-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AdHPTR3gWN6HvrRZVgCP9OQkvY0X4DnVxj6CvRmoCspfslbrvCdL2OENF5hGOzfo WZ69LFdUm4tCFEj7mhtsYw== 0000893220-01-000143.txt : 20010212 0000893220-01-000143.hdr.sgml : 20010212 ACCESSION NUMBER: 0000893220-01-000143 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20010209 GROUP MEMBERS: BET ASSOCIATES LP GROUP MEMBERS: BET ASSOCIATES, L.P. GROUP MEMBERS: BRUCE E. TOLL SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NEW WORLD COFFEE MANHATTAN BAGEL INC CENTRAL INDEX KEY: 0000949373 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 133690261 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-55609 FILM NUMBER: 1530586 BUSINESS ADDRESS: STREET 1: 246 INDUSTRIAL WAY WEST STREET 2: C/O NEW WORLD HOLDINGS CITY: EATONTOWN STATE: NJ ZIP: 07724 BUSINESS PHONE: 7325440155 MAIL ADDRESS: STREET 1: 246 INDUSTRIAL WAY WEST STREET 2: C/O NEW WORLD HOLDINGS CITY: EATONTOWN STATE: NJ ZIP: 07724 FORMER COMPANY: FORMER CONFORMED NAME: NEW WORLD COFFEE & BAGELS INC / DATE OF NAME CHANGE: 19981007 FORMER COMPANY: FORMER CONFORMED NAME: NEW WORLD COFFEE INC DATE OF NAME CHANGE: 19950815 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BET ASSOCIATES LP CENTRAL INDEX KEY: 0001063711 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232957243 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 3101 PHILMONT AVENUE CITY: HUNTINGTON VALLEY STATE: PA ZIP: 19006 BUSINESS PHONE: 2159635060 MAIL ADDRESS: STREET 1: 3101 PHILMONT AVENUE CITY: HUNTINGDON STATE: PA ZIP: 19006 SC 13D/A 1 w44993sc13da.txt AMENDMENT NO.2 TO SCHEDULE 13D 1 SCHEDULE 13D-A (RULE 13d-101) Information to be Included in Statements Filed Pursuant to Rule 13d-1(a) and Amendments Thereto Filed Pursuant to Rule 13d-2(a) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 13D-A Under the Securities Exchange Act of 1934 (Amendment No. 2) NEW WORLD COFFEE - MANHATTAN BAGEL, INC., f/k/a NEW WORLD COFFEE & BAGELS, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock - -------------------------------------------------------------------------------- (Title of Class of Securities) 648904200 - -------------------------------------------------------------------------------- (CUSIP Number) Michael J. Pedrick, Esquire Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) JANUARY 22, 2001 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box / /. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 CUSIP NO. 648904200 13D-A PAGE 2 OF 11 PAGES - -------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) BET ASSOCIATES, L.P. FEIN: 23-2957243 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) BK, WC - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 388,095 SHARES OF COMMON STOCK. WARRANTS TO PURCHASE 250,000 SHARES OF COMMON STOCK WARRANTS TO PURCHASE 3,263,178 SHARES OF COMMON STOCK SHARES ----------------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY EACH ----------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER REPORTING 388,095 SHARES OF COMMON STOCK. WARRANTS TO PURCHASE 250,000 SHARES OF COMMON STOCK WARRANTS TO PURCHASE 3,263,178 SHARES OF COMMON STOCK PERSON ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,901,273 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* (See Instructions) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.1%(1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) PN - -------------------------------------------------------------------------------- ------------------------- (1) Includes shares of common stock issuable to BET Associates, L.P. upon exercise of its warrant, but does not include any other shares issuable upon exercise of warrants issued in the transaction described herein. 3 CUSIP NO. 648904200 13D-A PAGE 3 OF 11 PAGES - -------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Bruce E. Toll - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) PF - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 388,095 shares of Common Stock. 219,250 shares of Common Stock. SHARES Warrants to purchase 250,000 shares of Common Stock Warrants to purchase 3,263,178 shares of Common Stock ----------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER -0- OWNED BY EACH ----------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER REPORTING 388,095 shares of Common Stock. 219,250 shares of Common Stock. Warrants to purchase 250,000 shares of Common Stock PERSON Warrants to purchase 3,263,178 shares of Common Stock ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,120,523 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* (See Instructions) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.2%(2) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IN - -------------------------------------------------------------------------------- ----------------------- (2) Includes shares of common stock issuable to BET Associates, L.P. upon exercise of its warrant, but does not include any other shares issuable upon exercise of warrants issued in the transaction described herein. 4 ITEM 1. SECURITY AND ISSUER. This Amendment No. 2 (the "Amendment") amends Schedule 13D-A which was originally filed on October 5, 2000, relating to the common stock (the "Common Stock") of New World Coffee - Manhattan Bagel, Inc., f/k/a New World Coffee & Bagels, Inc., a Delaware corporation ("New World"). The principal executive offices of New World are located at 246 Industrial Way West, Eatontown, New Jersey 07724. ITEM 2. IDENTITY AND BACKGROUND. (a) This statement is being filed by (i) BET Associates, L.P., a Delaware limited partnership (the "Company"), with respect to shares beneficially owned by it; and (ii) Bruce E. Toll with respect to shares beneficially owned by Mr. Toll and the Company. Mr. Toll is the sole member of BRU LLC, a Delaware limited liability company ("BRU"), which is the sole general partner of the Company. Mr. Toll and the Company are sometimes referred to herein as the "Filing Persons." Any disclosure herein with respect to persons other than the Filing Persons are made on information and belief after making inquiry to the appropriate party. (b) The business address of the Filing Persons is: 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006. (c) The principal business of the Company is to invest in businesses. Mr. Toll's principal occupation is as Vice-Chairman of Toll Brothers Inc., a publicly-traded company engaged primarily in the business of developing and constructing residential real estate. (d) During the last five years, none of the persons referred to in paragraph (a) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors.) (e) During the last five years, none of the persons referred to in paragraph (a) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he was or is subject to a judgement, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Mr. Toll is a United States citizen. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) As described more fully in that certain Schedule 13D filed by the Filing Persons on October 5, 2000, the Company was issued 8,108.108 shares of Series D Preferred Stock (the "Original Preferred Stock") and a warrant to purchase 1,196,910 shares of Common Stock at a price of $0.01 per share (the "Original Warrant") pursuant to a Series D Preferred Stock and Warrant Purchase Agreement (the "Original Purchase Agreement") among New World, the Company and Brookwood New World Investors, LLC, a Delaware limited liability company ("Brookwood"). New World later issued the Company 258.522 shares of Series D Preferred Stock as a payment in kind dividend for the Original Preferred Stock (the "PIK Shares"). 4 5 In a new financing transaction between New World and Halpern Denny III, L.P. ("HD") (the "HD Transaction"), New World and HD entered into a Series F Preferred Stock and Warrant Purchase Agreement (the "HD Purchase Agreement"), pursuant to which New World sold shares of newly authorized Series F Preferred Stock, $0.001 par value per share (the "Series F Preferred Stock"), and a warrant to purchase Common Stock. In connection with the HD Transaction, New World, Brookwood and the Company entered into an Exchange Agreement dated as of January 18, 2001 (the "Exchange Agreement"). The Exchange Agreement is attached hereto as Exhibit 99.6. The transactions contemplated by the Exchange Agreement were closed on January 22, 2001. Under the Exchange Agreement, New World exchanged the Original Preferred Stock, the PIK Shares and the Original Warrant for 8,213.01 shares of Series F Preferred Stock, $0.001 par value per share, and the warrant to purchase an aggregate of 3,263,178 shares of Common Stock at a price of $0.01 per share (the "New Warrant"). The form of a New Warrant is attached hereto as Exhibit 99.7. (b) The Company, through separate agreement, has the right to purchase 250,000 shares of Common Stock at a price of $2.00 per share upon exercise of its Warrant (the "November Warrant"). The Company's November Warrant was acquired pursuant to a Warrant Transfer Agreement dated July, 1999, by and between the Company and Jack Zalkind. The aggregate consideration paid for the November Warrant was $50,000. The Company funded the purchase of the November Warrant from the Company's working capital. (c) The Company sold 150,000 shares of Common Stock on January 26, 2001, on the open market. In addition, Mr. Toll personally acquired 200,000 shares of Common Stock on January 31, 2001, as part of a referral fee in connection with the placement of Series F Preferred Stock investors. ITEM 4. PURPOSE OF TRANSACTION. The purpose of the Exchange Agreement was to ensure that the terms of the original investment by the Company and Brookwood would be economically equivalent to the terms of the HD Transaction. To provide for such equivalency, the Company's Original Preferred Stock and Original Warrant were exchanged for the 8,213.01 shares of Series F Preferred Stock and the New Warrant having the terms described below. The Exchange Agreement supercedes the Original Purchase Agreement, except for the representations and warranties made by the parties in the Original Purchase Agreement. According to the Certificate of Designation, Preferences and Rights of the Series F Preferred Stock (the "Certificate of Designation"), attached hereto as Exhibit 99.8, holders of Series F Preferred Stock are entitled to receive, when, as and if declared by New World's board of directors, and to the extent funds are legally available, cumulative dividends payable quarterly, commencing on March 31, 2001 at the rate of 16% per annum (the "Dividend Percentage Rate") of the liquidation preference. The dividends are payable in kind as additional shares of Series F Preferred Stock. The liquidation preference for each share of Series F Preferred Stock is equal to $1,000 plus all accrued and unpaid dividends. The Dividend Percentage Rate will increase by an additional 2% per semi-annum on each January 18 and July 18, commencing on January 18, 2002, on each outstanding share of Series F Preferred Stock until such share of Series F Preferred Stock has been redeemed by New World as required by the Certificate of Designation. No dividends or other distributions of any kind may be declared or paid on, nor will New World redeem, purchase or acquire any shares of the Common Stock, any of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or Series D Preferred Stock or any other junior class or series of stock, other than stock dividends and distributions of the right to purchase common stock and repurchase any such rights in accordance with New World's Rights Agreement dated June 7, 1999 (the "Rights Plan"), unless all dividends on the Series F Preferred Stock accrued for all past dividend periods have been paid. 5 6 The Certificate of Designation provides that the Series F Preferred Stock is redeemable at the election of New World, in whole or in part, at any time ("Optional Redemption Date") on not less than 5 nor more than 60 days' prior notice, for an amount equal to 100% of the Purchase Price (as defined below), plus all accrued or declared but unpaid dividends, if any, to the date of redemption (the "Redemption Price"). The "Purchase Price" of each share of the Series F Preferred Stock shall be $1,000 (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares). All outstanding shares of Series F Preferred Stock must be redeemed (subject to the legal availability of funds therefor) in whole on the earlier of January 18, 2004 or the closing date of New World's acquisition of 70% or more of the outstanding stock, or all or substantially all of the assets, of Einstein/Noah Bagel Corporation ("Einstein") or the acquisition by Einstein of all or substantially all of the assets or stock of New World (the "Mandatory Redemption Date"), at the Redemption Price. In the event that New World fails to pay the Redemption Price in cash on the Mandatory Redemption Date, the Redemption Price will be paid on such date by the issuance of a senior subordinated note (the "Note"), in the form attached hereto as Exhibit 99.9. Under the terms of the Exchange Agreement, if within one year of the closing, New World (i) fails to redeem the Series F Preferred Stock in accordance with the terms set forth in the Certificate of Designation, (ii) redeems the Series F Preferred Stock by the issuance of the Note, but has not paid the Note in full or (iii) a business combination with Einstein has not occurred and the Series F Preferred Stock has not been redeemed in full in accordance with the Certificate of Designation, New World will be required to issue to the Company a warrant representing an additional 0.577% of the fully diluted Common Stock (taking into account all options, warrants and other convertible securities of New World, but not including any outstanding warrants or options with a strike price greater than $3.00 per share and not including the New Warrant) outstanding on such first anniversary date and on each June 30 and December 31 thereafter. The percentage will be reduced pro rata to the extent that the Series F Preferred Stock issued to the Company has been redeemed or the Note has been repaid. The Company is also entitled to receive additional warrants in certain circumstances. The shares of Common Stock issuable upon exercise of the New Warrant are entitled to registration rights under the terms of the Amended and Restated Registration Rights Agreement among New World, the Company, Brookwood and HD, attached hereto as Exhibit 99.10. Also under the terms of the Exchange Agreement, New World amended its bylaws to provide that the authorization of at least 75% of the board of directors is required to authorize the filing of a petition under the United States bankruptcy code and increased the number of directors to nine. Under a Stockholders Agreement among New World, the Company, Brookwood and HD, dated as of January 18, 2001 (the "Stockholders Agreement"), attached hereto as Exhibit 99.11, New World must take all necessary actions to cause the election of one director designated by the Company; provided, however, that if the shares of Series F Preferred Stock held by the Company are redeemed for cash in accordance with the Certificate of Designation or the Note to be issued in accordance with the Certificate of Designation is paid in full, the Company will no longer have 6 7 the right to designate a director. The Note also requires New World to take all necessary actions to cause the election of one director designated by the Company. Under the Stockholders Agreement, New World has granted to the Company, Brookwood and HD the right to purchase such stockholder's proportionate percentage in future offerings of securities of New World other than (i) issuances of certain options or warrants to employees, directors or consultants, (ii) issuances in connection with any merger or acquisition, (iii) issuances in an underwritten public offering or (iv) issuances to a bank or other institutional investor in connection with a debt financing. Also pursuant to the Stockholders Agreement, New World granted the Company, Brookwood and HD a co-sale right in certain situations. Furthermore, according to the Certificate of Designation, so long as any shares of Series F Preferred Stock remain outstanding, New World may not, without the vote or written consent by the holders of at least 67% of the then outstanding shares of the Series F Preferred Stock, voting together as a single class: (i) amend or repeal any provision of New World's Certificate of Incorporation or By-Laws in a manner which materially and adversely affects the rights and preferences of the holders of Series F Preferred Stock; (ii) authorize or issue shares of any class of stock having any preference or priority as to dividends or assets superior to or on a parity with the Series F Preferred Stock; (iii) pay or declare any dividend on any other type or class of securities, other than a dividend payable in Common Stock or rights under the Rights Plan; (iv) repurchase or redeem any shares of capital stock of New World other than the redemption of the Series F Preferred Stock; (v) authorize (i) a sale of any material asset of a value in excess of $1,000,000 of New World or any subsidiary or subsidiaries of New World, (ii) a sale of any substantial portion of the assets of New World or any subsidiary or subsidiaries (other than sales of stores owned by New World or its subsidiaries) or (iii) a recapitalization or reorganization of New World or any subsidiary or subsidiaries of New World (other than stock splits, combinations and/or dividends); (vi) take any action that results in New World or any subsidiary or subsidiaries of New World incurring or assuming more than $1,000,000 of funded indebtedness (other than borrowings of up to $17,119,848 by New World for funded debt, either on an individual or accumulative basis except (A) that New World may obtain substitute financings for its existing line of credit on similar terms from a substitute lender up to the outstanding loan balance on the existing line of credit on the date of such substitution, and (B) as contemplated by the HD Purchase Agreement and the Exchange Agreement); 7 8 (vii) effect any change of control event, except as contemplated by the HD Purchase Agreement and the Exchange Agreement; (viii) effect (i) an acquisition of another corporation or other entity, or a unit or business group of another corporation or entity, by merger or otherwise, except as contemplated by the HD Purchase Agreement and the Exchange Agreement or (ii) the purchase of all or substantially all of the capital stock, other equity interests or assets of any other entity or person, except as contemplated in the HD Purchase Agreement and the Exchange Agreement; (ix) increase the number of directors of the board of directors of New World except as contemplated in the HD Purchase Agreement and the Exchange Agreement; (x) effect or allow fundamental change in the nature of New World's business; (xi) otherwise materially affect the rights, privileges and preferences of the holders of New World's Series F Preferred Stock; or (xii) effect any change of the executive officers of New World. Under the Certificate of Designation, the holders of Series F Preferred Stock, except as otherwise required under the laws of Delaware or as set forth in the Certificate of Designation, are not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of New World. Under the Certificate of Designation and the Note, the majority of the then outstanding Series F Preferred Stock, voting or consenting, as the case may be, as one class, will be entitled to elect up to four directors (the "Series F Directors"), provided that one of the Series F Directors shall be designated by the Company. If (i) dividends on the Series F Preferred Stock are in arrears and unpaid for any quarterly period, which failure to pay continues for a period of thirty (30) days; or (ii) New World fails to discharge any redemption obligation with respect to the Series F Preferred Stock and such failure continues more than 90 days following a mandatory redemption date, then (A) the number of members comprising New World's board of directors will automatically increase by such number so that such additional directors (but including the board seats elected by the holders of Series F Preferred Stock) constitutes not less than 50% of the board of directors of New World and (B) the holders of the majority of the then outstanding Series F Preferred Stock, voting or consenting, as the case may be, as one class, will be entitled to elect directors to the board of directors to fill the vacancies created by such increase, provided that such directors are designated equally by (A) HD on the one hand, and (B) the Company and Brookwood on the other hand. Such voting rights will 8 9 continue until such time as, in the case of a dividend default, all dividends in arrears on the Series F Preferred Stock are paid in full and, in the case of the failure to redeem, until payment of the Redemption Price in cash or until the Note is delivered, at which time the term of the directors elected as described in this paragraph will terminate. New World may not modify, change, affect or amend the Certificate of Incorporation or the Certificate of Designation to increase the authorized Series F Preferred Stock, without the affirmative vote or consent of holders of at least a 67% of the shares of Series F Preferred Stock then outstanding, voting or consenting, as the case may be, as one class. The Company was paid a transaction fee of $187,500 by New World upon consummation of the transaction under the Exchange Agreement. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) The Company beneficially owns an aggregate of 3,901,273 shares (including 3,263,178 shares of Common stock which the Company may acquire upon exercise of its Warrant and 250,000 shares of Common Stock that the Company may acquire upon exercise of its November Warrant) of Common Stock of New World, which constitutes approximately 20.1% of the 19,418,007 shares of Common Stock outstanding as of January 18, 2001, giving effect to the issuance of the shares which the Company has the right to acquire upon exercise of its Warrants. As the Company's general partner, Mr. Toll beneficially owns an aggregate of 4,120,523 shares (including 3,263,178 shares of Common Stock which the Company may acquire upon exercise of its Warrant and 250,000 shares of Common Stock that the Company may acquire upon exercise of its November Warrant) of Common Stock of New World, which constitutes approximately 21.2% of the 19,418,007 shares of Common Stock outstanding as of January 18, 2001, giving effect to the issuance of the shares which the Company has the right to acquire upon exercise of its Warrants. (b) The Company has the power to vote and dispose of all of the shares of Common Stock (including the shares of Common Stock which the Company has the right to acquire upon the exercise of its Warrant and November Warrant) beneficially owned by it. As the Company's general partner, Mr. Toll has the power to vote and dispose of all of the shares of Common Stock (including the shares of Common Stock which the Company has the right to acquire upon exercise of its Warrant and November Warrant) beneficially owned by the Company. (c) Other than as described in Items 3 and 4 above, neither of the Filing Persons has engaged in any transactions in the Common Stock within the past 60 days. (d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Except as set forth in Item 4 of this Amendment, neither of the Filing Persons has any contracts, arrangements, understandings or relationships (legal or otherwise) with any person with respect to any securities of New World, including but not limited to transfer or voting of any of the securities of New World, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, or a pledge or contingency the occurrence of which would give another person voting power over the securities of New World. 9 10 ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. 99.6 Exchange Agreement 99.7 Form of New Warrant 99.8 Certificate of Designation 99.9 Form of Note 99.10 Amended and Restated Registration Rights Agreement 99.11 Stockholders Agreement 10 11 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: February 9, 2001 BET ASSOCIATES, LLC, a Delaware limited partnership By: BRU LLC Its General Partner By: /s/ BRUCE E. TOLL ----------------------------- Name: Bruce E. Toll Title: Member /s/ BRUCE E. TOLL ----------------------------- Name: Bruce E. Toll 11 12 EXHIBIT INDEX Exhibit No. Document 99.6 Exchange Agreement dated January 18, 2001 among New World Coffee - Manhattan Bagel, Inc., and the Stockholders (as listed on Schedule I of the Exchange Agreement) 99.7 Form of New Warrant to purchase common stock of New World Coffee - Manhattan Bagel, Inc. 99.8 New World Coffee - Manhattan Bagel, Inc., Certificate of Designation, Preferences and Rights of Series F Preferred Stock 99.9 Form of New World Coffee - Manhattan Bagel, Inc., Senior Subordinated Note 99.10 Amended and Restated Registration Rights Agreement dated January 18, 2001, among New World Coffee - Manhattan Bagel, Inc., Brookwood New World Investors, LLC, BET Associates, L.P. and Halpern Denny III, L.P. 99.11 Stockholders Agreement dated January 18, 2001, among New World Coffee - Manhattan Bagel, Inc., Brookwood New World Investors, LLC, BET Associates, L.P. and Halpern Denny III, L.P. 12 EX-99.6 2 w44993ex99-6.txt EXCHANGE AGREEMENT AMONG NEW WORLD & STOCK HOLDERS 1 EXHIBIT 99.6 EXCHANGE AGREEMENT EXCHANGE AGREEMENT dated as of January 18, 2001, by and among New World Coffee - Manhattan Bagel, Inc., a Delaware corporation (the "Company"), and the stockholders listed on Schedule I hereto (being hereinafter called individually a "Stockholder" and collectively the "Stockholders"). WHEREAS, pursuant to the Series D Preferred Stock and Warrant Purchase Agreement, dated as of August 11, 2000 (the "Series D Purchase Agreement") and related documents, by and among the Company and the Stockholders, the Stockholders purchased an aggregate 16,216.216 shares of Series D Preferred Stock, $0.001 par value ("Series D Preferred Stock"), of the Company and warrants to purchase 2,393,820 shares of the Company's Common Stock, par value $.001 per share (the "Common Stock") (the "Original Warrants") (as set forth in Schedule I hereto), and since such dates, payment in kind dividends have accrued and been paid in part, which, with the original purchase, total 16,719.76 shares of Series D Preferred Stock (the Series D Exchange Shares"); WHEREAS, simultaneously with the execution and delivery of this Agreement, the Company and Halpern Denny III, L.P. ("HD") entered into a certain Series F Preferred Stock and Warrant Purchase Agreement pursuant to which the Company issued and sold HD an aggregate of 20,000 shares of Series F Preferred Stock of the Company, $.001 par value (the "Series F Preferred Stock") and 8,484,112 warrants to purchase the Common Stock of the Company (the "HD Transaction") the proceeds of which are to be used to purchase certain 7.25% Convertible Subordinated Notes ("Einstein Bonds") of Einstein/Noah Bagel Corporation ("Einstein"); and WHEREAS, simultaneously with the consummation of the HD Transaction, the Company wishes to issue an aggregate of 16,398.33 shares of Series F Preferred Stock (the "Series F Exchange Shares") and warrants to purchase an aggregate of 6,526,356 shares of Common Stock (the "New Warrants") to the Stockholders in exchange for all of the shares of Series D Preferred Stock and the Original Warrants owned by each Stockholder, and the Stockholders wish to exchange such shares of Series D Preferred Stock and Original Warrants held by them for the shares of Series F Exchange Shares and the New Warrants on the terms and subject to the conditions hereinafter set forth; WHEREAS, the Company is currently negotiating the terms of a certain Bond Purchase Agreement and related documents (the "Greenlight Documents") with Greenlight Capital, L.P. and related entities (the "Greenlight Capital Entities") pursuant to which the Greenlight Capital Entities will invest $10,000,000 in the aggregate into an entity formed for the purpose of acquiring Einstein Bonds; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: SECTION 1. Exchange of Series D Exchange Shares and Original Warrants for Series F Exchange Shares and New Warrants. 2 (a) On and as of the date hereof (as defined below), the Company shall issue to each of the Stockholders the number of shares of Series F Exchange Shares and New Warrants (substantially in the form annexed hereto as Exhibit C) set forth opposite the name of such Stockholder on Schedule I annexed hereto under the columns labeled "Series F Exchange Shares" and "New Warrants". (b) In exchange for the issuance of the shares of Series F Exchange Shares and New Warrants provided for in paragraph (a) above, and in full payment therefore as aforesaid, each Stockholder shall, on the date hereof, (i) assign, transfer and deliver to the Company all of such Stockholder's right, title and interest in and to the shares of Series D Exchange Shares and the Original Warrants held by such Stockholder as specified in Schedule I hereto, and (ii) in that connection, deliver to the Company each certificate representing such Series D Exchange Shares and the Original Warrants, duly endorsed for transfer. SECTION 2. Warrant Step-Up. (a) If within one year from the date hereof (i) the Company has not redeemed the Series F Exchange Shares in accordance with the terms set forth in the Certificate of Designation, Preferences and Rights or Series F Exchange Shares in the form annexed hereto as Exhibit A (the "Certificate of Designation"), (ii) the Company has redeemed the Series F Exchange Shares by the issuance of the Notes in the form annexed hereto as Exhibit B (the "Notes") but has not paid such Notes in full, or (iii) the closing of (A) the Company's acquisition of 70% or more of the outstanding stock of Einstein, (B) the Company's acquisition of all or substantially all of the assets of Einstein or (C) the acquisition by Einstein of all or substantially all of the assets or capital stock of the Company ("Einstein Combination") has not occurred and the Series F Exchange Shares have not been redeemed in full in accordance with Section 3 of the Certificate of Designation, the Company will issue pro-rata to the Stockholders warrants substantially in the form annexed hereto as Exhibit C representing an additional 1.154% of the Fully Diluted Common Stock of the Company outstanding on such first anniversary date and on each June 30 and December 31 following such first anniversary of the date hereof, which percentage shall be reduced pro rata based upon Series F Exchange Shares redeemed or the Notes repaid as applicable. The term "Fully Diluted Common Stock" shall mean the fully diluted Common Stock of the Company, determined by taking into account all options, warrants and other convertible securities of the Company, but not including any outstanding warrants or options with a strike price greater than $3.00 per share and not including the warrants issued under this Section 2(a). (b) For purposes of this Section 2, at the time of each such issuance of the warrants referred to in Section 2(a) above, the number of shares subject to such warrants shall be calculated to result in the applicable percentage of Fully Diluted Common Stock before such issuance of warrants. (c) The issuance of any additional warrants pursuant to this Section 2 shall be treated as an adjustment to the Stockholders' basis in the Series F Exchange Shares. 3 SECTION 3. Representations and Warranties of the Company. The Company represents and warrants to the Stockholders as follows: (a) Organization, Qualifications and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the necessary corporate power and authority to own and hold its properties and to carry on its business as currently conducted and to execute, deliver and perform this Agreement and the transactions contemplated hereby. The Company has the corporate power and authority to issue and deliver the Series F Exchange Shares and New Warrants pursuant to this Agreement. (b) Authorization, Validity, Etc. The execution, delivery and performance by the Company of this Agreement and the issuance and delivery by the Company of the shares of Series F Exchange Shares and the New Warrants pursuant hereto have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Certificate of Incorporation or By-laws of the Company, or any provision of any indenture, agreement or other instrument by which the Company or any of its properties or assets is bound or affected, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company. The execution, delivery and performance of this Agreement by the Company constitutes its valid and binding obligations enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting creditors' rights generally, and (ii) general principles of equity that restrict the availability of equitable remedies. (c) The Series F Exchange Shares are duly authorized by the Company and, when issued and delivered in exchange for the Series D Exchange Shares and the Original Warrants will be validly issued and outstanding, fully paid and nonassessable shares of Series F Exchange Shares of the Company. The issuance, sale and delivery of the Series F Exchange Shares is not subject to any preemptive rights of shareholders of the Company, and is not subject to any right of first refusal or other similar right in favor of any person. (d) The Company has delivered to the Stockholders, true and correct copies of all documents pertaining to the HD Transaction and all representations and warranties contained therein are true and correct in all material respects. (e) The Company has received the necessary consent from Fleet National Bank to the transactions contemplated herein and in the HD Transaction. SECTION 4. DELIVERIES AT CLOSING. (a) Deliveries by the Company. At the closing of the transactions contemplated hereby (the "Closing"), the Company shall deliver to each of the Stockholders the following: 4 (i) Certificates representing the Series F Exchange Shares to be delivered to each Stockholder; (ii) Warrant Certificates representing the number of New Warrants to be delivered to each Stockholder; (iii) A Certificate of the Secretary of the Company, dated as of the date hereof, substantially in the form annexed hereto as Exhibit D. (iv) An opinion of counsel to the Company addressed to the Stockholders dated as of the date hereof, substantially in the form annexed hereto as Exhibit E. (v) An Amended and Restated Registration Rights Agreement (the "Amended and Restated Registration Rights Agreement") dated as of the date hereof in the form annexed hereto as Exhibit F executed by the Company; (vi) A Stockholders' Agreement (the "Stockholders' Agreement") dated as of the date hereof in the form annexed hereto as Exhibit G duly executed by the Company; and (vii) A copy of the Certificate of Designation as filed with the Delaware Secretary of State. (b) Deliveries by the Stockholders. At the Closing, each of the Stockholders shall deliver to the Company the following: (i) A Certificate representing the Series D Exchange Shares held by such Stockholder, duly endorsed for transfer; and (ii) The Warrant Certificate representing all of the Original Warrants held by such Stockholder. (iii) Amended and Restated Registration Rights Agreement duly executed by the Stockholders; and (iv) Stockholders' Agreement duly executed by the Stockholders. SECTION 5. Representations and Warranties of the Stockholders. Each Stockholder, severally and not jointly, represents and warrants to, and agrees with, the Company as follows: (a) Title to Shares. Such Stockholder is the lawful owner, of record and beneficially, of the number of Series D Exchange Shares set forth opposite its name on Schedule I hereto, which shares are free and clear of all liens, charges and encumbrances and are not subject to any options, rights of first refusal, pre-emptive rights or claims of any kind whatsoever in favor of any person. 5 (b) Investment Representations. Such Stockholder is acquiring the Series F Exchange Shares, the New Warrants and the Common Stock issuable upon exercise of the New Warrants for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof. Such Stockholder understands that it must bear the economic risk of such Stockholder's investment for an indefinite period of time because the Series F Exchange Shares, the New Warrants and the Common Stock issuable upon exercise of the New Warrants are not registered under the Securities Act or any applicable state securities laws, and may not be resold unless subsequently registered under the Securities Act and such other laws or unless an exemption from such registration is available. Such Stockholder also understands that, except as provided in the Amended Registration Rights Agreement, it is not contemplated that any registration will be made under the Securities Act or that the Company will take steps which will make the provisions of Rule 144 or Rule 144A under the Securities Act available to permit resale of the Series F Exchange Shares, the New Warrants and the Common Stock issuable upon exercise of the New Warrants. Such Stockholder agrees not to pledge, transfer, convey or otherwise dispose of any of the shares of Series F Exchange Shares, the New Warrants and the Common Stock issuable upon exercise of the New Warrants, except in a transaction that is the subject of either (i) an effective registration statement under the Securities Act and any applicable state securities laws, (ii) an opinion of counsel to the effect that such registration is not required, or (c) as provided for in the Stockholders Agreement. (c) Authorization, Etc. (i) The execution, delivery and performance by the Stockholder of this Agreement and the surrender and delivery by such Stockholder of the Series D Exchange Shares and the Old Warrants pursuant hereto have been duly authorized by all requisite partnership or limited liability company action, as the case may be, and will not violate any provision of law, any order of any court or other agency of government, the organizational documents of such Stockholder, or any provision of any indenture, agreement or other instrument by which such Stockholder or any of its properties or assets is bound or affected, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of such Stockholder. SECTION 7 Protective Provisions. (a) The Company covenants and agrees that, without the prior approval of the holders of two-thirds of the outstanding shares of Series F Preferred Stock: (i) The Company shall not sell or transfer its interest in any Einstein Bond (or securities into which such Einstein Bond is convertible) other than in connection with an Einstein Combination, unless the price received by the Company, net of any cash fees and expenses, is at least equal to 60% of such bond's face value. (ii) There shall be no application of the proceeds from the sale of the Einstein Bonds (or securities into which such bonds are convertible) for any purpose other than the repayment of outstanding senior debt or the redemption of the Series F Preferred Stock. The holders of the Series F Exchange Shares including but not limited to the Stockholders, shall have 6 the right of first offer, in proportion to their respective interests, to purchase any Einstein Bonds that the Company desires to sell or transfer. (iii) Proceeds received by the Company as the result of the HD Transaction may be used only to purchase at one time Einstein Bonds (with a maximum price, including cash fees and expenses, of 60% of the face value of each such bond) having ay least aggregate face amount of $30 million and expenses associated with the issuance of the Series F Preferred Stock and the Acquisition of Einstein, including fees incurred with the HD Transaction payable to HD or to the Stockholders in accordance with Section 8(d) below, subject to the reasonable approval of the Einstein Supervisory Committee of the Company's Board of Directors (the "Einstein Supervisory Committee"). The Einstein Supervisory Committee shall be comprised of two (2) designees of the management of the Company (the "Management Designees") and one (1) designee of the Stockholders. The initial Management Designees shall be R. Ramin Kamfar and Karen Hogan and the Stockholders' designee shall be Eve Trkla. (b) Contemporaneously with the Closing, the Company shall deposit proceeds in an amount sufficient to purchase Einstein Bonds in the minimum amount specified in Section 7(a)(iii) with the Company's broker(s) who shall be authorized to purchase Einstein Bonds in accordance with the requirements of Sections 7(a)(iii) and 7(c). (c) The Company shall utilize its best efforts to apply the proceeds first toward the purchase of all Einstein Bonds held by the three bondholders currently represented on the Einstein Unsecured Creditors Committee. (d) The Company shall amend its bylaws to provide that the authorization of at least 75% of the Board of Directors shall be required to authorize the filing of a petition under the United States Bankruptcy Code. (e) Subject to the performance of this Agreement and the accuracy of the representations and warranties contained herein, the Stockholders hereby consent to the HD Transaction. SECTION 8. Miscellaneous. (a) Survival of Agreements. All covenants, agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the issuance, sale and delivery of the Series F Exchange Shares and New Warrants pursuant hereto, and all statements contained in any certificate or other instrument delivered by the Company hereunder shall be deemed to constitute representations and warranties made by the Company. The Series D Purchase Agreement is hereby terminated, provided, however, that the representations and warranties of the Company contained in Section 5 in the Series D Purchase Agreement shall survive termination. (b) Each Stockholder agrees that it will not sell, assign or transfer any share of Series F Preferred Stock, any New Warrant or common stock issuable upon exercise of any New Warrant to any person other than: (i) in the case of BET Associates, L.P., any such transfer to 7 Bruce Toll, Leonard Tannenbaum, any entity where a majority of capital stock or other equity interest is held by either Mr. Toll or Mr. Tannenbaum, their respective heirs, or any trust created for the benefit of their heirs; and (ii) in the case of Brookwood New World Investors LLC, (A) its members, (B) the members of its managing member, and (C) the members, partners or shareholders of any of the managing member's members, as to (C), not to exceed twenty transferees. Any attempt transfer shares not in compliance with this Section 8(b) shall be null and void. Certificates evidencing the shares will include the following legend: "THE TRANSFERABILITY OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS FURTHER RESTRICTED BY THE TERMS OF THE EXCHANGE AGREEMENT DATED JANUARY 12, 2001, A DUPLICATE OF THE ORIGINAL OF WHICH IS MAINTAINED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY." (c) The Company shall not consummate the transactions contemplated by the Greenlight Documents without the prior consent of the Stockholders. (d) Subject to the consummation of the HD Transaction, the Company shall pay each Stockholder a transaction fee in the amount of $187,500. (e) Subject to the consummation of the HD Transaction, the Company shall reimburse the Stockholders for their reasonable attorney's fees incurred as a result of said transaction, provided such amount in the aggregate does not exceed $50,000. (f) Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be mailed by first class registered mail, postage prepaid, or sent by recognized courier service addressed as follows: (i) if to the Company, at New World Coffee - Manhattan Bagel, Inc. 246 Industrial Way West Eatontown, New Jersey 07724 Attention: R. Ramin Kamfar, Chief Executive Officer with a copy to Ruskin, Moscou, Evans & Faltischek, P.C. 170 Old Country Road Mineola, New York 11501 Attention: Stuart M. Sieger (ii) if to any Stockholder, at its address set forth in Schedule I hereto, with a copy to the counsel noted on said Schedule I: 8 or, in any such case, at such other address or addresses as shall have been furnished in writing by such party to the others. (g) CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PARTIES HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE CITY, COUNTY AND STATE OF NEW YORK AND IRREVOCABLY AGREE THAT, SUBJECT TO THE ELECTION, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE RELATED AGREEMENTS MAY BE LITIGATED IN SUCH COURTS. THE PARTIES ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY (SUBJECT TO ANY APPEAL AVAILABLE WITH RESPECT TO SUCH JUDGMENT) IN CONNECTION WITH THIS AGREEMENT OR THE NOTES. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE PARTIES TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST EACH OTHER IN THE COURTS OF ANY OTHER JURISDICTION. (h) WAIVER OF JURY TRIAL. THE PARTIES AND THE COMPANY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE RELATED AGREEMENTS OR ANY DEALINGS AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO THE RELATED AGREEMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT. (i) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9 IN WITNESS WHEREOF, the Company and the Stockholders have executed this Agreement as of the day and year first above written. New World Coffee-Manhattan Bagel, Inc. By _________________________________ R. Ramin Kamfar Chief Executive Officer STOCKHOLDERS: BET Associates, L.P. By: BRU Holding Co., LLC, its General Partner By:_________________________________ Brookwood New World Investors, LLC By: Brookwood New World Co., LLC, its Managing Member By:_________________________________ 10 SCHEDULE I - STOCKHOLDERS ORIGINAL WARRANTS
Series D Series F Preferred Original Preferred New Shareholder Stock Warrants Stock Warrants - ----------- ----- -------- ----- -------- BET Associates, L.P. 8,366.63 1,196,910 8,213.01 3,263,178 Brookwood New World 8,353.13 1,196,910 8,185.32 3,263,178 Investors, LLC
11 EXHIBIT A CERTIFICATE OF DESIGNATION 12 EXHIBIT B FORM OF NOTE 13 EXHIBIT C FORM OF WARRANT 14 EXHIBIT D SECRETARY'S CERTIFICATE 15 EXHIBIT E OPINION OF COUNSEL 16 EXHIBIT F AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT 17 EXHIBIT G STOCKHOLDERS' AGREEMENT EX-99.7 3 w44993ex99-7.txt FORM OF NEW WARRANT TO PURCHASE COMMON STOCK 1 EXHIBIT 99.7 NEITHER THIS WARRANT NOR THE SECURITIES PURCHASABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION IS AVAILABLE AND AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER IS DELIVERED TO SUCH EFFECT. THE SECURITY EVIDENCED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE OF SUCH SECURITY ARE SUBJECT TO THE TERMS OF A STOCKHOLDERS AGREEMENT, DATED AS OF JANUARY 18, 2001, AMONG THE ISSUER AND THE OTHER PARTIES THERETO, AS AMENDED FROM TIME TO TIME, AND THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO THE CONDITIONS PRECEDENT SPECIFIED IN SUCH STOCKHOLDERS AGREEMENT. Issue Date: January 18, 2001 No. of Shares Subject to Warrant: [ ] WARRANT TO PURCHASE COMMON STOCK OF NEW WORLD COFFEE - MANHATTAN BAGEL, INC. This is to certify that, for value received, HALPERN DENNY III, L.P. (the "Holder") is entitled to purchase, subject to the provisions of this Warrant, from NEW WORLD COFFEE - MANHATTAN BAGEL, INC., a Delaware corporation (the "Company"), [ ] shares (subject to adjustment or reduction as provided herein) of Common Stock, $0.001 par value, of the Company ("Common Stock"), at a price of $0.01 per share (subject to adjustment as provided herein) at any time during the period beginning on the Issue Date and ending not later than 5:00 p.m. New York time on January 18, 2006 (the "Termination Date"). The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for a share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares," and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price." 2 (a) EXERCISE OF WARRANT. (1) This Warrant may be exercised in whole or in part at any time from time to time on or after the Issue Date until the Termination Date, by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of shares specified in such form, in lawful money of the United States of America in cash or by official bank or certified check made payable to the Company. (2) As an alternative to payment of the Exercise Price in cash, the Holder shall have the right, at any time and from time to time, to convert this Warrant in whole or in part into shares of Common Stock (the "Conversion Right"). Upon exercise of the Conversion Right, payment of the aggregate Exercise Price shall may be made by delivery of this Warrant with instructions that the Company retain as payment of the aggregate Exercise Price such number of Warrant Shares as shall be determined under the next sentence. The Holder shall receive that number of Warrant Shares determined by multiplying the number of Warrant Shares for which the Conversion Right is exercised by a fraction, the numerator of which shall be the difference between the then fair market value per Warrant Share (based on the closing price on the trading day preceding the exercise of the Conversion Right) and the Exercise Price per Warrant Share, and the denominator of which shall be the then fair market value per Warrant Share. The remaining Warrant Shares for which the Conversion Right has been made shall be deemed to have been paid to the Company as the aggregate Exercise Price. (3) The term "closing price" for each day shall mean the last reported sale price or, in case no such sale takes place, on such day the average of the closing bid and asked prices, in either case on the principal national securities exchange or the Nasdaq National Market on which the Company's Common Stock is listed or admitted to trading, or if the Company's Common Stock is not listed or admitted to trading on any national securities exchange or the Nasdaq National Market, the average of the highest reported bid and lowest reported asked prices as furnished by the National Association of Securities Dealers Inc. Automated Quotation System, or comparable system. The term "trading day" shall mean (X) if the Common Stock is listed on at least one stock exchange, a day on which there is trading on the principal stock exchange on which the Common Stock is listed or (Y) if the Common Stock is not listed on a stock exchange but sale prices of the Common Stock are reported on an automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported. (4) If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable thereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company, if any, at its office, in proper form for exercise and together with payment of the Exercise Price in the manner provided herein, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, provided, however, that if at the date of surrender of such Warrants and payment of such Exercise Price, the transfer books for the Common Stock shall be closed, the certificates for the shares in respect of which such 2 3 Warrants are then exercised shall be issuable as of the date on which such books shall next be opened, and until such date the Company shall be under no duty to deliver any certificate for such shares and the Holder shall not be deemed to have become a holder of record of such shares. (5) Notwithstanding anything herein to the contrary, this Warrant shall automatically be deemed to be exercised in full pursuant to the provisions of paragraph (a)(2) above, without any further action by or on behalf of the Holder, immediately preceding the time this Warrant would otherwise expire. (6) So long as this Warrant shall be outstanding, (i) if the Company shall declare any dividend or make any distribution upon the Common Stock, or (ii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least 20 days prior to the date specified in(x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or offer for subscription or purchase, or (y) such reorganization, reclassification, consolidation, merger, sale, lease, transfer, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of the Common Stock or other capital stock of the Company shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (7) The Holder shall have no rights as a stockholder of the Company for shares of Common Stock issuable hereunder unless and until such shares are purchased in accordance herewith. (b) RESERVATION OF SHARES. The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of this Warrant. (c) FRACTIONAL SHARES. The Company shall not be required to issue fractions of shares on the exercise of Warrants. If any fraction of a share would, except for the provisions of this Section, be issuable on the exercise of any Warrant, the Company will (1) if the fraction of a share otherwise issuable is equal to or less than one-half, round down and issue to the Holder only the largest whole number of shares of Common Stock to which the Holder is otherwise entitled, or (2) if the fraction of a share otherwise issuable is greater than one-half, round-up and issue to the Holder one additional share of Common Stock in addition to the largest whole number of shares of Common Stock to which the holder is otherwise entitled. (d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other 3 4 Warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Subject to the provisions of Section (g), upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the permitted assignee named in such instrument of assignment and this Warrant shall be canceled. If this Warrant should be assigned in part only, the Company shall, upon surrender of this Warrant in accordance with the procedures set forth in the preceding sentence, execute and deliver, in addition to the new Warrant described in the preceding sentence, anew Warrant evidencing the rights of the Holder to purchase the balance of the shares purchasable thereunder. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. (e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (f) ANTI-DILUTION AND ADJUSTMENT PROVISIONS. The Exercise Price and the number and kind of securities purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time beginning on the date of issue of this Warrant, as hereinafter provided: (1) In case the Company shall issue Common Stock as a dividend upon Common Stock or in payment of a dividend thereon shall subdivide the number of outstanding shares of its Common Stock into a greater number of shares or shall contract the number of outstanding shares of its Common Stock into a lesser number of shares, the Exercise Price then in effect shall be adjusted, effective at the close of business on the record date for the determination of stockholders entitled to receive such dividend or be subject to such subdivision or contraction, to the price (computed to the nearest thousandth of a cent) determined by dividing (A) the product obtained by multiplying the Exercise Price in effect immediately prior to the close of business on such record date by the number of shares of Common Stock outstanding prior to such dividend, subdivision or contraction, by (B) the sum of the number of shares of Common Stock outstanding immediately after such dividend, subdivision, or contraction. (2) If any capital reorganization or reclassification of the capital stock of the Company (other than as set forth in subsection (1) of this Section (f)), or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected, then, lawful and adequate provision shall be made whereby the holder of each Warrant shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions specified in the Warrant and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented by such Warrant (the "Purchasable Shares"), such shares of stock, securities or assets issuable or payable with respect to or in exchange for the Purchasable Shares 4 5 had they been purchased immediately before such reorganization, reclassification, consolidation, merger or sale, and in any such case appropriate provision shall be made with respect to the rights and interest of the Holder to the end that the provisions of the Warrant (including, without limitation, provisions for adjustment of the Exercise Price and of the number of shares issuable upon the exercise of Warrants) shall thereafter be applicable as nearly as may be practicable in relation to any shares of stock, securities, or assets thereafter deliverable upon exercise of Warrants. The Company shall not effect any such consolidation, merger or sale unless prior to or simultaneously with the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume, by written instrument, the obligation to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase. (3) Upon the occurrence of each Dilution Event (as hereinafter defined), the number of shares of Common Stock specified in this Warrant shall be adjusted to that number of shares of Common Stock equal to the Existing Warrant Shares plus the Additional Warrant Shares (where X is the number of Additional Warrant Shares derived from the following equation): the number of shares of Common Stock which could be purchased hereunder or have already been purchased hereunder immediately prior to such Dilution Event (the "Existing Warrant Shares") X + the Existing Warrant Shares = - ------------------------------------ --------------------------------------- the Fully-Diluted Common Stock of the the Fully-Diluted Common Stock of the Company immediately prior to such Company immediately after such Dilution Dilution Event Event (including the Additional Warrant Shares and any additional shares of Common Stock issuable pursuant to adjustments in other warrants of the Company due to such Dilution Event) provided, that in each case the number of shares of Fully-Diluted Common Stock shall not include shares of Common Stock, options, warrants or other convertible securities (including convertible debt) issued simultaneously with a Dilution Event but which itself is not a Dilution Event. For purposes of this subsection (3) the "Fully-Diluted Common Stock of the Company" shall include all outstanding shares of Common Stock, and all shares of Common Stock issuable pursuant to all outstanding options, warrants or convertible securities (including convertible debt) of the Company. In the event that this Warrant shall be exercised in full prior to a Dilution 5 6 Event, a new Warrant representing the amount of the adjustment pursuant to this subsection (3) shall be issued upon the occurrence of each Dilution Event and such Warrant shall be substantially in the form of this Warrant. The preceding provision shall survive the exercise of this Warrant. The Company hereby covenants that it shall not effect any such Dilution Event unless prior to or simultaneously with the consummation thereof, the successor corporation (if other than the Company) resulting from such Dilution Event shall agree, by written instrument, to issue to the Holder a warrant, in substantially the form of this Warrant, to purchase the number of shares of Common Stock of such surviving corporation as provided in this subsection (3). For purposes hereof, a "Dilution Event" shall mean any issuance of Common Stock, options, warrants or other convertible securities (including convertible debt) of the Company or any successor entity (including Einstein) (i) to any shareholder or other stakeholder of Einstein/Noah Bagel Corporation ("Einstein") as consideration for the Company's acquisition of at least a majority of the stock or assets of Einstein, whether by merger, consolidation, asset purchase, stock purchase or otherwise (an "Einstein Transaction") or to any shareholder or other stakeholder of the Company as consideration for an Einstein Surviving Transaction (as hereinafter defined), (ii) to any person or entity prior to an Einstein Transaction if the holders of 66-2/3% of the Common Stock issuable upon exercise of the warrants issued by the Company on the date hereof to Halpern Denny III, L.P. ("Halpern Denny"), Brookwood New World Investors LLC ("Brookwood") and BET Associates, L.P. ("BET") reasonably object to such issuance unless at least 90% of the net proceeds from such issuance are used to redeem shares of Series F Preferred Stock, $.001 par value, of the Company or the notes to be issued pursuant to the Purchase Agreement or the Exchange Agreement dated as of January 18, 2001 among the Company and the several stockholders named therein, (iii) to any person or entity in connection with any equity or convertible debt financing transaction the proceeds of which are used to acquire equity or assets of Einstein in an Einstein Transaction or equity or assets of the Company in an Einstein Surviving Transaction (as hereinafter defined) to the extent such proceeds exceed $25,000,000, or (iv) to any person or entity (X) in connection with a debt financing (other than convertible debt) in which the Company or its subsidiaries is a debtor, or (Y) in connection with a debt financing by Einstein or its subsidiaries in which the proceeds of such financing are used to acquire equity or assets of the Company in connection with an Einstein Surviving Transaction, in each case to the extent such issuance represents in excess of 2% of the Fully-Diluted Common Stock of the Company or Fully-Diluted Common Stock of Einstein, as the case may be, determined by taking into account all options, warrants and other convertible securities. In the event that the Company consummates a transaction with Einstein (a "Einstein Surviving Transaction") pursuant to which Einstein purchases at least a majority of the outstanding stock or assets of the Company, or in which Einstein merges with the Company and Einstein is the surviving corporation, then as a condition to the Company entering into any such Transaction, Einstein shall agree to issue to the Holder a warrant in substantially the form of this Warrant (the "Replacement Warrant") for the Applicable Warrant Percentage of the Fully-Diluted Common Stock of Einstein. The "Fully-Diluted Common Stock of Einstein" shall mean (x) all outstanding shares of common stock, and all shares of common stock issuable pursuant to all outstanding options, warrants or convertible securities (including convertible debt) of Einstein as of the date on which the bankruptcy proceedings of Einstein result in a distribution of the securities of Einstein or a reorganization of Einstein plus (y) any additional shares of common 6 7 stock, options, warrants or other convertible securities issued pursuant to clauses (i), (iii) and (iv) of the definition of "Dilution Event" above plus (z) any additional shares of common stock of Einstein issuable pursuant to adjustments in the Replacement Warrant and any similar replacement warrants issued to Brookwood, BET, Greenlight Capital, L.P., Greenlight Capital Qualified, LP, Greenlight Capital Offshore, Ltd. or Halpern Denny or any affiliate of the foregoing due to the Dilution Events listed in clause (y). For purposes hereof, the "Applicable Warrant Percentage" shall mean the percentage which is equal to the quotient of (i) the number of shares of Common Stock which could be purchased hereunder or have already been purchased hereunder immediately prior to such Einstein Surviving Transaction (including any adjustments that would be required to be made due to Dilution Events) divided by (ii) the number of shares of Fully-Diluted Common Stock of the Company immediately prior to such Einstein Surviving Transaction. The Company shall not permit its subsidiaries, or shall not consummate an Einstein Surviving Transaction if Einstein has permitted its subsidiaries, to consummate a transaction that, if consummated by the Company or Einstein, as the case may be, would constitute a Dilution Event. (4) Upon each adjustment of the Exercise Price pursuant to subsection (1) of this Section (f), the number of shares of Common Stock specified in each Warrant shall thereupon evidence the right to purchase that number of shares of Common Stock (calculated to the nearest hundredth of a share of Common Stock) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable immediately prior to such adjustment upon exercise of such Warrant and dividing the product so obtained by the Exercise Price in effect after such adjustment. (5) Irrespective of any adjustments of the number or kind of securities issuable upon exercise of Warrants or the Exercise Price, Warrants theretofore or thereafter issued may continue to express the same number of shares of Common Stock and Exercise Price as are stated in similar Warrants previously issued. (6) The Company may, at its sole option, retain the independent public accounting firm regularly retained by the Company, or another firm of independent public accountants of recognized standing selected by the Company's Board of Directors, to make any computation required under this Section (f) and a certificate signed by such firm shall be conclusive evidence of any computation made under this Section (f). (7) Whenever there is an adjustment in the Exercise Price or in the number or kind of securities issuable upon exercise of the Warrants, or both, as provided in this Section (f), the Company shall (i) promptly file in the custody of its Secretary or Assistant Secretary a certificate signed by the Chairman of the Board or the President or a Vice President of the Company and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, setting forth the facts requiring such adjustment and the number and kind of securities issuable upon exercise of each Warrant after such adjustment; and (ii) cause a notice stating that such adjustment has been effected and stating the Exercise Price then in effect and the number and kind of securities issuable upon exercise of each Warrant to be sent to each registered holder of a Warrant. 7 8 (8) The Exercise Price and the number of shares issuable upon exercise of this Warrant shall not be adjusted except in the manner and only upon the occurrence of the events heretofore specifically referred to in this Section (f). (9) The Board of Directors of the Company may, in its sole discretion, (a) reduce the Exercise Price of each Warrant, (b) increase the number of shares of Common Stock issuable upon exercise of each Warrant and/or (c) provide for the issuance of other securities (in addition to the shares of Common Stock otherwise issuable upon exercise of the Warrant) upon exercise of each Warrant. (g) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933 AND OTHER APPLICABLE SECURITIES LAWS. This Warrant or the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may not be sold or otherwise disposed of unless Holder provides the Company with an opinion of counsel satisfactory to the Company in form satisfactory to the Company that this Warrant or the Warrant Shares or such other security may be legally transferred without violating the Securities Act of 1933, as amended (the "1933 Act") and any other applicable securities law and then only against receipt of an agreement of the transferee to comply with the provisions of this Section (g) with respect to any resale or other disposition of such securities. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, that the Warrant Shares are being acquired solely for the Holder's own account and that Holder or Holder's purchaser representative is an accredited investor, as defined in Rule 501 under the 1933 Act. (h) This Warrant is subject to the rights and benefits of the Amended and Restated Registration Rights Agreement dated as of January 18, 2001. 8 9 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed as of the Issue Date first set forth above by an authorized officer. NEW WORLD COFFEE - MANHATTAN BAGEL, INC. By: ______________________ Ramin Kamfar, Chief Executive Officer Attest:______________________, Secretary Dated: January 18, 2001 10 PURCHASE FORM Dated: _______________, 2001 The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing shares of Common Stock and hereby makes payment of ________ in payment of the Exercise Price thereof. INSTRUCTIONS FOR REGISTRATION OF STOCK Name _____________________________________________ (Please typewrite or print in block letters.) Address __________________________________________ Signature ________________________________________ 11 ASSIGNMENT FORM FOR VALUE RECEIVED, hereby sells, assigns and transfers unto Name _____________________________________________ (Please typewrite or print in block letters.) Address __________________________________________ The right to purchase Common Stock represented by this Warrant to the extent of ______ shares as to which such right is exercisable and does hereby irrevocably constitute and appoint ______________, Attorney, to transfer the on the books of the Company with full power of substitution in the premises. Date ____________, 2001 Signature _________________________________ EX-99.8 4 w44993ex99-8.txt CERTIFICATE OF DESIGNATION - SERIES F PREF STOCK 1 EXHIBIT 99.8 NEW WORLD COFFEE - MANHATTAN BAGEL, INC. CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES F PREFERRED STOCK Pursuant to Section 242 of the General Corporation Law of the State of Delaware New World Coffee - Manhattan Bagel, Inc., a corporation duly organized and existing under the laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: A. That pursuant to the authority contained in Article 4 of its Amended and Restated Certificate of Incorporation and in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware, its Board of Directors has adopted the following resolution creating a series of the Preferred Stock, $0.001 par value, designated as Series F Preferred Stock (the "Series F Preferred Stock"): RESOLVED, that a series of Preferred Stock, $0.001 par value, of the Corporation be hereby created, and that the designation and amount thereof and the voting powers, preferences, and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are: Designation and Amount. There is hereby established a series of the Preferred Stock designated "Series F Preferred Stock" (herein referred to as "Series F Preferred Stock"), consisting of 65,000 shares and having the relative rights, designations, preferences, qualifications, privileges, limitations, and restrictions applicable thereto as follows: 1. Dividends. (a) The holders of shares of Series F Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, and to the extent of funds legally available therefor, cumulative dividends payable quarterly, on each March 31, June 30, September 30 and December 31, commencing on March 31, 2001, with dividends for partial quarters based on the dates of issuance and redemption accruing pro rata. Such dividends shall be paid, for each quarterly period, at the rate of 16% per annum (the "Dividend Percentage Rate") of the Liquidation Preference, payable each quarter as 4% as payment in kind Series F Preferred Stock; provided, however, that the Dividend Percentage Rate shall be increased by an additional 2% per semi-annum on each January 18 and July 18, commencing on January 18, 2002 on each outstanding share of Series F Preferred Stock until such share of Series F Preferred Stock has been redeemed by the Corporation as required by Section 3 hereof, and provided further that to 2 the extent that the Corporation has insufficient available surplus to declare the dividend, the Board of Directors of the Corporation shall undertake to use its best efforts to increase the available surplus and thereafter shall immediately declare such dividend. Dividends on the Series F Preferred Stock shall be cumulative so that if, for any dividend accrual period, dividends at the rate hereinabove specified are not declared and paid or set aside for payment, the amount of accrued but unpaid dividends shall accumulate, and shall be added to the dividends payable for subsequent dividend accrual periods. If the funds legally available for the payment of such dividends are insufficient to pay in full the dividends payable on all outstanding shares of Series F Preferred Stock, the total available funds may be paid in partial dividends to the holders of the outstanding shares of Series F Preferred Stock ratably in proportion to the fully accrued dividends to which they are entitled. Each issued and outstanding share of Series F Preferred Stock shall entitle the holder of record thereof to receive an equal proportion of said dividends (adjusted for issuance dates). (b) No dividends or other distributions of any kind shall be declared or paid on, nor shall the Corporation redeem, purchase or acquire any shares of the Common Stock, any of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or Series D Preferred Stock or any other junior class or series of stock other than stock dividends and distributions of the right to purchase common stock and repurchase any such rights in accordance with the Rights Agreement dated June 7, 1999, unless all dividends on the Series F Preferred Stock accrued for all past dividend periods shall have been paid. 2. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series F Preferred Stock shall be entitled to receive, on a pro rata basis, such amount, paid prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of the Common Stock or any other junior class or series of stock by reason of their ownership thereof, an amount equal to $1,000 per share of Series F Preferred Stock then outstanding ("Liquidation Preference") (as adjusted for any stock dividends, combinations or splits with respect to such shares), plus all accrued or declared but unpaid dividends on such share for each share of Series F Preferred Stock then held by them. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Series F Preferred Stock shall rank at least pari passu with any security hereinafter existing or created ("Parity Stock"). If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series F Preferred Stock shall be insufficient to permit the payment to the holders of the Series F Preferred Stock and of any Parity Stock the full amounts to which they otherwise would be entitled, the holders of Series F Preferred Stock and such Parity Stock shall share ratably in any distribution of the entire assets and funds of the Corporation legally available for distribution pro rata in proportion to the respective liquidation preference amounts which would otherwise be payable upon liquidation with respect to the outstanding shares of the Series F Preferred Stock and such Parity Stock if all liquidation preference dollar amounts with respect to such shares were paid in full. 3 (b) Upon the completion of the distribution required by subparagraph (a) of this Section 2, the remaining assets and funds of the Corporation legally available for distribution, if any, shall be distributed among the holders of the Common Stock pro rata based on the number of shares of Common Stock held by each, and the holders of Series F Preferred Stock shall not be entitled to participate in such distribution. (c) For purposes of this Section 2, a liquidation, dissolution or winding up of this Corporation shall be deemed to be occasioned by, or to include (A) a change in 50% or more of the members of the Board of Directors, nominated and recommended by the Board of Directors for election at the 2000 Annual Meeting of Stockholders except changes in investor appointed directors, (B) a consolidation or merger of the Corporation with or into any other corporation (other than (i) a merger in which the Corporation is the surviving corporation and which will not result in more than 50% of the capital stock of the Corporation being owned of record or beneficially by persons other than the holders of such capital stock immediately prior to such merger or (ii) a transaction contemplated by the Series F Preferred Stock and Warrant Purchase Agreement dated January 18, 2001 (the "Purchase Agreement") and the Exchange Agreement dated January 18, 2001 (the "Exchange Agreement")), (C) a sale or disposition of all or substantially all of the properties and assets of the Corporation as an entirety to any other person or persons in a single transaction or series of related transactions, (D) an acquisition of "beneficial ownership" by any "person" or "group" of voting stock of the Company representing more than 50% of the voting power of all outstanding shares of such voting stock, whether by way of merger or consolidation or otherwise, other than pursuant to the exercise of the warrants contemplated by the Exchange Agreement, the Purchase Agreement and agreements with other investors disclosed in the schedules thereto and/or the transfer of the Common Stock purchased pursuant to such agreements with other investors (collectively, the "Investor Securities"), or (E) any other transaction which results in the disposition of 50% or more of the voting power of all classes of capital stock of the Corporation on a combined basis, other than relating to the purchase of the Investor Securities (an event or series of events under subsections (A), (B), (C), (D) and (E) above shall be referred to as a "Change of Control Event"). The holders of 67% or more of the voting power of the then outstanding shares of the Series F Preferred Stock may execute a written waiver of any Change of Control Event. 3. Redemption. The shares of Series F Preferred Stock shall be redeemable as follows: (a) Optional Redemption. (i) The shares of Series F Preferred Stock will be redeemable at the election of the Corporation, as a whole or from time to time in part, at any time ("Optional Redemption Date") on not less than 5 nor more than 60 days' prior notice, for an amount equal to 100% of the Purchase Price (as hereinafter defined), plus all accrued or declared but unpaid dividends, if any, to the date of redemption (the "Redemption Price"). The "Purchase Price" of the Series F Preferred Stock shall be $1,000 (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares). 4 (ii) No partial optional redemption may be authorized or made unless on or prior to such redemption all unpaid cumulative dividends shall have been paid in full, or a sum set apart in cash for such payment, on all shares of Series F Preferred Stock then outstanding to the extent dividends are payable in cash. If less than all the shares of Series F Preferred Stock are to be redeemed, the particular shares of Series F Preferred Stock to be redeemed will be determined on a pro rata basis. If less than all of the shares of Series F Preferred Stock are to be redeemed, the Redemption Notice that relates to such shares of Series F Preferred Stock shall state the portion of the shares of Series F Preferred Stock to be redeemed. A new Series F Preferred Stock certificate representing the unredeemed shares of Series F Preferred Stock will be issued in the name of the holder thereof upon cancellation of the original certificate for Series F Preferred Stock and, unless the Company fails to pay the Redemption Price on the Redemption Date, after the Redemption Date dividends will cease to accrue on the shares of Series F Preferred Stock called for redemption. (b) Mandatory Redemption. (i) All outstanding shares of Series F Preferred Stock shall be redeemed (subject to the legal availability of funds therefor) in whole on the earlier of January 18, 2004 or the closing date of the Corporation's acquisition of 70% or more of the outstanding stock, or all or substantially all of the assets, of Einstein/Noah Bagel Corporation, or the acquisition by Einstein of all or substantially all of the assets or stock of the Company ("Acquisition of Einstein") (the "Mandatory Redemption Date" and together with the "Optional Redemption Date", the "Redemption Date"), at the Redemption Price. (ii) Failure to Redeem. In the event that the Corporation fails to pay the Redemption Price on the Mandatory Redemption Date, the Redemption Price will be paid by the issuance of Senior Subordinated Notes (the "Notes"), which Notes will be substantially in the form of the Note attached as Exhibit D to the Purchase Agreement and Exhibit B to the Exchange Agreement and all outstanding shares of Series F Preferred Stock shall be deemed to be retired and no longer outstanding. (c) Procedure for Redemption. (i) Not more than 60 and not less then 5 days prior to any Optional Redemption Date, and as soon as practical prior to the Mandatory Redemption Date, written notice (the "Redemption Notice") shall be given by first-class mail, postage prepaid, to each holder of record of shares of Series F Preferred Stock to be redeemed on the record date fixed for such redemption of the shares of Series F Preferred Stock at such holder's address as the same appears on the stock register of the Company. The Redemption Notice shall state: (A) the Redemption Price; (B) whether all or less than all of the outstanding shares of Series F Preferred Stock are to be redeemed and the total number of shares of Series F Preferred Stock being redeemed; 5 (C) the number of shares of Series F Preferred Stock held by the holder that the Corporation intends to redeem; (D) the Redemption Date; (E) that the holder is to surrender to the Corporation, at the place or places designated in such Redemption Notice, its certificates representing the shares of Series F Preferred Stock to be redeemed; (F) that dividends on the shares of Series F Preferred Stock to be redeemed shall cease to accrue on such Redemption Date unless the Corporation defaults in the payment of the Redemption Price; and (G) the name of any bank or trust company performing the duties referred to in subsection (c)(iv) below. (ii) On or before the Redemption Date, each holder of shares of Series F Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares of Series F Preferred Stock to the Corporation, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full redemption price for such shares of Series F Preferred Stock shall be payable in cash to the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be returned to authorized but unissued shares of Series F Preferred Stock. In the event that less than all of the shares of Series F Preferred Stock represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares of Series F Preferred Stock. (iii) Unless the Corporation defaults in the payment in full of the Redemption Price, dividends on the shares of Series F Preferred Stock called for redemption shall cease to accrue on the Redemption Date, and the holders of such shares shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the Redemption Price, without interest. (iv) If a Redemption Notice shall have been duly given or if the Corporation shall have given to the bank or trust company hereinafter referred to irrevocable authorization promptly to give such notice, and if on or before the Redemption Date specified therein the funds necessary for such redemption shall have been deposited by the Corporation with such bank or trust company in trust for the pro rata benefit of the holders of the shares of Series F Preferred Stock called for redemption, then, notwithstanding that any certificate for shares of Series F Preferred Stock so called for redemption shall not have been surrendered for cancellation, from and after the time of such deposit, all shares so called, or to be so called pursuant to such irrevocable authorization, for redemption shall no longer be deemed to be outstanding and all rights with respect of such shares of Series F Preferred Stock shall forthwith cease and terminate, except only the right of the holders thereof to receive from such bank or trust company at any time after the time of such deposit the funds so deposited, without 6 interest. The aforesaid bank or trust company shall be organized and in good standing under the laws of the United States of America, and shall have capital, surplus and undivided profits aggregating at least $100,000,000 according to its last published statement of condition, and shall be identified in the Redemption Notice. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so set aside or deposited, as the case may be, and unclaimed at the end of three years from such Redemption Date shall, to the extent permitted by law, be released or repaid to the Corporation, after which repayment the holders of the shares of Series F Preferred Stock so called for redemption shall look only to the Corporation for payment hereof. (v) If the Redemption Price will be paid by the issuance of Notes as required by Section 3(b)(ii) above, the Corporation will issue to each holder of shares of Series F Preferred Stock that has surrendered the certificate or certificates representing such shares of Series F Preferred Stock, a Note in the principal amount of the aggregate Redemption Price payable to such holder, including the increases in the Redemption Price required by Section 3(b)(ii) above, and payable to the holder as such holder's name appears on the stock register of the Corporation. The Corporation will, within 5 days following the 90th day following the Mandatory Redemption Date, send notice to each holder that has not surrendered the certificate or certificates representing its shares of Series F Preferred Stock stating that the Redemption Price is to be paid by the issuance of Notes and confirming the location at which such certificates are to be surrendered. Such notice shall be sent in the same manner as was required for the Redemption Notice. Thereafter, not later than five days following any surrender by a holder of certificates representing shares of Series F Preferred Stock, the Corporation will issue to such holder a Note in the amount specified above. 4. Protective Rights. (a) So long as any shares of Series F Preferred Stock remain outstanding, the Corporation shall not, without the vote or written consent by the holders of at least 67% of the then outstanding shares of the Series F Preferred Stock, voting together as a single class: (i) amend or repeal any provision of the Corporation's Certificate of Incorporation or By-Laws in a manner which materially adversely affects the rights and preferences of the holders of Series F Preferred Stock; (ii) authorize or issue shares of any class of stock having any preference or priority as to dividends or assets superior to or on a parity with the Series F Preferred Stock, including, without limitation, the Series E Preferred Stock of the Company; (iii) pay or declare any dividend on any other type or class of securities, other than a dividend payable in common stock or rights under the Rights Plan; 7 (iv) repurchase or redeem any shares of capital stock of the Corporation other than the redemption of the Series F Preferred Stock; (v) authorize (i) a sale of any material asset of a value in excess of $1,000,000 of the Corporation or any subsidiary or subsidiaries of the Corporation, (ii) a sale of any substantial portion of the assets of the Corporation or any subsidiary or subsidiaries (other than sales of stores owned by the Corporation or its subsidiaries), or (iii) a recapitalization or reorganization of the Corporation or any subsidiary or subsidiaries of the Corporation (other than stock splits, combinations and/or dividends); (vi) take any action that results in the Corporation or any subsidiary or subsidiaries of the Corporation incurring or assuming more than $1,000,000 of funded indebtedness (other than borrowings of up to $17,119,848 by the Corporation for funded debt, either on an individual or accumulative basis except (A) that the Corporation may obtain substitute financings for its existing line of credit on similar terms from a substitute lender up to the outstanding loan balance on the existing line of credit on the date of such substitution, and (B) as contemplated by the Corporation and described in the Purchase Agreement and the Exchange Agreement); (vii) effect any Change of Control Event, except as contemplated by the Corporation and described in the Purchase Agreement and the Exchange Agreement; (viii) effect (i) an acquisition of another corporation or other entity, or a unit or business group of another corporation or entity, by merger or otherwise, except as contemplated in the Purchase Agreement and the Exchange Agreement or (ii) the purchase of all or substantially all of the capital stock, other equity interests or assets of any other entity or person, except as contemplated in the Purchase Agreement and the Exchange Agreement; (ix) increase the number of directors of the Board of Directors of the Corporation except as contemplated in the Purchase Agreement and the Exchange Agreement; (x) effect or allow fundamental change in the nature of the Corporation's business; or (xi) otherwise materially affect the rights, privileges and preferences of the holders of Corporation's Series F Preferred Stock; or (xii) effect any change of the executive officers of the Company. 5. Voting Rights. (a) The holders of Series F Preferred Stock, except as otherwise required under the laws of the State of Delaware or as set forth herein, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation. 8 (b) The majority of the then outstanding Series F Preferred Stock, voting or consenting, as the case may be, as one class, will be entitled to elect up to four directors (the "Series F Directors"), provided that at least two of the Series F Directors shall be designated by Halpern Denny III, L.P. (each a "Halpern Denny Designee"), one of the Series F Directors shall be designated by Brookwood New World Investors, LLC (the "Brookwood Designee") and one of the Series F Directors shall be designated by BET Associates, L.P. (the "BET Designee"). At any meeting held for the purpose of electing directors at which the holders shall have the right, voting separately as a class, to elect directors, the presence in person or by proxy of the holders of a majority of the outstanding shares of Series F Preferred Stock shall be required to constitute a quorum of such holders. Any vacancy occurring in the office of a director elected by the holders pursuant to this Section 5(b) may be filled by the remaining director elected by the holders unless and until such vacancy shall be filled by the holders. (c) If (i) dividends on the Series F Preferred Stock are in arrears and unpaid for any quarterly period, which failure to pay shall continue for a period of thirty (30) days; or (ii) the Corporation fails to discharge any redemption obligation with respect to the Series F Preferred Stock (delivery of the Notes as set forth in Section 3 above shall constitute discharge of the Company's redemption obligation) and such failure continues more than 90 days following a Mandatory Redemption Date; then (A) the number of members comprising the Corporation's Board of Directors shall automatically increase by such number so that such additional directors (but including the Board seats elected by the holders of Series F Preferred Stock pursuant to Section 5(b) above) shall constitute not less than 50% of the Board of Directors of the Corporation and (B) the holders of the majority of the then outstanding Series F Preferred Stock, voting or consenting, as the case may be, as one class, will be entitled to elect directors to the Board of Directors to fill the vacancies created by such increase, provided that such directors shall be designated equally by (A) Halpern Denny III, L.P., on the on hand, and (B) Brookwood New World Investors, LLC and BET Associates, L.P., on the other hand. Such voting rights will continue until such time as, in the case of a dividend default, all dividends in arrears on the Series F Preferred Stock are paid in full and, in the case of the failure to redeem, until payment in cash or until the Notes are delivered, at which time the term of the directors elected pursuant to the provisions of this paragraph shall terminate. The event described is referred to herein as a "Voting Rights Triggering Event." (d) Immediately after voting power to elect directors shall have become vested and be continuing in the holders pursuant to Section 5(c) or if vacancies shall exit in the offices of directors elected by the holders, a proper officer of the Corporation shall call a special meeting of the holders for the purpose of electing the directors which such holders are entitled to elect. Any such meeting shall be held at the earliest practicable date, and the Corporation shall provide holders with access to the lists of holders, pursuant to the provisions of this Section 5(d). At any meeting held for the purpose of electing directors at which the holders shall have the right, voting separately as a class, to elect directors, the presence in person or by proxy of the holders of at least a majority of the outstanding shares of Series F Preferred Stock shall be required to constitute a quorum of such holders. 9 (e) Any vacancy occurring in the office of a director elected by the holders pursuant to Section 5(c) may be filled by the remaining director elected by the holders unless and until such vacancy shall be filled by the holders. (f) The Corporation shall not modify, change, affect or amend the Certificate of Incorporation or this Certificate of Designation to affect materially and adversely the specified rights, preferences or privileges of the holders of the Series F Preferred Stock or increase the authorized Series F Preferred Stock, without the affirmative vote or consent of holders of at least a 67% of the shares of Series F Preferred Stock then outstanding, voting or consenting, as the case may be, as one class. (g) In any case in which the holders shall be entitled to vote pursuant to this Section 5 or pursuant to the laws of the State of Delaware, each holder shall be entitled to one vote for each share of Series F Preferred Stock held. (h) In lieu of voting at a meeting, holders may act by written consent in accordance with Section 228 of the General Corporation Law of the State of Delaware ("GCL"). (i) Except as otherwise required by the GCL, holders of at least 67% of the then outstanding shares of Series F Preferred Stock, voting or consenting, as the case may be, separately as a class, may waive compliance with any provisions of this Certificate of Designation. 6. No Reissuance of Series F Preferred Stock. No share or shares of Series F Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such reacquired shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to issue. 7. Counterparts. This Certificate may be signed in any number of counterparts, each of which will be an original, with the same effect as if the signatures hereto were upon the same instrument. 10 IN WITNESS WHEREOF, the Corporation has executed this Certificate of Designation to be prepared and executed by the officers named below as of this 18th day of January, 2001. NEW WORLD COFFEE - MANHATTAN BAGEL, INC. By: _________________________________ Name: R. Ramin Kamfar Title: Chief Executive Officer By: _________________________________ Name: Jerold Novack Title: Secretary EX-99.9 5 w44993ex99-9.txt SENIOR SUBORDINATED NOTE 1 EXHIBIT 99.9 NOTE THE SECURITY EVIDENCED BY THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION THEREFROM, UNLESS AN OPINION OF COUNSEL IS FURNISHED REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO NEW WORLD COFFEE - MANHATTAN BAGEL, INC. STATING THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF APPLICABLE SECURITIES LAWS IS AVAILABLE. THIS NOTE AND THE OBLIGATIONS OF THE COMPANY ARISING HEREUNDER ARE SUBORDINATED IN THE MANNER AND TO THE EXTENT SET FORTH IN SECTION 6 HEREOF, AND EACH HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS THEREOF. New World Coffee - Manhattan Bagel, Inc. [ ](1) % Senior Subordinated Note Dated: FOR VALUE RECEIVED, the undersigned New World Coffee-Manhattan Bagel, Inc., a Delaware Corporation (herein, together with any successor, referred to as the "Company"), hereby promises to pay to ____________or registered assigns, the principal sum of ___________ ($_______), subject to adjustment as herein provided, on the later of January 18, 2004 and 120 days following the Mandatory Redemption Date, with interest (computed on the basis of a 360 day year) on the unpaid balance of such principal sum from the date hereof at the initial interest rate of [ ](1)% per annum, subject to adjustment as herein provided, payable, in arrears, quarterly on the first day of January, April, July and October of each year, commencing April 1 (which first interest payment shall be for the period from and including January 18, 20[_] through and including March 31, 20[_], until the entire principal amount hereof shall have become due and payable, whether at maturity or at a date fixed for prepayment or by acceleration or declaration or otherwise, and such per annum interest rate shall be increased by 2% on each January 18 and July until the principal has been paid in full (including on any overdue installment of principal (including any overdue prepayment of principal) and (to the extent permitted by law) on any overdue installment of interest until paid (whether or not any subordination provision or other circumstance prevents such payment)). The principal amount of the Note shall be increased by 1% on each of the 30th, 60th and 90th day following the Mandatory Redemption Date. - ------------ (1) The interest rate will be equal to the dividend rate of the Series F Preferred Stock in effect as of the date of issuance of the Note. 2 This Note is issued pursuant to the (i) Series F Preferred Stock and Warrant Purchase Agreement dated as of January 18, 2001 (the "Purchase Agreement") between the Company and the purchasers named therein and (ii) the Exchange Agreement dated as of January 18, 2001 (the "Exchange Agreement") between the Company and the parties named therein, and is one of the "Notes" contemplated in each of such Agreements. 1. Payments (a) If any payment of interest due hereunder becomes due and payable on a day which is not a Business Day ("Business Day" means any day, other than a Saturday, Sunday or legal holiday, on which banks in the location of the offices of the Company are open for business), the due date thereof shall be the next preceding day which is a Business Day, and the interest payable on such next preceding Business Day shall be the interest which would otherwise have been payable on the due date which was not a Business Day. (b) Payments of principal and interest shall be made in lawful money of the United States of America to the address or account designated by the holder hereof for such purpose. (c) All payments of principal and interest with respect to this Note and each of the other Notes shall be made pro rata among the holders of the Notes in proportion to the unpaid principal amount and amount of accrued but unpaid interest, as applicable, with respect to each Note as of the date of each such payment. 2. Exchange of Notes; Accrued Interest; Cancellation of Surrendered Notes; Replacement. (a) At any time at the request of any holder of this Note to the Company at its offices the Company at its expense (except for any transfer tax or any other tax arising out of the exchange) will issue and deliver to or upon the order of the holder in exchange therefor new Notes, in such denomination or denominations as such holder may request, in aggregate principal amount equal to the unpaid principal amount of this Note and substantially in the form thereof, dated as of the date to which interest has been paid on this Note (or, if no interest has yet been so paid thereon, then dated the date this Note is so surrendered) and payable to such person or persons or order as may be designated by such holder. (b) In the event that this Note is surrendered to the Company upon a prepayment the Company shall pay all accrued and unpaid interest on this Note or such portion thereof and thereupon interest shall cease to accrue upon that portion of the principal amount of this Note which was prepaid, and the right to receive, and any right or obligation to make, any prepayment on such portion of the principal amount shall terminate all upon the date of such prepayment and upon presentation and surrender of this Note to the Company. (c) Upon any prepayment if only a portion of the principal amount of this Note is prepaid, then this Note shall be surrendered to the Company and the Company shall simultaneously execute and deliver to or on the order of the holder thereof, at the expense of the 2 3 Company, a new Note or Notes in principal amount equal to the unused or unpaid portion of this Note. (d) This Note or portions thereof which have been prepaid shall be canceled by the Company and no Notes shall be issued in lieu of the principal amount prepaid. (e) Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to the Company (if requested by the Company and unsecured in the case of the Purchaser or an institutional holder), or in the case of any such mutilation, upon surrender of this Note (which surrendered Note shall be canceled by the Company), the Company will issue a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note as if the lost, stolen, destroyed or mutilated Note were then surrendered for exchange. 3. Maximum Legal Rate. The Company shall not be obligated to pay and the holder of this Note shall not collect interest at a rate in excess of the maximum permitted by law or the maximum that will not subject Payee to any civil or criminal penalties. If, because of the acceleration of maturity, the payment of interest in advance, the scheduled increases in the interest rate or any other reason, the Company is required to pay interest at a rate in excess of such maximum rate, the rate of interest under such provisions shall immediately and automatically be reduced to such maximum rate, and any payment made in excess of such maximum rate, together with interest thereon at the rate provided herein from the date of such payment, shall be immediately and automatically applied to the reduction of the unpaid principal balance of this Note as of the date on which such exceeds the unpaid principal balance, the amount of such excess shall be refunded by Payee to Company. It is expressly stipulated and agreed to be the intent of the Company and the holder of this Note at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits the holder of this Note to contract for, charge, take, reserve or receive a greater amount of interest than under state law) and that this section shall control every other covenant and agreement in this Note, the Purchase Agreement and the Exchange Agreement. 4. Protective Rights. (a) The Company shall not, without the prior written consent of the holder or holders of Notes representing at least sixty-seven percent (67%) in aggregate principal amount of the outstanding Notes: (i) pay or declare any dividend on any other type or class of securities, other than a dividend payable in common stock or rights under the Rights Plan and solely paid-in-kind dividends to the holders of the Series E Preferred Stock; (ii) repurchase or redeem any shares of capital stock of the Company; (iii) authorize (i) a sale of any material asset of a value in excess of $1,000,000 of the Company or any subsidiary or subsidiaries of the Company, (ii) a sale of any 3 4 substantial portion of the assets of the Company or any subsidiary or subsidiaries (other than sales of stores owned by the Company or its subsidiaries), or (iii) a recapitalization or reorganization of the Company or any subsidiary or subsidiaries of the Company (other than stock splits, combinations and/or dividends; (iv) take any action that results in the Company or any subsidiary or subsidiaries of the Company incurring or assuming more than $1,000,000 of funded indebtedness, except as contemplated by the Company and described in the Purchase Agreement (other than (A) Senior Indebtedness (as hereinafter defined) and (B) such other funded indebtedness as is subordinated to the Notes in a manner substantially comparable to the subordination provisions set forth in Section 6 hereof; (v) effect any of the following: (i) a consolidation or merger of the Company with or into any other corporation (other than a merger in which the Company is the surviving corporation and which will not result in more than 50% of the capital stock of the Company being owned of record or beneficially by persons other than the holders of such capital stock immediately prior to such merger), except as contemplated by the Purchase Agreement, (ii) sell or otherwise dispose of all or substantially all of the properties and assets of the Company as an entirety to any other person or persons in a single transaction or series of related transactions, except as contemplated by the Purchase Agreement, or (iii) an acquisition of "beneficial ownership" by any "person" or "group" of voting stock of the Company representing more than 50% of the voting power of all outstanding shares of such voting stock, whether by way of merger or consolidation or otherwise, except as contemplated by the Purchase Agreement (each, a "Change of Control"); (vi) effect (i) an acquisition of another corporation or other entity, or a unit or business group of another corporation or entity, by merger or otherwise, except as contemplated by the Purchase Agreement or (ii) the purchase of all or substantially all of the capital stock, other equity interests or assets of any other entity or person, except as contemplated by the Purchase Agreement; (vii) increase the number of directors of the Board of Directors of the Company except as set forth herein; (viii) effect or allow fundamental change in the nature of the Company's business; or (ix) effect any change of the executive officers of the Company. 4 5 5. Defaults. (a) Any of the following shall constitute an "Event of Default": (i) The Company defaults in the payment of (A) any part of the principal of any Note, when the same shall become due and payable, whether at maturity or at a date fixed for prepayment or by acceleration or otherwise, or (B) the interest on any Note, when the same shall become due and payable, and such default in the payment of interest shall have continued for five (5) Business Days; or (ii) the Company defaults in the performance of any other agreement or covenant contained in the Purchase Agreement or Exchange Agreement, and such default shall not have been remedied within thirty (30) days after written notice thereof shall have been given to the Company by any holder of this Note (the Company to give forthwith to all other holders of this Note at the time outstanding written notice of the receipt of such notice, specifying the default referred to therein); or (iii) any material representation or warranty by the Company herein, in the Purchase Agreement, the Exchange Agreement or in any certificate delivered by the Company pursuant hereto proves to have been incorrect in any material respect when made; or (iv) the Company or any Subsidiary shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts; or a receiver or trustee is appointed for the Company or any Subsidiary or for substantially all of its assets and, if appointed without its consent, such appointment is not discharged or stayed within sixty (60) days; or proceedings under any law relating to bankruptcy, insolvency or the reorganization or relief of debtors are instituted by or against the Company or any Subsidiary, and, if contested by it, are not dismissed or stayed within sixty (60) days; or any writ of attachment or execution or any similar process is issued or levied against the Company or any Subsidiary or any of its property and is not released, stayed, bonded or vacated within sixty (60) days after its issue or levy; or the Company or any Subsidiary takes corporate or limited liability company action in furtherance of any of the foregoing. (b) If an Event of Default occurs pursuant to any of clauses (i) through (iii) of Section 5(a) of this Note then and in each such event and with the concurrence of holders of 67% of the Notes any holder of this Note (unless all Events of Default shall theretofore have been waived or remedied) at its option, by written notice or notices to the Company, may declare this Note to be due and payable. If an Event of Default occurs pursuant to clause (iv) of Section 5(a) of this Note, this Note shall automatically and without further action become due and payable. Upon any such declaration (or as to such clause (v) upon its occurrence) this Note shall forthwith immediately mature and become due and payable. However, the foregoing acceleration rights are subject to the following: (i) if, at any time after the principal of this Note shall so become due and payable and prior to the date of maturity stated in this Note, all interest on this Note (with 5 6 interest at the rate specified in this Note on any overdue principal and, if applicable, on any overdue interest) shall be paid to the holder of this Note by or for the account of the Company, then the Note holder, by written notice or notices to the Company, may waive such Event of Default and its consequences and rescind or annul any such declaration, but no such waiver shall extend to or affect any subsequent Event of Default or impair any right or remedy resulting therefrom; (ii) if any holder or holders of Notes which, at the time, holds or hold at least sixty-seven percent (67%) in aggregate principal amount of the Notes then outstanding exercises the above rights of acceleration, then the Company shall notify each other holder of Notes of the fact of such acceleration and each other holder shall, without limiting any other rights hereunder, (A) have the right for thirty (30) days after such notice from the Company to accelerate its own Notes based on the Event or Events of Default on which such acceleration was based (regardless of whether such Event or Events of Default are then continuing), unless at the time there are no outstanding Events of Default and any acceleration of any Notes has been rescinded or (B) be deemed automatically (without any action by such holder) to have accelerated its Notes if such holder has not received such notice of an acceleration from the Company within ten (10) business days after such acceleration; provided that any such automatic acceleration may take place regardless of whether the Event or Events of Default on which the initial acceleration was based are then continuing but such automatic acceleration shall not take place if at the time any and all accelerations of any Notes have been rescinded or annulled pursuant to subparagraph (i) above or otherwise; (iii) any holder may at any time rescind and annul any acceleration with respect to its own Notes; and (iv) if any holder of a Note shall give any notice or take any other action with respect to a claimed Event of Default, the Company, forthwith upon receipt of such notice or obtaining knowledge of such other action, will give written notice thereof to all other holders of the Notes then outstanding, describing such notice or other action and the nature of the claimed Event of Default. 6. Subordination (a) Notwithstanding anything to the contrary expressed or implied in this Note, the payment of, and any action taken to enforce, this Note is hereby expressly subordinated in right of payment, and is made subject, to the extent and in the manner hereinafter set forth, to the prior payment in full in cash of all Senior Indebtedness (as hereinafter defined), and the Company and each holder of this Note, by its acceptance hereof, agrees to be bound by the provisions of this Section 6. (i) No payment on account on this Note shall be made by or on behalf of the Company or any of it subsidiaries or other affiliates; provided that the Company shall be permitted to pay, and the holder of this Note shall be permitted to receive, regularly scheduled payments of principal and interest under the terms of this Note as in effect on 6 7 the date hereof unless, at the time of any such payment or after giving effect thereto, (A) a payment default under the Senior Indebtedness shall have occurred and be continuing or (B) any other event of default under the Senior Indebtedness shall have occurred and be continuing; provided, however, that such restriction upon payment pursuant to clause (B) above shall be limited to a period of 180 days following notice to the holder of this Note of such Event of Default under the Senior Indebtedness. So long as the Senior Indebtedness is outstanding, the Company shall not make, or allow or cause to be made on its behalf, any prepayment (whether by redemption, defeasance or otherwise) or any principal amount or interest under this Note prior to the date on which such principal or interest is required to be made under the terms of this Note as in effect on the date hereof. (ii) So long as the Senior Indebtedness is outstanding, the holder of this Note shall not, without the prior written consent of the holders of Senior Indebtedness or any agent therefor, assert, collect, or enforce all or any part of this Note or any claims in respect thereof, or take any action to foreclose upon, take possession of or liquidate or proceed against any property or assets of the Company or any subsidiary or other affiliate of the Company, or institute any action or proceeding or otherwise provide for the payment of this Note or exercise any rights or remedies under this Note or declare this Note to be due and payable prior to the scheduled maturity date thereof under the terms of this Note as in effect on the date hereof or otherwise accelerate the payment of this Note; provided that the foregoing shall not prevent the holder of Subordinated Debt from accelerating this Note following the acceleration of any principal payment due under the Senior Indebtedness. (iii) Upon any acceleration of the principal amount due on any Senior Indebtedness or upon any distribution of all or substantially all of the assets of Company or upon any payment or distribution of assets of Company of any kind of character, whether in cash, property or securities, to creditors whether in connection with any dissolution, winding-up, total or partial liquidation or reorganization of Company whether voluntary of involuntary or otherwise and whether in bankruptcy, insolvency, receivership, arrangement or other proceedings, or upon an assignment for the benefit or creditors, or upon any other marshaling of the assets and liabilities of Company (each, an "Insolvency Event"), all Senior Indebtedness shall first be paid in full in cash before the holder of this Note shall be entitled to receive any payments hereunder; and upon any such Insolvency Event or similar proceedings, any payment or distribution of property or assets of Company of any kind or character, whether in cash, property or securities, to which the holder of this Note, would, except for the provisions hereof, be entitled, shall be paid or delivered by Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment of distribution, directly to the holders of Senior Indebtedness pro rata upon the basis of the respective amounts of Senior Indebtedness held by such holders, to the extent necessary to pay all Senior Indebtedness in full in cash (after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness) before any payment or distribution is made to the holder of this Note. 7 8 (iv) Upon any such Insolvency Event, any payment or distribution of property or assets of Company of any kind or character, whether in cash, property or securities, which shall be received by the holder of this Note before the entire Senior Indebtedness shall have been paid in full in cash, shall be held in trust for the benefit of and promptly paid over to the holders of Senior Indebtedness pro rata as aforesaid, for application to the payment of Senior Indebtedness remaining unpaid until all Senior Indebtedness shall have been paid in full in cash, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. (v) Notwithstanding the foregoing provisions of this Note, the holder of this Note shall be entitled to receive shares of the stock or other securities of Company issued as part of a reorganization or readjustment of securities of Company or any other corporation provided for by a plan of reorganization or readjustment, provided that the terms, rights and preferences of stock issued in payment of the Note is subordinated at least to the same extent as this Note to the payment of all Senior Indebtedness which may at the time be outstanding, and provided further that the rights of the holders of Senior Indebtedness are not altered by such reorganization or readjustment. (b) The foregoing provisions are solely for the purpose of defining the relative rights of the holder of Senior Indebtedness on the one hand and the holder of this Note on the other hand, and noting herein shall impair, as between Company and the holder of this Note, the obligation of Company, to pay to the holder hereof the principal hereof and interest hereon in accordance with its terms. The term "Senior Indebtedness" shall mean the principal of, premium, if any, interest (including, without limitation, all interest on the Senior Indebtedness accruing after the commencement of any Insolvency Event and any additional interest that would have accrued but for the commencement of such proceeding whether or not the claim for such interest is allowed under applicable law) on, and all other obligations of any type with respect to Indebtedness outstanding under the Senior Credit Facility in all such cases whether outstanding on the date hereof or hereinafter incurred; the term "Senior Indebtedness" shall not include the principal of loans or the amount of letter of credit obligations under the Senior Credit Facility or any other agreement evidencing Senior Indebtedness in excess of $20,350,000 at all times prior to the acquisition at least 70% of the outstanding stock, or all or substantially all of the assets, of Einstein/Noah Bagel Corporation ("Einstein") as contemplated by the Purchase Agreement, and $75,000,000 upon completion of such acquisition of Einstein. The term "Senior Credit Facility" shall mean the existing Credit Agreement, dated as of August 31, 1999, with BankBoston, N.A. (the "BankBoston Credit Facility") and any additional or substitute loan facilities with one or more financial institutions, provided that the maximum amount of financing the Company may obtain through any such substitute loan facilities shall not exceed in the aggregate the then outstanding loan balance on the BankBoston Credit Facility. 7. Board Representation. The holders of Notes representing at least sixty-seven percent (67%) of the aggregate principal amount of the outstanding Notes shall be entitled to designate at least four members of the Board of Directors of the Company (the "Series F Directors"), and the Company will use all reasonable efforts to cause the election of such designees, provided that two of the Series F Directors shall be designated by Halpern Denny III, L.P. (each a "Halpern 8 9 Designee"),one of the Series F Directors shall be designated by BET Associates, L.P (the "BET Designee") and one of the Series F Directors shall be designated by Brookwood New World Investors, LLC (the "Brookwood Designee"). 8. Home Office Payments. As long as the Purchaser or any payee named in this Note delivered to the Purchaser on the Closing Date, or any institutional holder which is a direct or indirect transferee from the Purchaser or such payee, shall be the holder of this Note, the Company will make payments (whether at maturity, upon mandatory or optional prepayment, or otherwise) of principal, interest and premium, if any, (i) by check payable to the order of the holder of any this Note duly mailed or delivered to the Purchaser at such address as the Purchaser or such other holder may designate in writing, or (ii) if requested by the Purchaser or such other holder, by wire transfer to the Purchaser's or such other holder's (or its nominee's) account at any bank or trust company in the United States of America, notwithstanding any contrary provision herein or in any Note with respect to the place of payment. If the Purchaser has provided an address for payments by wire transfer, then the Purchaser shall be deemed to have requested wire transfer payments under the preceding clause (ii). All such payments shall be made in federal or other immediately available funds. 9. Miscellaneous. The Company and all endorsers of this Note hereby waive presentment, demand, protest and notice. The holder of this Note shall, promptly upon full payment by the Company of the principal of and interest on this Note, together with all costs and expenses, if any, due hereon, surrender this Note to the Company for retirement and cancellation, provided, however, that to the extent that the Company makes a payment or payments to the holder of this Note, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, and/or required to be repaid to a trustee, receiver, or any other party under the United States Bankruptcy Code, as amended, any state or federal law, common law, or equitable causes (a "Voidable Transfer") and the holder of this Note is required to repay or restore any such Voidable Transfer or the amount or any portion thereof, or upon the advice of its counsel is advised to do so, then as to any such Voidable Transfer or the amount repaid or restored (including all reasonable costs, expenses and attorneys' fees of the holder of this Note related thereto), the liability of the Company shall automatically be revived, reinstated and restored and shall exist in full force and effect as though such Voidable Transfer had never been made. 10. Consent To Jurisdiction And Service Of Process. The parties hereby consent to the jurisdiction of any state or federal court located within the city, county and state of New York and irrevocably agree that, subject to the election, all actions or proceedings relating to this agreement or the related agreements may be litigated in such courts. The parties accept for themselves and in connection with their properties, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and waive any defense of forum non conveniens, and irrevocably agree to be bound by any judgment rendered thereby (subject to any appeal available with respect to such judgment) in connection with this Note. Nothing herein shall affect the right to serve process in any other manner permitted by law or 9 10 shall limit the right of the parties to bring proceedings or obtain or enforce judgments against each other in the courts of any other jurisdiction. 11. Waiver of jury trial. The holder and the company hereby waive their respective rights to a jury trial of any claim or cause of action based upon or arising out of this agreement, the related agreements or any dealings among them relating to the subject matter of this transaction. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this agreement or to the notes or the warrants. In the event of litigation, this agreement may be filed as a written consent to a trial (without a jury) by the court. 10 11 IN WITNESS WHEREOF, New World Coffee - Manhattan Bagel, Inc. has caused this Note to be dated and to be executed and issued on its behalf by its duly authorized officer. NEW WORLD COFFEE - MANHATTAN BAGEL, INC. By____________________________________ Name: Title: EX-99.10 6 w44993ex99-10.txt AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 99.10 AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT This Amended and Restated Registration Rights Agreement (this "Agreement") dated as of January 18, 2001, by and between New World Coffee - Manhattan Bagel, Inc., a Delaware corporation (the "Company") and the holders of certain warrants listed on Schedule I hereto (the "Stockholders"), amending and restating the Registration Rights Agreement dated as of August 11, 2000 (the "Initial Registration Rights Agreement"), by and between the Company, BET Associates, L.P., and Brookwood New World Investors, LLC (the "Initial Stockholders"). BACKGROUND On August 11, 2000, the Company and the Initial Stockholders entered into the Series D Preferred Stock and Warrant Purchase Agreement (the "Series D Purchase Agreement"), pursuant to which, among other things, the Initial Stockholders agreed to purchase up to 16,216.216 shares of the Company's Series D Preferred Stock at a purchase price of $925.00 per share (the "Series D Shares") and the Company delivered warrants in the form attached to the Series D Purchase Agreement and agreed to issue in the future certain additional Warrants in similar form (collectively, the "Series D Warrants"). On the date hereof, the Company and certain purchasers of the Series F Preferred Stock (the "New Stockholders", and together with the Initial Stockholder, the "Stockholders") entered into the Series F Preferred Stock and Warrant Purchase Agreement (the "Series F Purchase Agreement", pursuant to which, among other things, the New Stockholders agreed to purchase up to 20,000 shares of Series F Preferred Stock (the "Shares") at a purchase price of $1,000.00 per share and the Company delivered warrants in the form attached to the Series F Purchase Agreement and has agreed to issue in the future certain Warrants in similar form (collectively, the "Series F Warrants"). The Initial Stockholders have entered into an Exchange Agreement dated as of January 18, 2001 (the "Exchange Agreement") and pursuant to such Exchange Agreement, such Initial Stockholders have agreed to surrender the Series D Shares (plus all accrued and unpaid paid-in-kind dividends thereon) and the Series D Warrants in exchange for 16,398.33 shares of Series F Preferred Stock (the "Shares") and new warrants in the form attached to the Exchange Agreement (collectively, the "Exchange Warrants", and together with the Series F Warrants, the "Warrants"). Capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meanings given to them in the Series F Purchase Agreement. As a material term of the Series F Purchase Agreement, the Company has agreed to grant to the New Stockholders certain registration rights with respect to the Registrable Securities and the Initial Stockholders have agreed to amend and restate the Initial Registration Rights Agreement as hereinafter provided. Therefore, the parties agree as follows: 2 1. REGISTRATION RIGHTS. The Company covenants and agrees as follows: 1.1 DEFINITIONS. For purposes of this Section 1: (a) The term "1934 Act" means the Securities Exchange Act of 1934, as amended. (b) The term "Act" means the Securities Act of 1933, as amended. (c) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee of Registrable Securities in accordance with Section 1.9 of this Agreement. (d) The term "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement. (e) The term "Registrable Securities" means the shares of Common Stock issued or issuable (i) upon exercise of the Warrants; and (ii) any securities of the Company issued or issuable in exchange for, or in replacement of the Common Stock, excluding shares of Common Stock which may be immediately sold under Rule 144. (f) The term "SEC" means the Securities and Exchange Commission. 1.2 DEMAND REGISTRATION. (a) If the Company receives at any time, a written request from the Holders of a majority of the Registrable Securities then outstanding (the "Initiating Holders") that the Company file a registration statement under the Act covering the registration of at least twenty-five percent (25%) of the Registrable Securities then outstanding, then the Company shall: (i) within 10 days of the receipt thereof, give written notice of such request to all Holders; (ii) use all reasonable efforts to file as soon as practicable, and in any event within 60 days of the receipt of such request, a registration statement for registration under the Act of all Registrable Securities which the Holders request to be registered, subject to the limitations of subsection 1.2(b); and (iii) use all reasonable efforts to cause such registration statement to become effective. (b) If the Initiating Holders intend to distribute Registrable Securities by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to subsection 1.2(a), and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by the 2 3 Initiating Holders and shall be an underwriter of regional or national standing reasonably acceptable to the Company. In such event, the right of any Holder to include Registrable Securities in the registration shall be conditioned upon such Holder's participation in the underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder). All Holders proposing to distribute their securities through the underwriting shall (together with the Company as provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant to this subsection, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable Securities to be included in the underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. (c) Notwithstanding the foregoing, if the Company furnishes to Initiating Holders a certificate signed by the Chief Executive Officer of the Company stating that the Company is engaged in an offering for itself or others or that in the good faith judgment of the Board of Directors of the Company, it would be detrimental to the Company for a registration statement to be filed and it is therefore necessary to defer the filing of the registration statement, the Company shall have the right to defer taking action with respect to the filing for a period of not more than 120 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. (d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2 (i) after the Company has effected two registrations pursuant to this Section 1.2 and such registrations have been declared or ordered effective or (ii) if such demand registration would then be filed within six months of the initial filing of an earlier demand registration under this Section 1.2 or a registration under Section 1.9. 1.3 PIGGYBACK REGISTRATION. If the Company proposes to register (including for this purpose a registration effected by the Company for stockholder other than the Holders) any of its stock under the Act in connection with the public offering of such securities solely for cash (other than a registration on Form S-4 or Form S-8 or successors thereto or on any other form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within 20 days after 3 4 mailing of such notice by the Company, the Company shall, subject to the provisions of Section 1.4,cause to be registered under the Act all of the Registrable Securities that each such Holder has requested Registrable Securities to be registered. In the event that the Company decides, for any reason, not to complete the registration of shares of common stock other than the Registrable Securities, or in the event that inclusion of the Registrable Securities would in the opinion of the managing underwriter for the offering (or the Company if there is no underwriter), impair an offering by the Company or its stockholders for whom the registration statement is filed, the Company shall have no obligation under this Section 1.3 to register, or continue with the registration of, the Registrable Securities. 1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to 120 days or until the distribution contemplated in the Registration Statement has been completed, whichever is earlier; provided, however, that the 120-day period shall be extended for a period of time equal to the period the Holder is prohibited from selling any securities included in such registration pursuant to Section 1.10 hereof or the terms of any lockup agreement entered into at the request of the Company or an underwriter. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use reasonable efforts to register and qualify the securities covered by the registration statement under other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. 4 5 (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (g) Cause all Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange on which similar securities issued by the Company are then listed. (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of the registration. (i) Use reasonable efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Agreement, on the date that the Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company, in form and substance as is customarily given by counsel to underwriters in an underwritten public offering, and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering. 1.5 EXPENSES OF REGISTRATION. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Sections 1.2 or 1.3 for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the selling Holders selected by them, but excluding underwriting discounts and commissions relating to Registrable Securities. 1.6 UNDERWRITING REQUIREMENTS. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company and such other persons for whom the registration statement was filed. If the total amount of securities, including Registrable Securities, to be included in such underwriting exceeds the amount of securities, other than the securities to be sold by the Company, that the 5 6 underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the underwriting only that number of Registrable Securities, if any, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the Registrable Securities so included to be apportioned pro rata among the selling stockholders having piggyback registration rights according to the total amount of Registrable Securities entitled to be included therein owned by each selling stockholder of Registrable Securities or in such other proportions as shall mutually be agreed to by such selling stockholder of Registrable Securities). 1.7 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or material fact necessary to make the statements therein not misleading; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action, subject to the limitations of Section 1.7(c) below; provided, however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon written information furnished expressly for use in connection with such registration by or for any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter and its officers, and directors, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon written information furnished by or for such Holder expressly for use in connection with such registration; 6 7 and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection, in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this subsection exceed the net proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel reasonably satisfactory to the parties; provided, however, than an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section. (d) If the indemnification provided for in this Section is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 7 8 (e) The obligations of the Company and Holders under this Section shall survive the completion of any offering of Registrable Securities in a registration statement under this Agreement. 1.8 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Holders the benefits of Rule 144, the Company agrees to use reasonable efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and (c) furnish to any Holder, so long as the Holder owns any Registrable Securities, upon request (i) a written statement by the Company stating whether it has complied with the reporting requirements of Rule 144, the Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, unless available on EDGAR and (iii) such other information as may be reasonably requested in availing any Holder of any other rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.9 FORM S-3 REGISTRATION. In case the Company shall receive from any Holder or Holders a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.9: (i) if Form S-3 is not available for such offering by the Holders; (ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $1,000,000, 8 9 (iii) if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than one hundred twenty (120) days after receipt of the request of the Holder or Holders under this Section 1.9; provided, however, that the Company shall not utilize this right more than once in any twelve (12) month period; (iv) if the Company has, within the six (6) month period preceding the date of such request, already effected one (1) registration on Form S-3 for the Holders pursuant to this Section 1.9; or (v) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. All expenses incurred in connection with a registration requested pursuant to Section 1.9 (other than underwriting discounts and commissions and fees and disbursements of counsel for the Holders), including (without limitation) all registration, filing, qualification, printer's and accounting fees and counsel for the Company, shall be borne by the Company. Registrations effected pursuant to this Section 1.9 shall not be counted as demands for registration or registrations effected pursuant to Sections 1.2. 1.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned (but only with all related obligations) by a Holder, provided: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement; (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act and the Purchase Agreement; and (d) the Company gives its prior written consent, such consent not to be unreasonably withheld provided, however, that no consent shall be required for the transfer of such rights as follows: (i) by BET Associates L.P. to Bruce Toll, Leonard Tannenbaum, any entity where a majority of the capital stock or other equity interest is held by either Mr. Toll or Mr. Tannenbaum, the irrespective heirs, and any trust formed for the benefit of their heirs; (ii) by Brookwood New World Investors LLC to (A) its members, (B) the members of its managing member, and (C) the members, partners or shareholders of any of the managing member's members, which, as 9 10 to clause (C), shall not exceed 20 transferees; and (iii) by any Halpern Denny & Co. entity. The Company agrees that it will consent to assignments to trusts created by the Stockholder for estate planning purposes. The Company is not required to consent to any transfer of registration rights to securities which are then saleable under Rule 144. 1.11 LOCK-UP. In connection with any underwritten public offering by the Company, the Stockholder agrees, if requested, to execute a lock-up letter addressed to the managing underwriter in customary form agreeing not to sell or otherwise dispose of the Registrable Securities owned by the Stockholder (other than any that may be included in the offering) for a period not exceeding 180 days. 2. MISCELLANEOUS. 2.1 INSPECTION, ETC. (a) The Company shall, upon reasonable prior notice to the Company and during normal business hours, permit authorized representative of any Stockholder to visit and inspect any of the properties of the Company, including its books of account, and to discuss its affairs, finances and accounts with its officers and independent accountants, all at reasonable times and at such Stockholder's expense; provided that no action requested under this Section 2.1 shall unreasonably interfere with the normal business operations of the Company. (b) Not later than the beginning of each fiscal year, the Company shall prepare and deliver to each Stockholder a copy of the Company's operating plan for such fiscal year of the Company. 2.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or the irrespective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 2.3 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted hereunder shall terminate with respect to each holder of Registrable Securities at such time as all shares of Registrable Securities held by such holder of Registrable Securities may immediately be sold at one time under Rule 144 of the 1934 Act in a single transaction. 2.4 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of New York, without regard to choice of law provisions. 2.5 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10 11 2.6 NOTICES. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in the manner and to the addresses set forth in the Purchase Agreement. 2.7 EXPENSES. 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 necessary disbursements in addition to any other relief to which such party may be entitled. 2.8 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Company. 2.9 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provisions shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provisions were so excluded and shall be enforceable with its terms. 2.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PARTIES HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE CITY, COUNTY AND STATE OF NEW YORK AND IRREVOCABLY AGREE THAT, SUBJECT TO THE ELECTION, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE RELATED AGREEMENTS MAY BE LITIGATED IN SUCH COURTS. THE PARTIES ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY (SUBJECT TO ANY APPEAL AVAILABLE WITH RESPECT TO SUCH JUDGMENT) IN CONNECTION WITH THIS AGREEMENT OR THE NOTES. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE PARTIES TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST EACH OTHER IN THE COURTS OF ANY OTHER JURISDICTION. 2.11 WAIVER OF JURY TRIAL. THE HOLDER AND THE COMPANY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF 11 12 ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE RELATED AGREEMENTS OR ANY DEALINGS AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO THE NOTES OR THE WARRANTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT. 2.12 ENTIRE AGREEMENT. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter of this agreement [SIGNATURE PAGE FOLLOWS] 12 13 The parties have executed this Amended and Restated Registration Rights Agreement as of the date first above written. NEW WORLD COFFEE - MANHATTAN BAGEL, INC. By: ____________________________ R. Ramin Kamfar, Chief Executive Officer HALPERN DENNY III, L.P. By: ____________________________ Name: Title: BET ASSOCIATES, L.P. By: BRU Holding Co., LLC Its General Partner By: ____________________________ Name: Title: BROOKWOOD NEW WORLD INVESTORS LLC By: Brookwood New World Co., LLC, Its Managing Member By: ____________________________ Name: Title: EX-99.11 7 w44993ex99-11.txt STOCKHOLDERS AGREEMENT DATED JANUARY 18, 2001 1 EXHIBIT 99.11 STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT dated as of January 18, 2001, by and among NEW WORLD COFFEE - MANHATTAN BAGEL, INC., a Delaware corporation (the "Company") and the several holders (the "Stockholders") listed on Schedule I hereto of Series F Preferred Stock, $.001 par value of the Company (the "Series F Preferred Stock"). WHEREAS, the Company and certain purchasers (the "Series F Purchasers") have entered into a Series F Preferred Stock and Warrant Purchase Agreement dated as of January 18, 2001 (the " Purchase Agreement"), pursuant to which the Series F Purchasers will purchase from the Company an aggregate of 20,000 shares of Series F Preferred Stock of the Company and warrants (the "Warrants") to purchase shares (the "Warrant Shares") of Common Stock, $.001 par value (the "Common Stock"), of the Company; WHEREAS, simultaneously with the closing of the transactions contemplated by the Purchase Agreement, the holders of Series D Preferred Stock (the "Series D Purchasers", together with the Series F Purchasers, the "Stockholders") have entered into an Exchange Agreement (the "Exchange Agreement") with the Company pursuant to which such Series D Preferred Holders have agreed to exchange the shares of Series D Preferred Stock, $.001 par value (the "Series D Preferred Stock"), and warrants issued pursuant to a Series D Preferred Stock and Warrant Purchase Agreement dated August 11, 2000 for the respective number of shares of Series F Preferred Stock and Warrants set forth opposite its name on Schedule I hereto; WHEREAS, as an inducement to the Stockholders to consummate the transactions contemplated by the Purchase Agreement and the Exchange Agreement, the Company and each of the Stockholders have agreed to enter into this Agreement; and NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. Election of Directors; Number of Directors. (a) At any annual or special stockholders meeting called for such purpose, and whenever the stockholders of the Company act by written consent with respect to election of directors, each Stockholder agrees to vote or otherwise give such Stockholder's consent in respect of all shares of voting capital stock of the Company (whether now or hereafter acquired) owned by such Stockholder or as to which such Stockholder is entitled to vote, and the Company shall take all necessary and desirable actions within its control, in order to cause: (i) the authorized number of directors on the Board of Directors of the Company (the "Board") to be established and remain at nine (9); (ii) the election to the Board of: 2 (A) two directors (the "Halpern Denny Designees") designated by Halpern Denny III, L.P. ("Halpern Denny"), one of which directors shall initially be William Nimmo and the other director shall initially remain unnamed; provided, however, (i) in the event that (X) the shares of Series F Preferred Stock held by Halpern Denny are redeemed for cash in accordance with the Certificate of Designation or (Y) the Notes to be issued in accordance with the Certificate of Designation are paid in full, Halpern Denny shall be entitled to designate only one director and (ii) in the event that (X) Halpern Denny owns less than 2% of the voting stock of the Company and (Y) the events described in clause (i) above have occurred, it shall no longer have the right to designate directors hereunder; and (B) one director (the "Brookwood Designee") designated by Brookwood New World Investors, LLC ("Brookwood"), which director shall initially be Eve Trkla; provided, however, that (X) the shares of Series F Preferred Stock held by Brookwood are redeemed for cash in accordance with the Certificate of Designation or (Y) the Notes to be issued in accordance with the Certificate of Designation are paid in full, Brookwood shall no longer have the right to designate a director hereunder; and (C) one director (the "BET Designee", together with the Halpern Designees and the Brookwood Designee, the "Series F Designees") designated by BET Associates, L.P., which director shall initially be Leonard Tannenbaum; (D) one director (the "Management Director") who shall be the Chief Executive Officer of the Company and, in the event that there are two Halpern Denny Designees, there shall be one additional Management Director; provided, however, that if by the first anniversary hereof, the Company has not (i) consummated an Acquisition of Einstein (as defined in the Purchase Agreement) or (ii) does not control or is not scheduled to control the Board of Directors of Einstein/Noah Bagel Corporation, then there shall only be one Management Director; (E) three individuals other than an employee or officer of the Company or its subsidiaries or any other individual having a relationship which, in the reasonable opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, which individual shall be designated by the non-investor directors (the "Independent Directors"), which Independent Directors shall initially be Karen Hogan, Edward McCabe and Keith Barket; all of which persons shall hold office, subject to their earlier removal in accordance with clause (iii) below, the By-laws of the Company and applicable corporate law, until their respective successors shall have been elected and shall have qualified; (iii) the removal from the Board (with or without cause) of any of the Series F Designee upon the written request of the Stockholder that designated such Series F Designee; and 2 3 (iv) upon any vacancy in the Board as a result of any of the Series F Designee ceasing to be a member of the Board, whether by resignation or otherwise, the election to the Board of a replacement such Series F Designee to be designated as provided in clause (ii) above. (b) The Company shall establish and maintain an Audit Committee and a Compensation Committee (collectively, the "COMMITTEES") as soon as practicable after the date hereof. Each Committee shall consist of a maximum of three (3) members. One of the Halpern Denny Directors may, at his or her election, serve on any Committee. In such event, the Halpern Denny Director may only be removed from such Committees, and any such vacancy may be filled, by the entity who designated the Halpern Denny Director. (c) The Board shall meet on a quarterly basis until otherwise agreed by the Board. The Company will reimburse all such directors for all expenses reasonably incurred in connection with attending meetings of the Board. SECTION 2. (a) Preemptive Rights. The Company hereby grants to each Stockholder the right to purchase such Stockholder's Proportionate Percentage (as hereinafter defined) of any future Eligible Offering (as hereinafter defined). For purposes of this Section 2(a): "Proportionate Percentage" means, with respect to any Stockholder as of any date, the result (expressed as a percentage) obtained by dividing (i) the number of shares of Common Stock issuable or issued upon exercise of warrants to purchase Common Stock of the Company owned by such Stockholder as of such date, by (ii) the total number of shares of Common Stock outstanding as of such date. "Eligible Offering" means an offer by the Company to sell to investors (including any of its stockholders) for cash, cash equivalents or indebtedness, any securities of the Company, including, without limitation, (i) shares of capital stock of the Company, or any security convertible into or exchangeable for, or carrying rights or options to purchase, capital stock of the Company, (ii) notes, debentures, bond or other evidences of indebtedness of the Company, and (iii) any combination or derivative of the foregoing, other than an offering by the Company: (i) to its full-time employees, and/or officers and/or directors and/or consultants and/or advisors of options or warrants to purchase shares of Common Stock representing up to 15% of the fully-diluted Common Stock of the Company in connection with or pursuant to any stock option or restricted stock option plan approved and adopted by the Company, whether currently in existence or created hereafter, or shares issuable upon the exercise thereof; or (ii) in connection with any merger of, or acquisition by, the Company; or (iii) in an underwritten public offering registered under the Securities Act; or 3 4 (iv) to a bank or other institutional investor in connection with, and in consideration for, the issuance of debt. (b) The Company shall, before issuing any securities pursuant to an Eligible Offering, give written notice thereof to each Stockholder (the "Offering Notice"). Such notice shall specify the security or securities the Company proposes to issue and the consideration that the Company intends to receive therefor. For a period of fifteen (15) days following the date of such notice, each Stockholder shall be entitled, by written notice to the Company, to elect to purchase all or any part of such Stockholder's Proportionate Percentage of the securities being sold in the Eligible Offering, provided, however, that if two or more securities shall be proposed to be sold as a "unit" in an Eligible Offering, any such election must relate to such unit of securities. In the event that elections pursuant to this Section 2(b) shall not be made with respect to any securities included in an Eligible Offering within such fifteen (15) day period, then the Company may issue such securities to investors, but only for a consideration payable in cash not less than, and otherwise on no more favorable terms to the investors than, that set forth in the Company's notice and only within ninety (90) days after the end of such fifteen (15) day period. In the event that any such offer is accepted by one or more Stockholders within the fifteen (15) day period designated above, the Company shall sell to such Stockholder or Stockholders, and such Stockholder or Stockholders shall purchase from the Company, for the consideration and on the terms set forth in the notice as aforesaid, the securities that such Stockholder or Stockholders shall have elected to purchase. (c) Right of Co-Sale. In the event all of the securities being sold in the Eligible Offering are not purchased pursuant to paragraph (b) above, then each Stockholder shall have the right and option to elect to sell, at the price and on the terms stated in the Offering Notice, all or part of that number of securities being offered which is equal to the product obtained by multiplying (i) the aggregate number of shares or securities covered by the proposed sale by (ii) such Stockholder's Proportionate Percentage. Notwithstanding the foregoing, this provision shall not apply to an Eligible Offering (X) in which the proceeds are used to redeem the Series F Preferred Stock or the notes issuable in accordance with the terms of the Series F Preferred Stock or (Y) if the Company's investment banking firm determines that the exercise by the Stockholder of its rights pursuant to this paragraph (c) would materially impact the Company's ability to sell the Requisite Number of Securities (as hereinafter defined), it being agreed that "materially impact" shall mean the inability to sell at least 75% of the Requisite Number of Securities. For purposes hereof, "Requisite Number of Securities" shall mean the number of securities that the Company's investment banking firm determines is necessary for the Company to issue in order to fund working capital and other general corporate uses of the Company. (d) Preemptive Right Procedures. With respect to any election pursuant to paragraph (a) above, the closing of such sale of securities in an Eligible Offering shall take place at the office of counsel for the purchasing Stockholder no later than sixty (60) days following the delivery date of the Offering Notice, or such other place and earlier date as may be agreed by all parties to the transaction. At such closing, as payment in full for the securities being purchased in an Eligible Offering, and against delivery hereof, the purchasing Stockholder shall deliver to 4 5 the Company a certified, official bank or attorney client trust check, payable to the order of the Company the purchase price of such securities, or shall transfer such purchase price by wire transfer to the account specified by the Company in writing. (e) Co-Sale Procedures. With respect to any election pursuant to paragraph (c) above: (i) Any such election shall be made by written notice (a "Co-Sale Notice") to the Company within ten (10) business days after receipt by such Stockholder of the notice required by Section 2(b) above. Thereupon, the Stockholder shall not sell any of the securities to be sold in an Eligible Offering except at the price and on the terms stated in the Company's Offering Notice and, if a Stockholder shall have delivered a Co-Sale Notice in respect thereof as aforesaid, unless such Stockholder shall have been afforded the opportunity to sell the shares in respect of which such Co-Sale Notice shall have been delivered, at said price and on said terms; (ii) Upon electing to participate in a proposed sale pursuant to paragraph (c) above, each Stockholder shall deliver to the Company, as its agent, for transfer to the proposed acquiror, one or more certificates, duly endorsed for transfer or accompanied by stock transfer powers duly endorsed for transfer, with all stock transfer taxes paid and stamps affixed, which represent the number and the type of securities that such Stockholder shall have so elected to sell; and (iii) The stock certificate or certificates delivered by each Stockholder to the Company pursuant to subparagraph (ii) above shall be transferred by the Company to the acquiror in consummation of the sale of the securities pursuant to the terms and conditions specified in the Offering Notice, and the Company shall promptly thereafter remit to such Stockholder that portion of the proceeds to which such Investor is entitled by reason of such participation. SECTION 3. Legend on Stock Certificates. Each certificate representing Warrants, Warrant Shares issuable upon the exercise of the Warrants or shares of Series F Preferred Stock, as the case may be, held by any Stockholder shall conspicuously bear the following legend until such time as the shares represented thereby are no longer subject to the provisions hereof: "[THE SHARES EVIDENCED BY THIS CERTIFICATE] [THE SECURITY EVIDENCED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE OF SUCH SECURITY] ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF JANUARY 18, 2001 AMONG THE ISSUER AND THE OTHER PARTIES THERETO, AS MAY BE AMENDED FROM TIME TO TIME IN ACCORDANCE WITH ITS TERMS. COPIES MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY 5 6 THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE COMPANY." The Company covenants that it shall keep a copy of this Agreement on file at the address listed in Section 8 for the purpose of furnishing copies to the holders of record of Warrants, Warrant Shares or Series F Preferred Stock, as the case may be. SECTION 4. Representations and Warranties. Each Stockholder represents and warrants to the Company and the other Stockholders as follows: (a) The execution, delivery and performance of this Agreement by such Stockholder will not violate any provision of law, any order of any court or other agency of government, or any provision of any indenture, agreement or other instrument to which such Stockholder or any of its or his properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of such Stockholder. (b) This Agreement has been duly executed and delivered by such Stockholder and constitutes the legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms. (c) The shares of Series F Preferred Stock, the Warrants or the Warrant Shares listed in Schedule I hereto, as the case may be, opposite the name of such Stockholder constitute all the shares of the capital stock of the Company owned by such Stockholder or that such Stockholder has acquired or may acquire pursuant to the Purchase Agreement and the Exchange Agreement. SECTION 5. Headings. Headings of articles, sections and paragraphs of this Agreement are inserted for convenience of reference only and shall not affect the interpretation or be deemed to constitute a part hereof. SECTION 6. Severability. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein shall, for any reason, be held to be invalid, illegal or unenforceable, such illegality, invalidity or unenforceability shall not affect any other provisions of this Agreement. SECTION 7. Benefits of Agreement. Nothing expressed by or mentioned in this Agreement is intended or shall be construed to give any person other than the parties hereto and their respective successors and permitted assigns and transferees any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and their respective successors and permitted assigns and transferees. Anything herein to the contrary notwithstanding, each Stockholder shall have the right to assign its interests hereunder to any transferee, provided that such transferee shall 6 7 agree in writing with the parties hereto to be bound by, and to comply with, all applicable provisions of this Agreement and to be deemed to be a Stockholder for purposes of this Agreement. SECTION 8. Notices. Any notice or other communications required or permitted hereunder shall be deemed to be sufficient and received if contained in a written instrument delivered in person or by courier or duly sent by first class certified mail, postage prepaid, or by facsimile addressed to such party at the address or facsimile number set forth below: (1) if to the Company, to: New World Coffee - Manhattan Bagel, Inc. 246 Industrial Way West Eatontown, New Jersey 07724 Fascimile: 732-544-1315 Attention: Chief Executive Officer with a copy to: Ruskin, Moscou, Evans & Faltischek, P.C. 170 Old Country Road Mineola, New York 11501 Facsimile: 516-663-6643 Attention: Stuart Sieger (2) if to any Stockholders, to the address of such Stockholder appearing in Schedule I hereto; or, in any case, at such other address or facsimile number as shall have been furnished in writing by such party to the other parties hereto. All such notices, requests, consents and other communications shall be deemed to have been received (a) in the case of personal or courier delivery, on the date of such delivery, (b) in the case of mailing, on the fifth business day following the date of such mailing and (c) in the case of facsimile, when received. SECTION 9. Modification. Except as otherwise provided herein, neither this Agreement nor any provision hereof may be modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom the enforcement of any modification, change, discharge or termination is sought or by the agreement of (i) the majority of voting power of shares of capital stock of the Company owned by the Stockholders, including the holders of 66-2/3% of the outstanding shares of Series F Preferred Stock and (ii) the Company; or if such modification, change, discharge or termination would adversely affect the rights of one party hereto without equally affecting all of the other parties hereto, such modification, change, discharge or termination requires the consent of such adversely affected party. SECTION 10. Counterparts. This Agreement may be executed in any number of counterparts (and may be delivered by facsimile), and each such counterpart hereof shall be 7 8 deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. SECTION 11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. 8 9 IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as a sealed instrument, all as of the day and year first above written. COMPANY: NEW WORLD COFFEE - MANHATTAN BAGEL, INC. By______________________________ Name: Title: STOCKHOLDERS: HALPERN DENNY III, L.P. By______________________________ Name: Title: BET ASSOCIATES, L.P. By: BRU Holding Co., LLC Its General Partner By: ____________________________ Name: Title: BROOKWOOD NEW WORLD INVESTORS LLC By: Brookwood New World Co., LLC, Its Managing Member By: ____________________________ Name: Title: 10 SCHEDULE I STOCKHOLDERS
Series F Stockholder Preferred Stock Warrant - ----------- --------------- ------- Halpern Denny III, L.P. 20,000,000 8,484,112 BET Associates, L.P. 8,213.01 3,263,178 Brookwood New World Investors, LLC 8,185.32 3,263,178
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