EXCHANGE AGREEMENT
This Exchange Agreement is made and entered into as of the 2nd day of
September, 1997, by Xxx. Xxxxxx' Holding Company, Inc., a Delaware corporation
("Fields"), and Xxxxxx X. Xxxxxxxxx, an individual resident in Pennsylvania
("Xxxxxxxxx"); each a "Party", and collectively, the "Parties".
WHEREAS, Fields and Xxxxxxxxx are shareholders in Pretzel Time, Inc., a
Pennsylvania corporation ("Pretzel Time");
WHEREAS, the Parties have agreed that in order to provide liquidity for
Xxxxxxxxx, in the event that Fields, or a subsidiary or sister entity of Fields
(a "Fields Entity"), commences an initial public offering or secondary offering
of stock (collectively, an "Offering"), then Xxxxxxxxx shall have the right and
obligation to exchange his Pretzel Time stock (together with the Pretzel Time
stock of all of his Permitted Transferees as defined in the Shareholders
Agreement between the Parties and Pretzel Time of even date herewith)
(collectively, the "Xxxxxxxxx Pretzel Stock") for stock (the "Offering Entity
Stock") in the Fields entity conducting the Offering (the "Offering Entity"), as
more fully described herein;
WHEREAS, in addition to this Agreement, the Parties are concurrently
entering into a Registration Rights Agreement (the "Registration Rights
Agreement") to further clarify the rights of Xxxxxxxxx;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
1. Certain Definitions.
1.1 For purposes hereof, a Fields Entity includes Fields, Xxx. Xxxxxx
Original Cookies, Inc. ("MFOC"), and any subsidiaries of either of them, or any
parent entity that may be formed; provided that "Fields Entity" shall not
include Capricorn Investors II, L.P., or any parent entity thereof.
2. Cooperation of Offering Entity. Fields shall cause the Offering Entity to
cooperate and perform the obligations described hereunder, including the
exchange of Offering Entity Stock for Xxxxxxxxx Pretzel Stock in the event that
Fields is not the Offering Entity.
3. Mechanics of Exchange of Shares.
3.1 At least sixty (60) days prior to the Offering, the Offering Entity
and Fields (if the Offering Entity is other than Fields) shall deliver notice of
the impending Offering to Xxxxxxxxx (the "Offering Notice").
3.2 Within five (5) days of receipt of the Offering Notice, the Parties
shall agree on an appraiser to determine the value of the Xxxxxxxxx Pretzel
Stock and the value of the Offering Entity, after giving effect to the Exchange
(as defined below) (the "Valuation"). If the Parties are unable to agree on an
appraiser within five (5) days, then the Parties shall cause the board of
directors of Pretzel Time (with the concurrence of one director selected by
Xxxxxxxxx and one director selected by Fields) to select the appraiser. Such
selection shall be made within fourteen (14) days of receipt of the Offering
Notice by Xxxxxxxxx. The costs of the appraisal shall be shared equally by
Fields and Xxxxxxxxx. The Valuation shall be made by the appraiser within
fourteen (14) days of the appointment of the appraiser. The Valuation shall
specify a conversion ratio of Xxxxxxxxx Pretzel Stock for Offering Entity Stock.
When issued by the appraiser, the Valuation shall be final and binding on Fields
and Xxxxxxxxx.
3.3 Within seven (7) days of the Valuation, Xxxxxxxxx and the Offering
Entity shall exchange (the "Exchange") the Xxxxxxxxx Pretzel Stock for the
required number of shares of the Offering Entity Stock as specified by the
Valuation, which shares of Offering Entity Stock shall be placed in a mutually
acceptable escrow. In the event that an underwriting agreement is not entered
into as described in the Registration Rights Agreement, then the Exchange shall
not be consummated. In the event an underwriting agreement is consummated, then
the Exchange shall be consummated and the shares of Offering Entity Stock
released from the escrow to Xxxxxxxxx. 4. Post-Exchange Agreements.
4.1 Fields, on behalf of itself and the Fields Entitys' hereby
covenants and agrees that if the Exchange: (i) causes Xxxxxxxxx a federal and/or
State taxable event, and (ii) if the Xxxxxxxxx shares of Offering Entity Stock
are not publicly tradeable (whether through registration, SEC Rule 144, or
otherwise), then (iii) Fields (or a Fields Entity) shall loan (the "Loan") to
Xxxxxxxxx sufficient funds to pay such tax. The Loan: (i) shall be for the
period of time that the Xxxxxxxxx shares of the Offering Entity Stock are not
publicly tradeable (whether through registration, SEC Rule 144, or otherwise),
provided that when a sufficient number of shares are publicly tradeable then all
principal and accrued interest shall be immediately due and payable, (ii) shall
be at an interest rate that is the lesser of the cost of funds to the Fields
Entity or the prime rate (plus 1%) as announced in the Wall Street Journal on
the date that the Loan is closed. Xxxxxxxx shall pledge as security for the Loan
twenty one percent (21%) of the number of shares of Offering Entity Stock he
receives as a result of the Exchange.
4.2 In the event that Fields makes the Loan, then Xxxxxxxx'x Employment
Agreement shall continue in full force and effect for the duration of the Loan.
When the Loan becomes due and payable as described above, then the Employment
Agreement shall terminate.
5. Miscellaneous.
5.1 Benefit. This Agreement shall be binding upon and inure to the
benefit of the successors, assigns, personal representatives, heirs and legatees
of the respective Parties hereto. This Agreement may be assigned to and assumed
by MFOC, provided that Fields shall not be relieved of its duties under this
Agreement in the event of an assignment thereof.
5.2 Entire Agreement; Waiver. This Agreement contains the entire
agreement of the Parties hereto with respect to the subject matter hereof and no
modification, amendment or change of any term or provision of this Agreement
shall be valid or binding unless the same is in writing and signed by all the
Parties hereto. No waiver of any of the terms of this Agreement shall be valid
unless signed by the Party against whom such waiver is asserted and a waiver at
any time of any of the terms of this Agreement shall not be construed as a
waiver at any subsequent time of the same terms.
5.3 Notices. Any notice, demand, offer, or other written instrument
required or permitted to be given, made or sent hereunder shall be in writing
and may be sent by personal delivery, overnight courier, registered or certified
United States mail, postage prepaid, return receipt requested, to all required
Parties simultaneously at the their respective addresses as set forth in the
shareholder records of Pretzel Time. Any person to receive a notice hereunder
shall have the right to change the place to which any such notice shall be sent
by a similar notice sent in like manner to all of the other Parties hereto.
Except as otherwise provided herein, all notices sent in the United States mail
in the manner set forth above shall be deemed given or received on the earlier
of actual receipt or three (3) days after being placed in the United States
mail, or in the case of overnight courier, the day after delivery to the courier
service.
5.4 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Utah, without giving effect to the
conflict of laws provisions thereof.
5.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one agreement.
5.6 Severability. In the event any one (1) or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
5.7 Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
Party shall be entitled to reasonable attorneys' fees, costs and other
disbursements in addition to any other relief to which such Party may be
entitled.
5.8 Terminology. With respect to terminology in this Agreement, each
number (singular or plural) will include all numbers and each gender (male,
female or neuter) will include all genders. The title of the Sections in this
Agreement will have no effect and will neither limit nor amplify the provisions
hereof.
5.9 Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Salt Lake City, Utah, in
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
5.10 Arbitration. All disputes hereunder shall be resolved by binding
arbitration in Salt Lake City, Utah conducted in accordance with the terms of
this arbitration clause. Arbitrations conducted pursuant to this Agreement,
including selection of arbitrators, shall be administered by the American
Arbitration Association (the "Administrator") pursuant to the Commercial
Arbitration rules of the Administrator. Judgment upon any award rendered
hereunder may be entered in any court having jurisdiction. Any Party who fails
to submit to binding arbitration following a lawful demand by the opposing Party
shall bear all costs and expenses, including reasonable attorney's fees,
incurred by the opposing Party in compelling arbitration of any dispute
hereunder.
IN WITNESS WHEREOF, the Parties have executed this Agreement personally
or has caused this Agreement to be executed by a duly authorized representative.
XXX. XXXXXX' HOLDING COMPANY, INC.,
By:/s/Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx, Vice President
/s/Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx, Individually
