a merger or sale of all or
substantially all of the Company's assets; 4) the closing of a transaction in
which more than 50% of the Company's voting power is transferred and 5) a tender
offer which results in a person or a group acquiring more than 40% of the
Company; 6) a resolution of the Board of Directors is passed, authorizing the
filing of a petition for or against the Company under Title 11 of the U.S. Code;
and 7) the stockholders of the Company approve a plan of liquidation or
dissolution of the Company.
Anthony Wedo
In July 2001, the Company entered into an employment agreement with Mr.
Anthony Wedo, the Company's Chief Executive Officer. The agreement expires on
July 31, 2003, but is automatically renewed for additional one (1) year periods
commencing each July 31, unless either party gives written notice of its desire
not to renew such term at least ninety (90) days prior to the end of the term or
any such renewal term. The agreement provides for a compensation package of
$425,000 per year, and an annual performance bonus of up to 88.25% of Mr. Wedo's
base salary for such year. The amount of the bonus shall be determined by the
Board of Directors after review by the Compensation Committee and is based upon
the achievement of predetermined goals for the Company during such period.
Pursuant to the agreement, Mr. Wedo has agreed to maintain the confidentiality
of any confidential or proprietary information of the Company.
Mr. Wedo was granted an option to purchase 3% of the Company's outstanding
common stock (including common stock issuable upon exercise of outstanding
options and warrants, having an exercise price of $3.00 per share or less,) (the
"Fully Diluted Common Stock") at a price per share of $1.15, which option will
vest as to 50% of the amount thereof at the end of each twelve (12) month period
during the Term. Mr. Wedo was also granted an option to purchase an additional
1% of the Company's Fully Diluted Common Stock at a price per share of $1.15,
which option shall vest at the end of the first one (1) year extension of the
Term (provided the Term is thus extended pursuant to the agreement). Mr. Wedo
shall be granted piggyback registration rights as to the common stock he may
acquire upon the exercise of such options.
In the event that the Company terminates Mr. Wedo's employment upon a
change in control or terminates Mr. Wedo's employment other than for cause, he
will be paid severance compensation equal to one times his annual base salary.
Mr. Wedo's employment agreement defines change of control as: 1) the acquisition
of more than 40% of the voting stock of the Company by a single person or group;
2) a change in the majority of the Board of Directors as a result of a cash
tender offer, merger, sale of assets, or contested election; 3) the approval by
the stockholders of the Company of the merger or sale of all or substantially
all of the Company's assets; 4) the closing of a transaction or series of
transaction in which more than 50% of the voting power of the corporation is
transferred to a single person or a group; 5) a tender offer which results in a
person or a group requiring more than 40% of the outstanding shares of the
Company's common stock and warrants to purchase the Company's common stock; 6) a
resolution of the Board of Directors is passed, authorizing the filing of a
petition for or against the Company under Title 11 of the U.S. Code; and 7) the
stockholders of the Company approve a plan of liquidation or dissolution of the
Company.
Jerold E. Novack
In September 2001, the Company entered into a new employment agreement with
Mr. Novack, the Company's Executive Vice President, Chief Financial Officer,
Treasurer and Secretary. The agreement expires on June 30, 2002. The agreement
provides for a compensation package of $300,000 per year, and an annual
performance bonus of 30% to 100% of the base salary based on the attainment of
certain corporate, departmental and individual goals. Pursuant to the agreement,
Mr. Novack has agreed to maintain the confidentiality of any confidential or
proprietary information of the Company.
In the event that Mr. Novack's employment with the Company ceases other
than for cause, he will be paid severance compensation of $300,000. For a period
of one year following Mr. Novack's voluntary termination or termination for
cause, Mr. Novack cannot perform services for, have an equity interest (except
for an interest of 10% or less in an entity whose securities are listed on a
national securities exchange) in any business (other than the Company) or
participate in the financing, operation, management or control of, any firm,
corporation or business that engages in the marketing or sale of specialty
coffee or bagels as its principal business.
William Rianhard
In April 2000, the Company entered into an employment agreement with Mr.
Rianhard with a term beginning May 15, 2000 and ending May 15, 2002, which term
is automatically renewed from year to year unless either party gives notice to
the contrary not less than ninety (90) days prior to the commencement of any one
(1) year extension period. The Agreement provides for annual compensation of
$160,000 plus such increases as the Board of Directors may approve. The
Agreement also provides for an annual service bonus equal to 25% of Mr.
Rianhard's base compensation and an annual performance bonus of up to 25% of Mr.
Rianhard's base compensation, as determined by the Board of Directors. The
Agreement also provides for an option to purchase 60,000 shares of common stock
at its closing price on April 12, 2000, a $12,000 annual automobile allowance, a
$12,000 annual rent allowance and a moving allowance.
If there is a "change in control", Mr. Rianhard shall be entitled to a
bonus equal to 50% of his base compensation for the year in which the same
occurs, and if he is terminated within six (6) months after the "change of
control," Mr. Rianhard would be entitled to receive 12 months' base
compensation, one year's bonus and 12 months' automobile allowance and would be
entitled to fully exercise his options. For a period of one year following Mr.
Rianhard's voluntary termination or termination for cause, Mr. Rianhard cannot
perform services for, have an equity interest (except for an interest of 5% or
less in an entity whose securities are listed on a national securities exchange)
in any business (other than the Company) or participate in the financing,
operation, management or control of, any firm, corporation or business that
engages in the marketing or sale of specialty coffee or bagels as its principal
business.
Directors' Compensation
Each non-employee director of the Company is paid $2,000 for each of the
quarterly Board meetings of each calendar year, $1,000 for each additional Board
meeting held in the same calendar year and $500 for each committee meeting. Such
payments are made in Common Stock of the Company. Employee directors are not
compensated for service provided as directors. Additionally, each non-employee
director receives stock options to purchase 10,000 shares of Common Stock on the
date on which such person first becomes a director, and on October 1 of each
year if, on such date, he or she shall have served on the Company's Board of
Directors for at least six months. The exercise price of such options shall be
equal to the market value of the shares of Common Stock on the date of grant.
All directors are reimbursed for out-of-pocket expenses incurred by them in
connection with attendance of Board meetings and committee meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's common stock, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange Commission and NASDAQ.
Officers, directors and greater than ten percent shareholders are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's knowledge, based
solely on its review of the copies of such forms received by it, the Company
believes that all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners have been complied with
for the fiscal year ended December 31, 2000, although a number of reports on
Form 4 and Form 5 for such fiscal year were filed after the end of such fiscal
year.
Indemnification of Directors and Officers and Related Matters
The Company's Certificate of Incorporation limits, to the maximum extent
permitted by the General Corporation Law of the State of Delaware ("Delaware
Law"), the personal liability of directors and officers for monetary damages for
breach of their fiduciary duties as directors and officers (other than
liabilities arising from acts or omissions which involve intentional misconduct,
fraud or knowing violations of law or the payment of distributions in violation
of Delaware Law). The Certificate of Incorporation provides further that the
Company shall indemnify to the fullest extent permitted by Delaware Law any
person made a party to an action or proceeding by reason of the fact that such
person was a director, officer, employee or agent of the Company. Subject to the
Company's Certificate of Incorporation, the Bylaws provide that the Company
shall indemnify directors and officers for all costs reasonably incurred in
connection with any action, suit or proceeding in which such director or officer
is made a party by virtue of his being an officer or director of the Company
except where such director or officer is finally adjudged to have been derelict
in the performance of his duties as such director or officer.
At present, there is pending litigation involving certain officers of the
Company where indemnification may be required. These involve routine litigations
in respect to which the officers were believed to be acting solely in their
corporate capacity.
Stock Performance Graph
The following performance graph compares the cumulative total return of the
Company's Common Stock to the NASDAQ National Stock Market (U.S.) Index and a
group of the Company's peers consisting of Papa John's International, Inc.
(PZZA), Panera Bread Company (PNRA), The Cheesecake Factory Incorporated (CAKE),
Wall Street Deli, Inc. (WSDI), and Starbucks Corporation (SBUX). Relative
performance is compared for the five-year period from December 31, 1996, to
December 31, 2000, each the last day of the Company's fiscal year. The graph
assumes that the value of the investments in the Company's Common Stock and in
each index was $100 at December 31, 1996, and that all dividends were
reinvested.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
Total Returns Index for: 12/1996 12/1997 12/1998 12/1999 12/2000
- ------------------------ ------- ------- ------- ------- -------
New World Restaurant Group, Inc. 100.0 61.25 42.5 42.5 22.5
Nasdaq Stock Market (US Companies) 100.0 112.23 218.43 421.76 278.89
Peer Group 100.0 107.51 135.1 101.97 161.86
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of October 24, 2001, certain information
regarding beneficial ownership of the Company's Common Stock (i) by each person
who, to the knowledge of the Company, beneficially owned more than 5% of the
shares of Common Stock of the Company outstanding at such date; (ii) by each
director of the Company; (iii) by the Chief Executive Officer of the Company;
and (iv) by each executive officer of the Company, other than the Chief
Executive Officer, who was serving as such at October 24, 2001 and whose annual
compensation exceeded $100,000:
Shares Percentage
Owned Beneficially
NAME OF BENEFICIAL OWNER** Number Owned
- -------------------------- ------ -----
Halpern Denny III, L.P..................................................... 16,951,320(1) 49.4%
Greenlight................................................................. 16,289,023(1) 48.4%
Brookwood New World Investors, LLC......................................... 3,263,178(1) 15.8%
BET Associates, L.P........................................................ 3,861,178(2) 18.2%
Bruce Toll................................................................. 4,080,428(2) 19.2%
Special Situations Fund.................................................... 4,287,811(1) 19.8%
Frank and Lydia LaGalia.................................................... 981,800 5.7%
R. Ramin Kamfar............................................................ 1,012,282(3) 5.6%
William Rianhard........................................................... 15,000(4) *
Anthony D. Wedo............................................................ 0(5) *
Jerold E. Novack........................................................... 1,005,683(6) 5.5%
Keith F. Barket............................................................ 67,721(7) *
Edward McCabe.............................................................. 48,532(8) *
Karen Hogan................................................................ 66,434(9) *
Leonard Tannenbaum......................................................... 127,376(10) *
Eve Trkla.................................................................. 10,000(11) *
William Nimmo.............................................................. 10,000(12) *
All Directors and Executive Officers as a group (10 persons)............... 2,363,028 12.4%
- ---------------------------
<FN>
* Less than one percent (1%).
** Address for each officer and director of the Company is the Company's
principal office located at 246 Industrial Way West, Eatontown, NJ.
(1) Consists of Common Stock which may be purchased pursuant to warrants.
(2) Includes 3,861,178 shares which may be purchased under warrants by BET
Associates, L.P. Mr. Toll is a controlling person of BET Associates, L.P.
Mr. Toll also beneficially owns 219,250 shares of Common Stock.
(3) Includes 684,367 shares, which may be acquired upon the exercise of options
which will be exercisable within 60 days.
(4) Includes 15,000 shares, which may be purchased pursuant to the exercise of
options which will be exercisable within sixty (60) days.
(5) Does not include options to purchase 2,285,889 shares of common stock in
connection with Mr. Wedo's employment agreement, which options are not
exercisable within sixty (60) days.
(6) Includes 802,874 shares, which may be acquired upon the exercise of
options, including options to purchase 381,212 shares of common stock in
connection with Mr. Novack's employment agreement.
(7) Includes 37,000 shares, which may be acquired upon the exercise of
presently exercisable options.
(8) Includes 35,000 shares, which may be acquired upon the exercise of
presently exercisable options.
(9) Includes 30,000 shares, which may be acquired upon the exercise of
presently exercisable options.
(10) Includes options to purchase 30,000 shares of Common Stock and warrants to
purchase 70,000 shares of Common Stock. Does not include 3,861,178 shares
owned beneficially by BET Associates, L.P., of which Mr. Tannenbaum is a
limited partner owning 10% of the interest of the limited partners, and of
which shares Mr. Tannenbaum disclaims beneficial ownership.
(11) Includes 10,000 shares, which may be acquired upon the exercise of
presently exercisable options. Ms. Trkla is a controlling person of
Brookwood Financial Partner, L.P., an affiliate of Brookwood New World
Investors, LLC (see Note (1) above). Ms. Trkla disclaims a beneficial
interest in the Common Stock beneficially owned by Brookwood New World
Investors, LLC.
(12) Includes 10,000 shares, which may be acquired upon the exercise of
presently exercisable options. Does not include 10,605,140 shares owned
beneficially by Halpern Denny III, LP (see Note (1)) in which Mr. Nimmo is
a partner. Mr. Nimmo disclaims a beneficial interest in the Common Stock
beneficially owned by Halpern Denny III, LP.
</FN>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Leonard Tannenbaum, a director of the Company, is a limited partner and ten
(10%) owner in BET Associates, L.P. ("BET"). On August 11, 2000 BET purchased
approximately 8,108 shares of our Series D Preferred Stock for a sum of
$7,500,000. In a related transaction on August 18, 2000, Brookwood New World
Investors, LLC ("Brookwood") purchased approximately 8,108 shares of our Series
D Preferred Stock for a sum of $7,500,000 (collectively the "Series D
Financing"). Each of BET and Brookwood received a warrant to purchase 1,196,909
shares of our common stock at a price of $.01 per share. In connection with the
Series D Financing, Mr. Tannenbaum received a fee of $225,000 and a warrant to
purchase 70,000 shares of our common stock at its closing price on August 18,
2000. In addition, Mr. Tannenbaum was designated by BET as a director of the
Company to serve for the period specified in the Stock Purchase Agreement.
Eve Trkla, a director of the Company, is the Chief Financial Officer of
Brookwood Financial Partners, L.P., an affiliate of Brookwood. In addition, Ms.
Trkla was designated by Brookwood as a director of the Company to serve for the
period specified in the Stock Purchase Agreement.
On January 22, 2001, we consummated a sale of 20,000 shares of our
authorized but unissued Series F Preferred Stock to Halpern Denny III, L.P.
("Halpern Denny") in exchange for the sum of $20 million. At such time we
entered into a Series F Preferred Stock and Warrant Purchase Agreement with
Halpern Denny. William Nimmo, a director of the Company, is a partner in Halpern
Denny and Co., an affiliate of Halpern Denny III, LP. Mr. Nimmo was designated
by Halpern Denny III, LP as a director of the Company. In connection with the
Series F Purchase Agreement, the Company issued Halpern Denny a warrant to
purchase 8,484,112 shares of our common stock at an exercise price of $0.01 per
share. Commencing in 2002, if the Series F Preferred Stock remains outstanding,
each of BET, Brookwood and Halpern Denny will be entitled to receive, every six
months, additional warrants equal to 0.375% of the fully diluted common stock of
the Company for every 5,000 shares of Series F Preferred Stock owned by such
entities.
BET and Brookwood had invested the sum of $15 million for substantially the
same purpose as that contemplated by the Series F Purchase Agreement, which
investment was made in August 2000, and BET and Brookwood were then holding
Series D Preferred Stock, which had a right to approve the creation of the
Series F Preferred Stock. Therefore, we considered it appropriate to restructure
the investment documents relating to the August 2000 investment by BET and
Brookwood. Accordingly, the Company, BET and Brookwood entered into an Exchange
Agreement on January 22, 2001, whereby we exchanged all of our outstanding
Series D Preferred Stock, including accrued but unpaid dividends (all of which
were retired) for a total of 16,398.33 shares of Series F Preferred Stock. BET
and Brookwood also exchanged the warrants received by them in August 2000 for
warrants to purchase an aggregate of 6,526,356 shares of our common stock.
In addition, the Company, BET, Brookwood and Halpern Denny entered into a
Stockholders Agreement, which relates principally to the composition of the
Board of Directors of the Company. Pursuant to the terms of the Stockholders
Agreement, as amended, the authorized number of directors on the Board of
Directors shall be ten. BET is entitled to designate one (1) member to the Board
of Directors. Brookwood is entitled to designate one (1) member of the Board of
Directors until such time as its Series F Preferred Stock, including any Notes
issued upon redemption thereof, have been paid for in full. Halpern Denny is
entitled to designate two members to the Board of Directors (and has designated
one as of this time) until such time as its Series F Preferred Stock, including
any Notes issued upon redemption thereof, have been paid in full, at which time
it shall be allowed to designate one director, which right will be continue
until such time as it owns less than 2% of our outstanding common stock. The
Stockholders Agreement provides that should Halpern Denny designate a second
member to the Board of Directors, a majority of directors who are not designees
of BET, Brookwood, or Halpern Denny may designate an additional member to the
Board of Directors bringing the total membership of the Board of Directors to
ten persons. In addition, pursuant to the terms of the Certificate of
Designation for the Series F Preferred Stock, in the event that any dividends on
the Series F Preferred Stock are in arrears, or that the Series F Preferred
Stock is not redeemed in accordance with its terms, the holders of the Series F
Preferred Stock will have the right to designate a majority of the members of
the Board of Directors.
On March 29, 2001, we consummated a sale of 5,000 additional shares of our
authorized, but unissued, Series F Preferred Stock to Halpern Denny in exchange
for the sum of $5,000,000. Pursuant to the terms of the Second Series F
Preferred Stock and Warrant Purchase Agreement (the "Second Purchase Agreement")
with Halpern Denny, we also sold Halpern Denny warrants to purchase 2,121,028
shares of our common stock at a price per share of $.01 (subject to adjustment
as provided in the form of warrant).
In connection with the acquisition of Einstein, on June 19, 2001, Halpern
Denny purchased an additional $7,500,000 of Series F Preferred Stock and
warrants to purchase 2,961,551 shares of our Common Stock at a price per share
of $.01 (subject to adjustment as provided in the form of warrant).
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION
OF THE CLASS II DIRECTORS SET FORTH IN THIS PROXY STATEMENT
2. SELECTION OF AUDITORS
The Board of Directors recommends that the stockholders ratify the
selection of Arthur Andersen LLP, independent auditors, which served as the
Company's independent auditors to audit the Company's consolidated financial
statements for the fiscal year ending January 1, 2002.
Relationship with Independent Auditors
Arthur Andersen LLP has served as our independent auditor for the year
ended December 31, 2000. Representatives of Arthur Andersen LLP may be present
at the meeting, will have an opportunity to make a statement, if desired, and
will be available to respond to appropriate questions, if any, of our
stockholders.
Independent Auditor Fees
The aggregate fees billed for professional services by Arthur Andersen LLP
and other firms for these various services were as follows:
Audit Fees: $158,100 for services rendered for the annual audit of our
consolidated financial statements for 2000 and the quarterly reviews of the
financial statements included in our Form 10-Q;
All Other Fees: $18,038 for network security performed.
Our management is responsible for decisions with respect to the
implementation of our financial information systems and for evaluating the
adequacy of such systems, as well as maintaining our system of internal
accounting controls. Our Board of Directors has determined that the provision of
services by Arthur Andersen LLP as described above is compatible with
maintaining such auditor's independence.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE
SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING JANUARY 1, 2002
3. OTHER MATTERS
The Board of Directors has no knowledge of any other matters which may come
before the Annual Meeting and does not intend to present any other matters.
However, if any other business shall properly come before the Annual Meeting or
any adjournment thereof, the persons named as proxies will have discretionary
authority to vote the shares of Common Stock represented by the accompanying
proxy in accordance with their best judgment.
PROCEDURE FOR SUBMISSION OF YEAR 2002 STOCKHOLDER PROPOSALS
Proposals by stockholders for inclusion in the 2002 annual meeting of
stockholders proxy statement must be received by New World Restaurant Group,
Inc., 246 Industrial Way West, Eatontown, New Jersey 07724, pursuant to the
provisions of the Restated Certificate of Incorporation. To be timely, a
stockholder's notice must be received not later than October 20, 2002 nor prior
to September 20, 2002; provided, however, that in the event that the date of the
annual meeting is advanced by more than thirty (30) days or delayed by more than
sixty (60) days from the first anniversary of the preceding year's annual
meeting, notice by the stockholder to be timely must be so received not earlier
than the ninetieth day prior to such annual meeting and not later than the close
of business on the later of (1) the sixtieth day prior to such annual meeting;
or (2) the tenth day following the date on which notice of the date of the
annual meeting was mailed or public disclosure there of was made, whichever
first occurs. All such proposals are subject to the applicable rules and
requirements of the Securities and Exchange Commission.
OTHER MATTERS
So far as the Board of Directors is aware, only the aforementioned matters
will be acted upon at the Annual Meeting. If any other matters properly come
before the Annual Meeting, it is intended that the accompanying proxy may be
voted on such other matters in accordance with the best judgment of the person
or persons voting said proxy.
By order of the Board of Directors.
Jerold E. Novack, Secretary
Dated: November 19, 2001
COMMON STOCK PROXY
------------------
NEW WORLD RESTAURANT GROUP, INC.
246 Industrial Way West
Eatontown, New Jersey 07724
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned, revoking all previous proxies, hereby appoints R. Ramin
Kamfar and Jerold E. Novack, and each of them, proxies with power of
substitution to each, for and in the name of the undersigned to vote all shares
of Common Stock of New World Restaurant Group, Inc. (the "Company"), held of
record by the undersigned on October 24, 2001 which the undersigned would be
entitled to vote if present at the Annual Meeting of Shareholders of the Company
to be held on December 19, 2001, at 10:30 a.m. at 246 Industrial Way West,
Eatontown, New Jersey 07724, and any adjournments thereof, upon the matters set
forth in the Notice of Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement.
1. ELECTION OF DIRECTORS
FOR the nominees listed below Withhold Authority to vote for the
(except as marked to the contrary nominee listed below _________
below) _________
(Instruction: To withhold authority to vote for an individual nominee
strike a line through such nominee's name in the list below).
KEITH F. BARKET
EDWARD MCCABE
2. RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JANUARY 1, 2002.
FOR __________ AGAINST ____________ ABSTAIN _________
3. TRANSACTION OF SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
FOR __________ AGAINST ___________ ABSTAIN ____________
PLEASE SIGN ON THE REVERSE SIDE AND RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
and when properly executed will be voted as directed herein. If no direction is
given, this Proxy will be voted "FOR" all proposals.
(Date)
(Signature)
(Signature, if held jointly)
Please sign exactly as name appears below. If Shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please list full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Please sign, date and return promptly in the enclosed envelope. No
postage need be affixed if mailed in the United States.
Appendix A
Audit Committee Charter
Status
The Audit Committee (the "Committee") is a committee of the Board of Directors.
The Audit Committee is appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the Company, (2) the compliance
by the Company with legal and regulatory requirements, and (3) the independence
and performance of the Company's auditors.
Membership
The Committee shall consist of three or more directors all of whom in the
judgment of the Board of Directors shall be independent. Each member shall in
the judgment of the Board of Directors have the ability to read and understand
the Company's basic financial statements or shall at the time of appointment
undertake training for that purpose. At least one member of the Committee shall
in the judgment of the Board of Directors have accounting or financial
management expertise.
Responsibilities
1. Review with members of the public accounting firm selected as outside
auditors for the Company, the scope of the prospective audit, the estimated
fees therefor and such other matters pertaining to such audit as the
Committee may deem appropriate and receive copies of the annual comments
from the outside auditors on accounting procedures and systems of control;
and review with them any questions, comments or suggestions they may have
relating to the internal controls, accounting practices or procedures of
the Company or its subsidiaries.
2. Review, at least annually, the then current and future programs of the
Company's Accounting Department, including the procedure for assuring
implementation of accepted recommendations made by the auditors; receive
summaries of all audit reports issued by the Accounting Department; and
review the significant matters contained in such reports.
3. Make or cause to be made, from time to time, such other examinations or
reviews as the Committee may deem advisable with respect to the adequacy of
the systems of internal controls and accounting practices of the Company
and its subsidiaries and with respect to current accounting trends and
developments, and take such action with respect thereto as may be deemed
appropriate.
4. Recommend annually the public accounting firm to be outside auditors for
the Company, for approval by the Board of Directors and set their
compensation.
5. Review with management and the public accounting firm selected as outside
auditors for the Company the annual and quarterly financial statements of
the Company and any material changes in accounting principles or practices
used in preparing the statements prior to the filing of a report on Form
10-K or 10-Q with the Securities and Exchange Commission. Such review to
include the items required by SAS 61 as in effect at that time in the case
of the annual statements and SAS 71 as in effect at that time in the case
of the quarterly statements.
6. Receive from the outside auditors the report required by Independence
Standards Board Standard No. 1 as in effect at that time and discuss it
with the outside auditors.
7. Review the status of compliance with laws, regulations, and internal
procedures, contingent liabilities and risks that may be material to the
Company, the scope and status of systems designed to assure Company
compliance with laws, regulations and internal procedures, through
receiving reports from management, legal counsel and other third parties as
determined by the Committee on such matters, as well as major legislative
and regulatory developments which could materially impact the Company's
contingent liabilities and risks.
8. While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between management and
the independent auditor or to assure compliance with laws and regulations
and the Company's Code of Conduct.
Meetings
The Committee shall meet at least quarterly and at such other times as it deems
necessary to fulfill its responsibilities.
Report
The Committee shall prepare a report each year concerning its compliance with
this charter for inclusion in the Company's proxy statement relating to the
election of directors.