-----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, ObajbeP+7rA5cu2H5pTZuMYSMz2M02tqJ5lnCxvg+pJx5ia0bI/R4JdxUSMOOxXe ch8i8nWMy7LgAAVeelxgqA== /in/edgar/work/20000825/0000950137-00-003872/0000950137-00-003872.txt : 20000922 0000950137-00-003872.hdr.sgml : 20000922 ACCESSION NUMBER: 0000950137-00-003872 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000825 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NEW WORLD COFFEE MANHATTAN BAGEL INC CENTRAL INDEX KEY: 0000949373 STANDARD INDUSTRIAL CLASSIFICATION: [5812 ] IRS NUMBER: 133690261 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-55609 FILM NUMBER: 710344 BUSINESS ADDRESS: STREET 1: 246 INDUSTRIAL WAY WEST CITY: EATONTOWN STATE: NJ ZIP: 07724 BUSINESS PHONE: 7325440155 MAIL ADDRESS: STREET 1: 246 INDUSTRIAL WAY WEST 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: BROOKWOOD NEW WORLD INVESTORS LLC CENTRAL INDEX KEY: 0001122574 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 55 TOWER ROAD CITY: BEVERLY STATE: MA ZIP: 01915 BUSINESS PHONE: 9789278300 SC 13D 1 sc13d.txt SCHEDULE 13D 1 SCHEDULE 13D (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 Under the Securities Exchange Act of 1934 (Amendment No. )* 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) Thomas N. Trkla Brookwood New World Investors, LLC 55 Tozer Road Beverly, Massachusetts 01915 Telephone no. (978) 927 8300 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 18, 2000 - -------------------------------------------------------------------------------- (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 PAGE 2 OF 9 PAGES - -------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Brookwood New World Investors, LLC FEIN: 04-3525760 - -------------------------------------------------------------------------------- 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) 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 -0- SHARES ----------------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 1,196,910 OWNED BY EACH ----------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH 1,196,910 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,196,910 - -------------------------------------------------------------------------------- 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) 7.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) OO - -------------------------------------------------------------------------------- 3 CUSIP NO. 648904200 13D PAGE 3 OF 9 PAGES - -------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Brookwood New World Co., LLC FEIN: 04-3525759 - -------------------------------------------------------------------------------- 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) 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 -0- SHARES ----------------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 1,196,910 OWNED BY EACH ----------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH 1,196,910 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,196,910 - -------------------------------------------------------------------------------- 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) 7.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) OO - -------------------------------------------------------------------------------- 4 ITEM 1. SECURITY AND ISSUER. This statement relates 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 filed by: (i) Brookwood New World Investors, LLC, a Delaware limited liability company (the "Company"), with respect to shares beneficially owned by it; and (ii) Brookwood New World Co., LLC, a Delaware limited liability company (the "Manager"), with respect to shares beneficially owned by it. The Manager is the sole managing member of the Company. (b) The address of both the Company and the Manager is 55 Tozer Road, Beverly, Massachusetts 01915. (c) The Company was formed for the purpose of acquiring, owning, voting and disposing of the securities of New World described herein. The Manager's primary business is to act as a managing member of the Company. (d) Neither the Company nor the Manager have, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) Neither the Company nor the Manager have, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, 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) The Company is a Delaware limited liability company. The Manager is a Delaware limited liability company. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The Company has the right to purchase 1,196,910 shares of Common Stock at a price of $0.01 per share upon exercise of its Warrant (as defined in Item 4). The aggregate purchase price for the Common Stock, if its Warrant is exercised in full, is $11,969.10. The Company's Warrant was acquired pursuant to a Series D Preferred Stock and Warrant Purchase Agreement (the "Purchase Agreement") among New World, the Company and BET Associates, L.P., a Delaware limited partnership ("BET") attached hereto as Exhibit 1. The aggregate consideration paid by the Company for both its Series D Preferred (as defined in Item 4) and its Warrant was $7,500,000, which was funded with contributions from the Company's members. 5 ITEM 4. PURPOSE OF TRANSACTION. On August 11, 2000, New World, the Company and BET entered into the Purchase Agreement. The first closing, under the Purchase Agreement, pursuant to which BET purchased its Series D Preferred and its Warrant, occurred on August 14, 2000. The second closing under the Purchase Agreement, pursuant to which the Company purchased its Series D Preferred and Warrant, occurred on August 18, 2000. Under the terms of the Purchase Agreement, the Company and BET each purchased (i) 8,108.108 shares of New World's Series D Preferred Stock (the "Series D Preferred") and (ii) a warrant to purchase up to 1,196,910 shares of Common Stock which represents approximately 7.7% of the Common Stock (each, a "Warrant"). The form of the Warrant is attached hereto as Exhibit 2. Pursuant to Section 2.1(a) of the Purchase Agreement, the number of shares that the Company may receive upon exercise of its Warrant is subject to upward adjustment depending upon certain future events affecting the capitalization of New World. The shares of Common Stock issuable upon exercise of a Warrant are entitled to registration rights under the terms of a Registration Rights Agreement among New World, the Company and BET, attached hereto as Exhibit 3. Under the terms of the Purchase Agreement, if New World fails to take actions to redeem the Series D Preferred within one year of the closing, New World will be required to issue to each of the Company and BET, each quarter for the next four quarters, additional warrants representing an additional 1.34% of New World, subject to reduction for any redemption(s) that occur during that year. Further, under the terms of the Purchase Agreement, if New World fails to take actions to redeem the Series D Preferred within two years of the closing, New World will be required to issue to each of the Company and BET, each quarter for the next four quarters, additional warrants representing an additional 2.015% of New World, subject to reduction for any redemption(s) that occur during that year. Pursuant to the Certificate of Designations for the Series D Preferred (the "Certificate of Designations"), which is attached hereto as Exhibit 4, Eve M. Trkla, an executive officer of an affiliate of the Company and the Manager, was appointed to the board of directors of New World (the "Board"). In addition, the Certificate of Designations provides that holders of a majority of the Series D Preferred (i.e., the Company and BET) are entitled to elect the minimum number of directors that shall consist of at least two-sevenths of the Board. Upon the occurrence of certain events described in the Certificate of Designations, the holders of the Series D Preferred have the right to elect additional directors so that the holders of the Series D Preferred will have then appointed one-half of the Board. Pursuant to the Certificate of Designations, so long as any shares of the Series D Preferred are outstanding, the consent of holders of at least 67% of the Series D Preferred is required for New World to: (i) amend or repeal any provision of New World's Certificate of Incorporation or By-Laws in a manner which materially adversely affects the rights and preferences of the holders of Series D Preferred; (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 D Preferred; (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 New World's rights plan; (iv) authorize a sale of any substantial portion of the assets of New World (other than sales of stores owned by New World or its 6 subsidiaries), or a recapitalization or reorganization of New World (other than stock splits, combinations and/or dividends); (v) take any action that results in New World incurring or assuming more than $1,000,000 of funded indebtedness (other than borrowings under the New World's existing line of credit, either on an individual or cumulative basis), except as contemplated by New World and described in the Purchase Agreement; (vi) merge or consolidate with or into any person, or enter into any agreement to accomplish such merger or consolidation, except as contemplated by New World and described in the Purchase Agreement; (vii) effect or allow fundamental change the nature of New World's business; or (viii) otherwise materially affect the rights, privileges and preferences of the holders of New World's Series D Preferred Stock. Except as set forth above, neither the Company nor the Manager have any plans or proposals which relate to or would result in any of the following: (a) The acquisition of additional securities of New World, or the disposition of securities of New World; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving New World; (c) A sale or transfer of a material amount of assets of New World; (d) Any material change in the present capitalization or dividend policy of New World; (e) Any other material change in New World's business or corporate structure; (f) Changes in New World's charter, by-laws or instruments corresponding thereto or other actions which may impede the acquisition of control of New World by any person; (g) A class of securities of New World being delisted from a national securities exchange or ceasing to be authorized to be quoted on an inter-dealer quotation system of a registered national securities association; (h) A class of equity securities of New World becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934 (the "Exchange Act"); or (i) Any action similar to those enumerated above. Any decision by the Company or the Manager in the future to take any such actions with respect to the Company or its securities will depend upon several factors, including the prospects of the Company, general market and economic conditions and other factors deemed relevant. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. 7 (a) As of the date hereof, the Company and the Manager, was the beneficial owner of an aggregate of 1,196,910 shares (including 1,196,910 shares of Common Stock which the Company has the right to acquire upon exercise of its Warrant) of Common Stock of New World, which constitutes approximately 7.7% of the 15,536,078 shares of Common Stock outstanding as of July 25, 2000 (as reported in New World's quarterly report on Form 10-Q for the quarter ended June 25, 2000) giving effect to the issuance of the shares which the Company and BET have the right to acquire upon exercise of their Warrants. (b) Each of the Company and the Manager share 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) beneficially owned by it. (c) Other than as described in Items 3 and 4 above, neither the Company nor the Manager have 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 Schedule 13D, neither the Company nor the Manager have 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. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. 1. Purchase Agreement 2. Warrant 3. Registration Rights Agreement 4. Certificate of Designations 5. Amendment to Certificate of Designations 8 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: August 25, 2000 BROOKWOOD NEW WORLD INVESTORS, LLC, a Delaware limited liability company By: Brookwood New World Co., LLC By: /s/ Thomas N. Trkla --------------------- Name: Thomas N. Trkla Title: Manager BROOKWOOD NEW WORLD CO., LLC By: /s/ Thomas N. Trkla ------------------- Name: Thomas N. Trkla Title: Manager 9 EXHIBIT INDEX Exhibit No. Document 1. Series D Preferred Stock and Warrant Purchase Agreement dated August 11, 2000 among New World Coffee - Manhattan Bagel, Inc., Brookwood New World Investors, LLC and BET Associates, L.P. 2. Form of Warrant to purchase common stock New World Coffee - Manhattan Bagel, Inc. issued to Brookwood New World Investors, LLC. 3. Registration Rights Agreement dated August 11, 2000 among New World Coffee - Manhattan Bagel, Inc., Brookwood New World Investors, LLC and BET Associates, L.P. 4. Certificate of Designations of New World Coffee - Manhattan Bagel, Inc. 5. Amendment to Certificate of Designations of New World Coffee - Manhattan Bagel, Inc. EX-99.1 2 ex99-1.txt SERIES D PREFERRED STOCK & WARRANT PURCHASE AGMT 1 EXHIBIT 1 NEW WORLD COFFEE - MANHATTAN BAGEL, INC. SERIES D PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT THIS SERIES D PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") is entered into as of August 11, 2000, by and among New World Coffee - Manhattan Bagel, Inc., a Delaware corporation (the "Company"), and each of those persons and entities, severally and not jointly, whose names are set forth on the Schedule of Purchasers attached hereto as EXHIBIT A (which persons and entities are hereinafter collectively referred to as "Purchasers" and each individually as a "Purchaser"). RECITALS WHEREAS, the Company has authorized the sale and issuance of up to an aggregate of 16,216.216 shares of its Series D Preferred Stock (the "Purchased Shares") and the issuance of such additional shares of its Series D Preferred Stock as may issued pursuant to the terms of such Series D Preferred Stock (the "PIK Shares" and, together with the Purchased Shares, the "Shares"); WHEREAS, Purchasers desire to purchase the Purchased Shares set forth on EXHIBIT A on the terms and conditions set forth herein; and WHEREAS, the Company desires to issue and sell such Purchased Shares to Purchasers on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows: 1. AGREEMENT TO SELL AND PURCHASE. 1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in Section 3 below), the Company shall have authorized the Shares. The Shares shall have the rights, preferences, privileges and restrictions set forth in the Certificate of Designation in the form attached hereto as EXHIBIT 1.1 (the "Certificate of Designation"). 1.2 SALE AND PURCHASE. (a) At the Interim Closing (as defined below), the Company shall issue and sell to each Purchaser and each Purchaser shall purchase the number of shares of Series D Preferred Stock, set forth opposite such Purchaser's name on Exhibit A under the heading "Interim Closing", for an aggregate of $7,500,000; and (b) At the Subsequent Closing (as defined below), the Company shall issue and sell to each Purchaser and each Purchaser shall purchase the number of shares of 2 Series D Preferred Stock set forth opposite such Purchaser's name on Exhibit A under the heading "Subsequent Closing", for an aggregate of $7,500,000. (c) The purchase price at the Interim Closing and the Subsequent Closing shall be nine hundred and twenty-five dollars ($925.00) per share (the "Purchase Price"). 1.3 REDEMPTION OF SHARES. (a) Optional Redemption. (i) The Shares will be redeemable at the election of the Company, 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, plus all accrued or declared but unpaid dividends, if any, to the date of redemption (the "Redemption Price"). (ii) No partial optional redemption may be authorized or made unless on or prior to such redemption full unpaid cumulative dividends shall have been paid, or a sum set apart in cash for such payment, on all Shares then outstanding to the extent dividends are payable in cash. If less than all the Shares are to be redeemed, the particular Shares to be redeemed will be determined on a pro rata basis. If less than all of the Shares are to be redeemed, the Redemption Notice that relates to such Shares shall state the portion of the Shares to be redeemed. A new Series D Preferred Stock certificate representing the unredeemed Shares will be issued in the name of the holder thereof upon cancellation of the original certificate for Series D 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 called for redemption. (b) Mandatory Redemption. (i) The Company shall redeem all outstanding Shares (subject to the legal availability of funds therefor) in whole on the earlier of August 11, 2003 or the closing date of the Company's acquisition of 70% or more of the outstanding stock, or all or substantially all of the assets, of Einstein/Noah Bagel Corporation ("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 Company fails to redeem the Shares on the Mandatory Redemption Date, the Redemption Price of unredeemed Shares will increase by 1% on each of the 30th, 60th, and 90th day following the Mandatory Redemption Date. If the Company fails to redeem the Shares by the 90th day following the Mandatory Redemption Date (the "Note 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 Note attached hereto as Exhibit B and all outstanding Shares shall be deemed to be retired and no longer outstanding. 2 3 (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 to be redeemed on the record date fixed for such redemption of the Shares 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 are to be redeemed and the total number of Shares being redeemed; (C) the number of Shares held by the Holder that the Company intends to redeem; (D) the Redemption Date; (E) that the Holder is to surrender to the Company, at the place or places designated in such Redemption Notice, its certificates representing the Shares to be redeemed; (F) that dividends on the Shares to be redeemed shall cease to accrue on such Redemption Date unless the Company 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 to be redeemed shall surrender the certificate or certificates representing such Shares to the Company, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full redemption price for such shares 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. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (iii) Unless the Company defaults in the payment in full of the Redemption Price, dividends on the Shares 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 Company 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 3 4 specified therein the funds necessary for such redemption shall have been deposited by the Company with such bank or trust company in trust for the pro rata benefit of the Holders of the Shares called for redemption, then, notwithstanding that any certificate for shares 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 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 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 Company 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 Company, after which repayment the Holders of the Shares so called for redemption shall look only to the Company for payment hereof. (v) If the Redemption Price will be paid by the issuance of Notes as required by 1.3 (b)(ii) above, the Company will issue to each Holder of Shares that has surrendered the certificate or certificates representing such Shares, 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 1.3(b)(ii) above, and payable to the Holder as such Holder's name appears on the stock register of the Company. The Company 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 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, the Company will issue to such Holder a Note in the amount specified above. 2. WARRANTS 2.1 ISSUANCE OF WARRANTS. (a) At the Closing, the Company will issue Warrants to purchase shares of the Company's Common Stock exercisable at $0.01 per share (the "Warrants") which Warrants will be substantially in the form of Warrant attached hereto as Exhibit C. The Warrants will be issued pro rata to Purchasers of the Purchased Shares including Shares sold in Subsequent Closings, if any, and will entitle such Purchasers to acquire Common Stock equal, in the aggregate, to 12.90% of the Fully Diluted Common Stock of the Company as of the Closing (assuming the issuance of all Purchased Shares at the 4 5 Subsequent Closing). In addition, within 10 days following the Acquisition of Einstein, the Company will issue pro-rata to the Purchasers such additional Warrants, if any, sufficient to cause the Warrants issued under this Section 2.1 to allow the purchase of that number of shares of Common Stock equal to 9.67% of the Fully Diluted Common Stock of the Company at the time of the Acquisition of Einstein exclusive of equity sold to unaffiliated third parties (other than shares issued in consideration for the equity of Einstein/Noah Bagel Corporation ("Einstein"), its assets and/or its business) in transactions related to the Acquisition of Einstein. The term "Fully Diluted" shall mean the fully diluted Common Stock of the Company, determined by taking into account all options, warrants and other convertible securities, but not including any warrants, or options with a strike price greater than $3.00 per share and not including any of the Warrants issued under Section 2.2. (b) For purposes of this Section 2.1, the number of shares subject to such Warrants shall be calculated to result in such percentages of Fully Diluted Common Stock after the issuance of such Warrants. 2.2 WARRANT STEP-UP. (a) If within one year following the Closing Date (i) the Company fails to redeem the Shares in accordance with the terms set forth above, (ii) the Company has redeemed the Shares by the issuance of Notes but has not paid such Notes in full, or (iii) there has not been an Acquisition of Einstein and the Shares have not been redeemed in full in accordance with Section 1.3(a) above, the Company will issue pro-rata to the Purchasers warrants in the form of Exhibit C hereto representing an additional 2.68% of the Fully Diluted Common Stock of the Company outstanding at the beginning of each quarter of the year following the first anniversary of the Closing Date, which percentage shall be reduced pro-rata based upon Shares theretofore redeemed or the Notes theretofore repaid, as applicable. (b) If within two years of the Closing Date (i) the Company fails to redeem the Shares in accordance with the terms set forth above, (ii) the Company has redeemed the Shares by the issuance of Notes but has not paid such Notes in full, or (iii) there has not been an Acquisition of Einstein and the Shares have not been redeemed in full in accordance with Section 1.3(a) above, the Company will issue pro rata to the Purchasers warrants in the form of Exhibit C hereto representing an additional 4.03% of the Fully Diluted Common Stock of the Company outstanding at the beginning of each quarter of the year following the second anniversary of the Closing Date, which percentage shall be reduced pro-rata based upon Shares theretofore redeemed or the Notes theretofore repaid, as applicable. (c) For purposes of this Section 2.2, at the time of each such issuance of Warrants, 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. 5 6 2.3 ADJUSTMENT OF WARRANT PERCENTAGES. If the aggregate purchase price of Shares purchased under this Agreement is less than $15,000,000, all percentages in this Section 2 shall be reduced by multiplying each such percentage by the quotient obtained by dividing the aggregate purchase price of Stock purchased under this Agreement by $15,000,000. 3. CLOSINGS, DELIVERIES, PAYMENT AND USE OF PROCEEDS. 3.1 CLOSING. The closing of the purchase and sale of Purchase Shares pursuant to Section 1.2(c) above (the "Interim Closing") shall take place at 10:00 a.m. on August 11, 2000, at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178-0060 or at such other time or place as the Company and Purchasers may mutually agree (such date is hereinafter referred to as the "Interim Closing Date"). 3.1.1 At the Interim Closing, subject to the terms and conditions hereof, the Company shall deliver to the Purchasers the following: (a) Certificates representing the number of Shares to be purchased at the Interim Closing by each Purchaser; (b) A Compliance Certificate, executed by the President of the Company, dated the Interim Closing Date, to the effect that the conditions specified in paragraphs (a) through (j) of Section 7.1 have been satisfied. (c) A certificate of the Secretary of the Company, dated as of the Closing Date, in substantially the form attached hereto as EXHIBIT 3.1.1(c). (d) An opinion of legal counsel to the Company addressed to the Purchasers, dated as of the Closing Date, in substantially the form attached hereto as EXHIBIT 3.1.1(d). 3.2 SUBSEQUENT CLOSING. The closing of the purchase and sale of Purchased Shares pursuant to Section 1.2(b) above (the "Subsequent Closing") shall take place a the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178-0060 upon one business day's written notice from the Purchasers to the Company (the "Subsequent Closing Date"). 3.2.1 At the Subsequent Closing, subject to the terms and provisions hereof, the Company shall deliver to the Purchasers the following: 6 7 (a) Certificates representing the number of Shares to be purchased at the Subsequent Closing by each Purchaser; and (b) A Compliance Certificate, executed by the President of the Company, dated the Subsequent Closing Date, to the effect that the conditions specified in paragraphs of Sections 7.2 have been satisfied. (c) An opinion of legal counsel to the Company addressed to the Purchasers, dated as of the Closing Date, in substantially the form attached hereto as EXHIBIT 3.1.1(d). 3.3 At the Interim Closing and the Subsequent Closing, subject to the terms and conditions hereof, each of the Purchasers shall deliver to the Company a wire transfer in the amount of the Purchase Price for the Shares to be purchased at the Interim Closing and the Subsequent Closing, respectively, by each Purchaser. 4. USE OF PROCEEDS. The proceeds from this transaction shall be used only to purchase the 7.25% Convertible Subordinated Notes (the "Bonds") issued by Einstein/Noah Bagel Corporation ("Einstein") at a blended average price no greater than 60% of the face amount thereof (the "Target Purchase Price"), and to pay interest, fees, and expenses related to this transaction. In the event that the Bonds are unavailable in the open market at a price that would keep the blended average at or below the Target Purchase Price the Company may, with the prior consent of the holders of at least 67% of the Shares, purchase the Bonds at a price that would cause the blended average to exceed the Target Purchase Price. The Purchasers will use good faith efforts to respond within one business day to any request by the Company for consent to purchase bonds at a price that would cause the blended average to exceed the Target Purchase Price, but any failure to respond within such time will not be deemed consent. 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on a Schedule of Exceptions delivered by the Company to the Purchasers at the Closing, the Company (which term for the purposes of Section 5, shall include its subsidiaries) hereby represents and warrants to each Purchaser as of the date of this Agreement as follows: 5.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement, the Warrant and the Registration Rights Agreement (collectively, the "Related Agreements"), to issue and sell the Shares and to carry out the provisions of this Agreement, the Related Agreements and the Certificate of Designation and to carry on its business as presently conducted and as presently proposed to be conducted. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and 7 8 leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business. 5.2 SUBSIDIARIES. The Company owns no equity securities of any other corporation, limited partnership or similar entity. The Company is not a participant in any joint venture, partnership or similar arrangement. 5.3 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of the Company, immediately prior to the Closing, will consist of (i) 50,000,000 shares of Common Stock, par value $.001 per share, 13,510,724 shares of which are issued and outstanding as of August 10, 2000, and 579,529 shares of which are reserved for future issuance to pursuant to the Company's Stock Option Plans, as amended and restated (the "Option Plan"), 3,109,445 shares of which are reserved for issuance upon exercise of the Warrants and other warrants of the Company, and (ii) 2,000,000 shares of Preferred Stock, par value $.001 per share, 400 of which are designated Series A Preferred Stock, none of which are issued and outstanding, 225 of which are designated Series B Preferred Stock, none of which are issued and outstanding, 500,000 of which are designated Series C Preferred Stock, 444,190 of which are issued and outstanding and which will convert into 1,332,570 Shares of Common Stock upon the effective date of the registration statement contemplated by Section 6.1(h) below, 25,000 of which are designated Series D Preferred Stock, none of which are issued and outstanding but up to 16,216.216 of which may be purchased hereunder and shares of Series A Junior Participating Preferred Stock, none of which is presently outstanding. All issued and outstanding shares of the Company's Common Stock (a) have been duly authorized and validly issued, (b) are fully paid and nonassessable, and (c) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. The rights, preferences, privileges and restrictions of the Shares are as stated in the Certificate of Designation. Other than the 3,688,974 shares reserved for issuance under the Option Plans, the Warrants, other warrants and Shares issued upon conversion of the Series C Preferred Stock and except as may be granted pursuant to the Related Agreements, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its securities. The Company is not a party or subject to any agreement or understanding, and, to the Company's knowledge, there is no agreement or understanding between any persons and/or entities, which affects or relates to the voting or giving of written consents with respect to any security or by a director of the Company. When issued in compliance with the provisions of this Agreement and the Certificate of Designation, the Shares will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances and any restrictions on transfer; provided, however, that the Shares may be subject to restrictions on transfer under applicable state and/or federal securities laws. The consummation of the transactions contemplated by this Agreement and the Related Agreements will not result in acceleration or other changes in the vesting provisions or other terms of any outstanding options granted by the Company. Each subsidiary of the Company listed on the Schedule of Exceptions is wholly-owned. 8 9 5.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization of this Agreement and the Related Agreements, the performance of all obligations of the Company hereunder and thereunder at the Closing and the authorization, sale, issuance (or reservation for issuance) and delivery of the Shares pursuant hereto have been taken or will be taken prior to the Closing. The Agreement and the Related Agreements, when executed and delivered, will be valid and binding obligations of the Company enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights and (b) general principles of equity that restrict the availability of equitable remedies. The sale of the Shares is not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with. 5.5 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser (a) its audited balance sheet as at and audited statement of income and cash flows for the fiscal year ending December 26, 1999 and (b) its unaudited balance sheet as at June 25, 2000 (the "Statement Date") and unaudited consolidated statement of income and cash flows for the six month period ending on the Statement Date (collectively, the "Financial Statements"), copies of which are attached hereto as Exhibit 5.5. The Financial Statements, together with the notes thereto, are complete and correct in all material respects, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except as disclosed therein, and present fairly the financial condition and position of the Company as of December 26, 1999 and the Statement Date; provided, however, that the unaudited financial statements are subject to normal recurring year-end audit adjustments (which are not expected to be material), and do not contain all footnotes required under generally accepted accounting principles. The Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation except its subsidiaries. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with generally accepted accounting principles. 5.6 LIABILITIES. The Company has no material liabilities and, to the best of its knowledge, knows of no material contingent liabilities not disclosed in the Financial Statements, except current liabilities incurred in the ordinary course of business subsequent to the Statement Date which have not been, either in any individual case or in the aggregate, materially adverse. 5.7 AGREEMENTS; ACTION. (a) Except for agreements explicitly contemplated hereby and agreements between the Company and its employees with respect to the sale of the Company's Common Stock, there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, affiliates or any affiliate thereof. 9 10 (b) There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or to its knowledge by which it is bound which may involve (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of $100,000 (other than obligations of, or payments to, the Company arising from purchase or sale agreements entered into in the ordinary course of business. (c) The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or any other liabilities (other than with respect to dividend obligations, distributions, indebtedness and other obligations incurred in the ordinary course of business or as disclosed in the Financial Statements) individually in excess of $25,000 or in the aggregate in excess of $250,000, (iii) made any loans or advances to any person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business except as set forth in the Company's filings with the Securities and Exchange Commission as of the date hereof (the "SEC Filings"). (d) For the purposes of subsections (b) and (c) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections. (e) The Company has proposed, and is engaged in, discussions regarding the acquisition of Einstein as described in the Schedule of Exceptions. 5.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the Company to officers, directors, stockholders, or employees of the Company other than (a) for payment of compensation for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company and (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company). None of the officers, directors or stockholders of the Company, or any members of their immediate families, are indebted to the Company or have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company, except that officers, directors and/or stockholders of the Company may own up to 5% of the capital stock of publicly traded companies which may compete with the Company. No officer, director or stockholder, or any member of their immediate families, is, directly or indirectly, to the knowledge of the Company, interested in any material contract with the Company (other than such contracts as relate to any such person's ownership of capital stock or other securities of the Company). Except as may be disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any 10 11 indebtedness of any other person, firm or corporation, other than its subsidiaries listed in the Schedule of Exceptions. 5.9 CHANGES. Since the Statement Date, there has not been to the Company's knowledge: (a) Any change in the assets, liabilities, financial condition or operations of the Company from that reflected in the Financial Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate has had or is expected to have a material adverse effect on such assets, liabilities, financial condition or operations of the Company; (b) Any resignation or termination of any key officers of the Company except for Sanford Nacht, and the Company, to the best of its knowledge, does not know of the impending resignation or termination of employment of any such officer; (c) Any material change, except in the ordinary course of business, in the contingent obligations of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise; (d) Any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties, business or prospects or financial condition of the Company; (e) Any direct or indirect loans or guarantees made by the Company to any stockholder, employee, officer or director of the Company or any members of their immediate families, other than advances made in the ordinary course of business; (f) Any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder; (g) Any declaration or payment of any dividend or other distribution of the assets of the Company; (h) Any labor organization activity; (i) Any debt, obligation or liability incurred, assumed or guaranteed by the Company, except those for immaterial amounts and for current liabilities incurred in the ordinary course of business; (j) Any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; (k) Any change in any material agreement to which the Company is a party or by which it is bound which materially and adversely affects the business, assets, liabilities, financial condition, operations or prospects of the Company; or 11 12 (l) Any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and that is not material to the assets, properties, financial condition, operating results or business of the Company (as such business is presently conducted and as it is proposed to be conducted); (m) receipt of notice that there has been a loss of, or material order cancellation by, any major customer of the Company; (n) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable; (o) any declaration, setting aside or payment or other distribution in respect of any of the Company's capital stock, or any direct or indirect redemption, purchase or other acquisition of any of such stock by the Company; (p) any agreement or commitment by the Company to do any of the things described in this Section 4.9. 5.10 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and marketable title to its properties and assets, including the properties and assets reflected in the most recent balance sheet included in the Financial Statements, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than those resulting from taxes which have not yet become delinquent, and minor liens and encumbrances arising in the ordinary course of business which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company. All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company are in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used, subject to ordinary wear and tear. The Company is in compliance with all material terms of each lease to which it is a party or is otherwise bound. 5.11 PATENTS AND TRADEMARKS. The Company owns or possesses sufficient legal rights to all material patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its business as now conducted and as presently proposed to be conducted, without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of "off the shelf" or standard products except in the ordinary course of business. The Company has not received any communications alleging that the Company has violated or, by conducting its business as presently proposed, would violate any of the material patents, trademarks, service marks, trade names, copyrights or 12 13 trade secrets or other proprietary rights of any other person or entity. The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or that would conflict with the Company's business as presently proposed to be conducted. Neither the execution nor delivery of this Agreement or the Related Agreements, nor the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as presently proposed, will, to the Company's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any material contract, covenant or instrument under which any employee is now obligated. 5.12 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation or default of any term of its Certificate of Incorporation or Bylaws, or of any provision of any material mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is bound or of any judgment, decree, order, writ or, to its knowledge, any statute, rule or regulation applicable to the Company which would individually or in the aggregate materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company. The execution, delivery, and performance of and compliance with this Agreement, and the Related Agreements, and the issuance and sale of the Shares pursuant hereto will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term, or result in the creation of any such mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties. 5.13 LITIGATION. There is no action, suit, proceeding or investigation pending, or to the Company's knowledge currently threatened, against the Company that questions the validity of this Agreement, or the Related Agreements or the right of the Company to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby, or which might result, either individually or in the aggregate, in any material adverse change in the assets, condition, affairs or prospects of the Company, financially or otherwise, or any change in the current equity ownership of the Company, nor is the Company aware that there is any basis for the foregoing. The Company is not a party or subject to the provisions of any material order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate except in the ordinary course of business. 5.14 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax returns (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and to the Company's knowledge all other taxes due and payable by the Company on or before the Closing have been paid or will be 13 14 paid prior to the time they become delinquent. The Company has not been advised (a) that any of its returns, federal, state or other, have been or are being audited as of the date hereof, or (b) of any deficiency in assessment or proposed judgment to its federal, state or other taxes. The Company has no knowledge of any liability for any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for. 5.15 EMPLOYEES. The Company has no collective bargaining agreements with any of its employees. There is no labor union organizing activity pending or, to the Company's knowledge, threatened with respect to the Company. Other than the Option Plans, the Company is not a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement, including any Employee Benefit Plan as defined in the Employee Retirement Income Security Act of 1974, except as set forth in SEC filings and any such plans, arrangements and agreements with non-executive officers. To the Company's knowledge, no employee of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company because of the nature of the business to be conducted by the Company; and to the Company's knowledge the continued employment by the Company of its present employees, and the performance of the Company's contracts with its independent contractors, will not result in any such violation. The Company has not received any notice alleging that any such violation has occurred. No executive officers of the Company have been granted the right to continued employment by the Company or to any material compensation following termination of employment with the Company except as set forth in SEC filings. The Company is not aware that any executive officer who intends to terminate his or her employment with the Company, nor does the Company have a present intention to terminate the employment of any executive officer. 5.16 REGISTRATION RIGHTS. Except as required pursuant to the Registration Rights Agreement, the Company is presently not under any obligation, and has not granted any rights, to register any of the Company's presently outstanding securities or any of its securities that may hereafter be issued under the Securities Act of 1933, as amended other than for Sanford Nacht and the holders of Series C Preferred Stock, which registration right will be satisfied upon the registration statement contemplated by Section 7.1(h) being declared effective. 5.17 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company is not in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations, qualifications, designations 14 15 or declarations are required to be filed in connection with the execution and delivery of this Agreement and the issuance of the Shares except such as has been duly and validly obtained or filed, or with respect to any filings that must be made after the Closing, as will be filed in a timely manner. The Company has all material franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the business, properties, prospects or financial condition of the Company and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted. The Company is not in default in any material respect under any of such franchises, permits, licenses or similar authority. The Company has duly filed, on a timely basis, all filings required pursuant to the Securities Exchange Act of 1934, as amended, and all rules and regulations thereunder. 5.18 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. 5.19 OFFERING VALID. Assuming the accuracy of the representations and warranties of the Purchasers contained in Section 5.2 hereof, the offer, sale and issuance of the Shares will be exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither the Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the Shares to any person or persons so as to bring the sale of such Shares by the Company within the registration provisions of the Securities Act or any state securities laws. 5.20 FULL DISCLOSURE. The Company has fully provided each Purchaser with all the information that such Purchaser has requested for deciding whether to purchase the Shares. This Agreement, the Disclosure Schedule and Exhibits hereto, the Related Agreements and all other documents delivered by the Company to Purchasers or their attorneys or agents in connection herewith or therewith or with the transactions contemplated hereby or thereby, do not contain any untrue statement of a material fact nor, to the Company's knowledge, omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. 5.21 MINUTE BOOKS; BOARD AND STOCKHOLDER MATERIALS. The Certificate of Designation and Bylaws of the Company are in the form previously provided to special counsel for the Purchasers. The minute books of the Company provided to the Purchasers contain a complete summary of all meetings of directors and stockholders since the time of incorporation. The Board and stockholder materials provided to the Purchasers are all of the materials provided by the Company to its directors and stockholders in connection with such meetings. 15 16 5.22 REAL PROPERTY HOLDING CORPORATION. The Company is not a real property holding corporation within the meaning of Internal Revenue Code Section 897(c)(2) and any regulations promulgated thereunder. 5.23 INSURANCE. The Company has in full force and effect fire and casualty, products liability and errors and omissions insurance policies with coverage customary for companies similarly situated to the Company. 5.24 INVESTMENT COMPANY ACT. The Company is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby represents and warrants, severally but not jointly, to the Company as follows: 6.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and the Related Agreements and to carry out their respective provisions. All action on Purchaser's part required for the lawful execution and delivery of this Agreement and the Related Agreements have been or will be effectively taken prior to the Closing. Upon their execution and delivery, this Agreement and the Related Agreements will be valid and binding obligations of Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' right and (b) general principles of equity that restrict the availability of equitable remedies. 6.2 INVESTMENT REPRESENTATIONS. Purchaser understands that the Shares have not been registered under the Securities Act. Purchaser also understands that the Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Purchaser's representations contained in the Agreement. Purchaser hereby represents and warrants as follows: (a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. Purchaser must bear the economic risk of this investment indefinitely unless the Shares are registered pursuant to the Securities Act, or an exemption from registration is available. Purchaser understands that the Company has no present intention of registering the Shares, Purchaser also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Purchaser to transfer all or any portion of the Shares under the circumstances, in the amounts or at the times Purchaser might propose. 16 17 (b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the Shares for Purchaser's own account for investment only, and not with a view towards their distribution. (c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents that by reason of its, or of its management's, business or financial experience, Purchaser has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement, and the Related Agreements. Further, Purchaser is aware of no publication of any advertisement in connection with the transactions contemplated in the Agreement. (d) ACCREDITED INVESTOR. Purchaser represents that it is an accredited investor within the meaning of Regulation D under the Securities Act. (e) COMPANY INFORMATION. Purchaser has received and read the Financial Statements and has had an opportunity to discuss the Company's business, management and financial affairs with directors, officers and management of the Company and has had the opportunity to review the Company's operations and facilities and all of the SEC Filings. Purchaser has also had the opportunity to ask questions of, and receive answers from, the Company and its management regarding the terms and conditions of this investment. (f) RULE 144. Purchaser acknowledges and agrees that the Shares, must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act as in effect from time to time, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number of shares being sold during any three-month period not exceeding specified limitations. (g) RESIDENCE. If the Purchaser is an individual, then the Purchaser resides in the state or province identified in the address of the Purchaser set forth on EXHIBIT A; if the Purchaser is a partnership, corporation, limited liability company or other entity, then the office or offices of the Purchaser in which its investment decision was made is located at the address or addresses of the Purchaser set forth on EXHIBIT A. 7. CONDITIONS TO INTERIM CLOSING. 7.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE INTERIM CLOSING. Purchasers' obligations to purchase the Shares at the Interim Closing are subject to the satisfaction, at or prior to the Interim Closing Date, of the following conditions: (a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS. The representations and warranties made by the Company in Section 5 17 18 hereof shall be true and correct in all material respects as of the Interim Closing Date with the same force and effect as if they had been made as of the Interim Closing Date, and the Company shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the Interim Closing Date. (b) LEGAL INVESTMENT. On the Interim Closing Date, the consummation of the transactions contemplated by the Agreement and the Related Agreements shall be legally permitted by all laws and regulations to which Purchasers and the Company are subject. (c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Agreement and the Related Agreements, including without limitation the consent of the senior lender of the Company. (d) FILING OF CERTIFICATE OF DESIGNATION. The Certificate of Designation shall have been filed with the Secretary of State of the State of Delaware. (e) BOARD OF DIRECTORS. Upon the Closing, the authorized size of the Board of Directors of the Company shall be six and the Board shall consist of Leonard Tannenbaum, Eve Trkla, Ramin Kamfar, Keith Barket, Edward McCabe, and Karen Hogan. (f) CLOSING DELIVERIES. The Company shall have delivered to Purchasers all items required to be delivered at the Closing by Section 3.1.1 of this Agreement. (g) CORPORATE DOCUMENTS. The Company shall have delivered to Purchasers or their counsel, copies of all corporate documents of the Company as Purchasers shall reasonably request. (h) FILING OF REGISTRATION STATEMENT. A registration statement registering the shares of common stock of the Company into which all outstanding shares of the Series C Preferred Stock of the Company may convert shall have been filed with the Securities Exchange Commission. (i) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated at the Closing hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Purchasers and their counsel, and the Purchasers and their counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (j) RIGHTS PLAN. All corporate action necessary to waive, (i) on behalf of a Purchaser, individually, and (ii) the permitted assignees of the Shares of such individual Purchaser, the trigger provisions of the Rights Plan dated in June 1999 between 18 19 the Company and American Stock Transfer and Trust Company which relate to purchases of common stock above a specified percentage of the outstanding common stock of the Company, but only with respect to shares of common stock of the Company purchased directly from the Company as "original issue shares" by the Purchaser under written agreements between such Purchaser and the Company shall have been taken. (k) PAYMENT OF FEES. The Company shall have paid all fees and expenses arising under Section 8.9(a) through such date. 7.2 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE SUBSEQUENT CLOSING. Purchasers' obligations to purchase the Shares at the Subsequent Closing are subject to the satisfaction, at or prior to the Subsequent Closing Date, of the following conditions: (a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS. The representations and warranties made by the Company in Section 4 hereof shall be true and correct in all material respects as of the Subsequent Closing Date with the same force and effect as if they had been made as of the Subsequent Closing Date, and the Company shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the Subsequent Closing Date. (b) LEGAL INVESTMENT. On the Subsequent Closing Date, the consummations of the transactions contemplated by the Agreement and the Related Agreements shall be legally permitted by all laws and regulations to which Purchasers and the Company are subject. (c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Agreement and the Related Agreements, including without limitation the consent of the senior lender of the Company. (d) CLOSING DELIVERIES. The Company shall have delivered to Purchasers all items required to be delivered at the Closing by Section 3.1.1 of this Agreement. (e) PAYMENT OF FEES. The Company shall have paid all fees and expenses arising under Section 8.9(a) through such date. (f) FILING OF REGISTRATION STATEMENT. A registration statement registering the shares of common stock of the Company into which all outstanding shares of the Series C Preferred Stock of the Company may convert shall have been filed with the Securities Exchange Commission. 7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY AT THE INTERIM CLOSING AND THE SUBSEQUENT CLOSING. The Company's obligation to issue and sell the Shares at the Interim Closing and the Subsequent Closing is subject to the satisfaction, on or prior to each such Closing, of the following conditions: 19 20 (a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties made by those Purchasers acquiring Shares in Section 5 hereof shall be true and correct in all material respects at the date of the Closing, with the same force and effect as if they had been made on and as of said date. (b) PERFORMANCE OF OBLIGATIONS. Such Purchasers shall have performed and complied with all agreements and conditions herein required to be performed or complied with by such Purchasers on or before the Closing. (c) CLOSING DELIVERIES. Such Purchasers shall have delivered to the Company all items required to be delivered at the Closing by Sections 3.1.2 and 3.1.3 of this Agreement. (d) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Agreement and the Related Agreements (except for such as may be properly obtained subsequent to the Closing). 8. MISCELLANEOUS. 8.1 GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of New York as such laws are applied to agreements between New York residents entered into and performed entirely in New York. 8.2 SURVIVAL. The representations, warranties, covenants and agreements made herein shall survive any investigation made by any Purchaser and the closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. 8.3 SUCCESSORS AND ASSIGNS. (a) Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of the Shares from time to time. (b) Each Purchaser agrees that it will not sell, assign or transfer any Share to any person other than: (i) in the case of BET Associates, L.P., any such transfer to Bruce Toll, Leonard Tannenbaum, any entity where a majority of capital stock or other equity interest is held by either of 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 20 21 (C), not to exceed twenty transferees. Any attempt to transfer Shares not in compliance with this Section 8.3(b) shall be null and void. Certificates evidencing the shares will include the following legend: THE TRANSFERABLIITY OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS FURTHER RESTRICTED BY THE TERMS OF THE SERIES D PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT DATED AUGUST 11, 2000, A DUPLICATE OF THE ORIGINAL OF WHICH IS MAINTAINED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. 8.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto, the Related Agreements and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. 8.5 SEVERABILITY. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 8.6 AMENDMENT AND WAIVER. (a) This Agreement may be amended or modified only upon the written consent of the Company and holders of at least a majority of the Shares. (b) The obligations of the Company and the rights of the holders of the Shares under the Agreement may be waived only with the written consent of the holders of at least a majority of the Shares. 8.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, the Related Agreements or the Certificate of Designation shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on any Purchaser's part of any breach, default or noncompliance under this Agreement, the Related Agreements or under the Certificate of Designation or any waiver on such party's part of any provisions or conditions of the Agreement, the Related Agreements, or the Certificate of Designation must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, the Related Agreements, the Certificate of Designation by law, or otherwise afforded to any party, shall be cumulative and not alternative. 21 22 8.8 NOTICES. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address as set forth on the signature page hereof and to Purchaser at the address set forth on Exhibit A attached hereto or at such other address as the Company or Purchaser may designate by ten (10) days advance written notice to the other parties hereto. 8.9 EXPENSES. (a) Whether or not the transactions herein contemplated are consummated, the Company will pay (i) the reasonable costs and expenses of the preparation of the Purchase Agreement and the issuance of the Notes, Warrants and the Shares and the furnishing of all opinions by counsel for the Company, (ii) the reasonable fees and disbursements of Morgan, Lewis & Bockius LLP in connection with the Purchase Agreement, the Notes, the Warrants and the transactions contemplated hereby and thereby (whether or not a closing occurs hereunder and if a closing occurs the Company will make such payment on the Closing Date), (iii) all fees contemplated by the fee letter entered into between the Company and MYFM Capital, LLC, (iv) the reasonable travel expenses incurred by any Purchaser prior to the Closing Date in connection with due diligence or negotiation of the terms of the Purchase Agreement, and (v) the legal and other expenses relating to the transaction, in an aggregate amount not to exceed fifty thousand dollars ($50,000), of Brookwood New World Investors, LLC. The obligations of the Company under this Section 7.9 shall survive the closing hereunder, the payment or cancellation of the Notes, exercise or cancellation of the Warrants and the termination of the Purchase Agreement. (b) In addition to all other sums due hereunder or provided for in this Agreement, the Company shall pay to each Purchaser or its agents, respectively, an amount sufficient to indemnify such persons (net of any taxes on any indemnity payments) against all reasonable costs and expenses (including reasonable attorneys' fees and expenses and reasonable costs of investigation) and damages and liabilities incurred by each Purchaser or its agents pursuant to any investigation or proceeding against any or all of the Company, any Purchaser, or their agents, arising out of or in connection with the Purchase Agreement, the Notes or the Warrants (or any transaction contemplated hereby or thereby or any other document or instrument executed herewith or therewith or pursuant hereto or thereto), whether or not the transactions contemplated by this Purchase Agreement are consummated, which investigation or proceeding requires the participation of such Purchaser or its agents or is commenced or filed against such Purchaser or its agents because of the Purchase Agreement, the Notes or the Warrants or any of the transactions contemplated hereby or thereby (or any other document or instrument executed herewith or therewith or pursuant hereto or thereto), other than any investigation or proceeding (x) in which it is finally determined that there was gross negligence or 22 23 willful misconduct on the part of such Purchaser seeking indemnification or its agents, (y) which relates to disputes among a Purchaser and its own partners, shareholders or beneficiaries or (z) which relates to a Purchaser's disposition of Notes, Warrants or Shares and the conduct of the Purchaser or its agents giving rise to such investigation or proceeding. The Company shall assume the defense, and shall have its counsel represent such Purchaser and such agents, in connection with investigating, defending or preparing to defend any such action, suit, claim or proceeding (including any inquiry or investigation); provided, however, that such Purchaser, or any such agent, shall have the right (without releasing the Company from any of its obligations hereunder) to employ its own counsel to participate in the Company's defense, but the fees and expenses of such counsel shall be at the expense of such person unless (i) the employment of such counsel shall have been authorized in writing by the Company in connection with such defense or (ii) the Company shall not have provided their counsel to take charge of such defense or (iii) the Purchaser, or such agent of the Purchaser, shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Company, then in any of such events referred to in clauses (i), (ii) or (iii) such reasonable counsel fees and expenses (but only for one counsel for the Purchaser and its agents) shall be borne by the Company. Any settlement of any such action, suit, claim or proceeding shall require the consent of the Company and such indemnified person (neither of which shall unreasonably withhold its consent). (c) The Company agrees to pay, or to cause to be paid, all documentary, stamp and other similar taxes levied under the laws of the United States of America or any state or local taxing authority thereof or therein in connection with the issuance and sale of the Notes and the execution and delivery of the Purchase Agreements and any other documents or instruments contemplated hereby or thereby and any modification of any of the Notes or the Purchase Agreements or any such other documents or instruments and will hold the Purchaser harmless without limitation as to time against any and all liabilities with respect to all such taxes. (d) The obligations of the Company under this Section 7.9 shall survive the closing hereunder, the payment or cancellation of the Notes, exercise or cancellation of the Warrants and the termination of the Purchase Agreement. 8.10 TITLES AND SUBTITLES. The titles of the sections and subsections of the Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 8.11 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 8.12 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it is not relying upon any person, firm, or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each 23 24 Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Shares. 8.13 PRONOUNS. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require. 8.14 PUBLICITY. Neither the Company nor the Purchasers shall issue any press release or other public statement relating to this Agreement or the Related Agreements or the transactions contemplated hereby or thereby without the prior written approval of the other, not to be unreasonably withheld. 8.15 DISPUTE RESOLUTION. If any dispute arises under this Agreement, the parties shall seek to resolve any such dispute between them in the following manner: (a) GOOD FAITH NEGOTIATIONS. First, by promptly engaging in good faith negotiations among senior executives of each party. (b) MEDIATION. If the parties are unable to resolve the dispute within 20 business days following the first request by either party for good faith negotiations, then the parties shall endeavor to resolve the dispute by mediation administered by the American Arbitration Association ("AAA") under its Commercial Mediation Rules. (c) EQUITABLE RELIEF. No party shall be precluded hereby from securing equitable remedies in courts of any jurisdiction, including, but not limited to, temporary restraining orders and preliminary injunctions to protect its rights and interests, but such relief shall not be sought as a means to avoid, delay or stay mediation, arbitration or Summary Proceeding. (d) CONTINUING PERFORMANCE. Each party is required to continue to perform its obligations under this contract pending final resolution of any dispute arising out of or relating to this contract, unless to do so would be impossible or impracticable under the circumstances. 8.16 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 24 25 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. 8.17 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. 25 26 IN WITNESS WHEREOF, the parties hereto have executed the SERIES D PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof. NEW WORLD COFFEE - MANHATTAN BAGEL, INC. By:________________________________ Name:______________________________ Title:_____________________________ PURCHASERS: BET ASSOCIATES, L.P. By: BRU Holding Co., LLC Its General Partner By:_____________________, Name: Title: Brookwood New World Investors, LLC By:_____________________, Name: Title: 26 27 EXHIBIT A SCHEDULE OF PURCHASERS*
NAME AND ADDRESS SHARES TO BE PURCHASED SHARES TO BE PURCHASED AGGREGATE - ---------------- ---------------------- ---------------------- --------- AT INTERIM CLOSING AT SUBSEQUENT CLOSING PURCHASE PRICE ------------------ --------------------- -------------- BET Associates, Inc. 8,108.108 0 $ 7,500,000 Brookwood New World 0 8,108.108 7,500,000 Investors, LLC TOTAL: 8,108.108 8,108.108 $15,000,000
27 28 EXHIBIT B NOTE 28 29 EXHIBIT C WARRANT 29 30 SCHEDULE OF EXCEPTIONS In connection with that certain Series D Preferred Stock and Warrant Purchase Agreement dated as of August 11, 2000 by and among New World Coffee - Manhattan Bagel, Inc. (the "Company") and the persons and entities listed on the Schedule of Purchasers attached thereto (the "Agreement"), the Company hereby delivers this Schedule of Exceptions to the Company's representations and warranties given in the Agreement. The section numbers in this Schedule correspond to the section numbers in the Agreement. Capitalized terms used but not defined herein shall have the same meanings given them in the Agreement. 30 31 EXHIBIT 1.1 CERTIFICATE OF DESIGNATION 31 32 EXHIBIT 3.1.1(c) SECRETARY'S CERTIFICATE 32 33 EXHIBIT 3.1.1(d) OPINION OF COUNSEL 33 EX-99.2 3 ex99-2.txt FORM OF WARRANT TO PURCHASE COMMON STOCK 1 EXHIBIT 2 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. Issue Date: August 18, 2000 No. of Shares Subject to Warrant: 1,196,909 WARRANT TO PURCHASE COMMON STOCK OF NEW WORLD COFFEE - MANHATTAN BAGEL, INC. This is to certify that, for value received, Brookwood New World Investors, LLC (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"), 1,196,909 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 August 18, 2005 ( 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." (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 2 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 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 2 3 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 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 3 4 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, a new 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 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 4 5 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 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 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. (4) 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. (5) 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). (6) 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 5 6 and kind of securities issuable upon exercise of each Warrant to be sent to each registered holder of a Warrant. (7) 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). (8) 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 Registration Rights Agreement dated as of August 11, 2000. 6 7 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: ______________________ R. Ramin Kamfar, President Attest: ______________________, Secretary Dated: August 18, 2000 7 8 PURCHASE FORM Dated _________, 2000 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 ________________________________________ 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 ____________, 2000 Signature 8 EX-99.3 4 ex99-3.txt REGISTRATION RIGHTS AGREEMENT DATED 8/11/00 1 EXHIBIT 3 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made as of the 11th day of August, 2000, by and between New World Coffee - Manhattan Bagel, Inc., a Delaware corporation (the "Company"), BET Associates, L.P., and Brookwood New World Investors, LLC (the "Stockholders"). BACKGROUND On the date hereof, the parties to this Agreement entered into the Series D Preferred Stock and Warrant Purchase Agreement (the "Purchase Agreement"), pursuant to which, among other things, 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 "Shares") and the Company delivered Warrants in the form of a Warrant attached to the Purchase Agreement and has agreed to issue in the future certain additional Warrants in similar form (collectively, the "Warrants"). Capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meanings given to them in the Purchase Agreement. As a material term of the Purchase Agreement, the Company has agreed to grant to the Stockholders certain registration rights with respect to the Registrable Securities. Therefore, the parties agree as follows: 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. -1- 2 (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 fifty percent (50%) 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 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. -2- 3 (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 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 -3- 4 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. (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. -4- 5 (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 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 -5- 6 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; 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 gross 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 -6- 7 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. (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; -7- 8 (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 $500,000, (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, -8- 9 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, their respective heirs, and any trust formed for the benefit of their heirs; and (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 to clause (C), shall not exceed 20 transferees. 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 -9- 10 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 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 their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 2.2 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. 2.3 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. 2.4 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. 2.5 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. 2.6 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. 2.7 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. 2.8 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. -10- 11 2.9 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. 2.10 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. 2.11 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] -11- 12 The parties have executed this Registration Rights Agreement as of the date first above written. NEW WORLD COFFEE - MANHATTAN BAGEL, INC. By: ____________________________ R. Ramin Kamfar, President BET ASSOCIATES, L.P. By: BRU Holding Co., LLC Its General Partner By: ____________________________ Name: Title: BROOKWOOD NEW WORLD INVESTORS LLC By: ____________________________ Name: Title: -12- EX-99.4 5 ex99-4.txt CERTIFICATE OF DESIGNATIONS 1 EXHIBIT 4 NEW WORLD COFFEE - MANHATTAN BAGEL, INC. CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES D PREFERRED STOCK Pursuant to Section 151 of the General Corporation Law of the State of Delaware New World Coffee - Manhattan Bagel, Inc. (the "Corporation") certifies 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 151 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 D Convertible 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 as follows: Designation and Amount. There is hereby established a series of the Preferred Stock designated "Series D Preferred Stock" (herein referred to as "Series D Preferred Stock"), consisting of 25,000 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 D 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 the eleventh day of February, May, August, and November in each year commencing on November 11, 2000, 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 ending on or before August 11, 2001, at the rate of $75.00 per share per annum, payable each quarter as $18.75 as payment-in-kind Series D Preferred Stock valued at the Liquidation Preference set forth below, and for each quarterly period thereafter at the rate of $140.00 per share per annum, payable each quarter as $35.00 in payment-in-kind Series D Preferred Stock valued at such Liquidation Preference; provided, however, that if the Corporation shall fail to redeem the Series D Preferred Stock as required by the terms of the Series D Preferred Stock and Warrant Purchase 1 2 Agreement dated August 11, 2000 (the "Purchase Agreement"), and such failure shall continue for a period of 90 days following the Mandatory Redemption Date (as defined in the Purchase Agreement), dividends shall thereupon increase by an amount of $20.00 per share per annum, payable-in-kind as provided above, and provided further that to the extent that the Corporation has insufficient available surplus to declare the payment-in-kind 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 D 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 D Preferred Stock, the total available funds may be paid in partial dividends to the holders of the outstanding shares of Series D Preferred Stock ratably in proportion to the fully accrued dividends to which they are entitled. Each issued and outstanding share of Series D 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 or the Series C 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 D 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 D 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 D 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 D 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 D Preferred Stock shall rank pari passu with any Parity Stock hereinafter existing or created. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series D Preferred Stock shall be insufficient to permit the payment to the holders of the Series D Preferred Stock and of any Parity Stock the full amounts to which they otherwise would be entitled, the holders of Series D 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 D Preferred Stock and such Parity Stock if all liquidation preference dollar amounts with respect to such shares were paid in full. 2 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 D 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, (B) a sale of all or substantially all of the assets of the Corporation or (C) 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 (an event or series of events under subsections (A), (B) and (C) 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 D Preferred Stock may execute a written waiver of any Change of Control Event. 3. Protective Rights. (a) So long as any shares of Series D 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 D 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 D 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 D 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) authorize a sale of any substantial portion of the assets of the Corporation (other than sales of stores owned by the Corporation or its subsidiaries), or a recapitalization or reorganization of the Corporation (other than stock splits, combinations and/or dividends); (v) take any action that results in the Corporation incurring or assuming more than $1,000,000 of funded indebtedness (other than borrowings under the Corporation's existing line of credit, either on an individual or cumulative basis), except as contemplated by the Corporation and described in the Purchase Agreement as of dated August 11, 2000; 3 4 (vi) merge or consolidate with or into any person, or enter into any agreement to accomplish such merger or consolidation, except as contemplated by the Corporation and described in the Purchase Agreement as of dated August 11, 2000; (vii) effect or allow fundamental change the nature of the Corporation's business; or (viii) otherwise materially affect the rights, privileges and preferences of the holders of Corporation's Series D Preferred Stock. 4. Voting Rights. (a) Holders, 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. (b) The majority of the then outstanding Series D Preferred Stock, voting or consenting, as the case may be, as one class, will be entitled to elect the minimum number of directors that shall consist of at least two-sevenths (2/7) of the then existing board of directors. Until such elections take place, Leonard Tannenbaum and Eve Trkla shall be considered thus elected. 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 D 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 4(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 D Preferred Stock are in arrears and unpaid for any quarterly period, which failure to pay shall continue for a period of (A) ten (10) days, as to any cash dividend, and (B) thirty (30) days, as to any dividend payable in kind; or (ii) the Corporation fails to discharge any redemption obligation with respect to the Series D Preferred Stock (delivery of the Notes as set forth in Section 1.3 of the Purchase Agreement 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 D Preferred Stock pursuant to Section 4(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 D 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. Such voting rights will continue until such time as, in the case of a dividend default, all dividends in arrears on the Series D 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 4 5 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 4(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 4(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 D Preferred Stock shall be required to constitute a quorum of such Holders. (e) Any vacancy occurring in the office of a director elected by the Holders pursuant to Section 4(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 D Preferred Stock or increase the authorized Series D Preferred Stock, without the affirmative vote or consent of Holders of at least a 67% of the shares of Series D 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 4 or pursuant to the laws of the State of Delaware, each Holder shall be entitled to one vote for each share of Series D 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 D 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. 5. No Reissuance of Series D Preferred Stock. No share or shares of Series D 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. 6. 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. 5 6 IN WITNESS WHEREOF, the Corporation has executed this Certificate of Designation to be prepared and executed by the officers named below as of this 11th day of August, 2000. Name: R. Ramin Kamfar Title: Chief Executive Officer Name: Michael Konig Title: Assistant Secretary 6 EX-99.5 6 ex99-5.txt AMENDMENT TO CERIFICATE OF DESIGNATIONS 1 EXHIBIT 5 CERTIFICATE OF CORRECTION OF CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES D PREFERRED STOCK OF NEW WORLD COFFEE - MANHATTAN BAGEL, INC. ------------------------- New World Coffee - Manhattan Bagel, Inc. (hereinafter called the "Corporation"), a corporation organized and existing and by virtue of the General Corporation Law of the State of Delaware, does hereby certify: 1. The name of the Corporation is New World Coffee - Manhattan Bagel, Inc. 2. The Certificate of Designations, Preferences and Rights of Series D Preferred Stock of the Corporation, which was filed with the Secretary of State of Delaware on August 11, 2000 (the "Certificate of Designations"), is hereby corrected as follows: 3. Section 3(a)(iv) is hereby deleted in its entirety and is replaced with corrected Section 3(a)(iv) to read as follows: "(iv) authorize 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 a recapitalization or reorganization of the Corporation or any subsidiary or subsidiaries of the Corporation (other than stock splits, combinations and/or dividends;" 4. Section 3(a)(v) is hereby deleted in its entirety and is replaced with a corrected Section 3(a)(v) to read as follows: "(v) 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 under the Corporation's existing line of credit, 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 dated as of August 11, 2000.)" Executed on this ___ day of August, 2000. ---------------------------- Secretary -----END PRIVACY-ENHANCED MESSAGE-----