(GREENLIGHT CAPITAL, INC. LETTERHEAD)
May 23, 2003
New World Coffee-Manhattan Bagel, Inc.
000 Xxxxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
New World Coffee-Manhattan Bagel, Inc.
0000 Xxxx Xxxxxxxxx
Xxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxxxx, Controller
Dear Sir or Madam:
Reference is hereby made to that certain Limited Liability Company
Operating Agreement (the "LLC Agreement") of Greenlight New World, L.L.C. (the
"LLC") dated as of January 8, 2001 by and among Greenlight Capital, L.P.
("GCLP"), Greenlight Capital Qualified L.P. ("GCQP") and Greenlight Capital
Offshore, Ltd. ("GCO") (collectively, "GREENLIGHT"). Under the terms of the LLC
Agreement, New World Coffee-Manhattan Bagel, Inc. (the "MANAGER") was appointed
the manager of the LLC and has been acting in such capacity for the LLC.
Reference is also made to that certain Bond Purchase Agreement (the "BOND
PURCHASE AGREEMENT") entered into as of January 17, 2001, by and among the
Manager and Greenlight, pursuant to which Greenlight agreed to contribute $10
million to the LLC for the purchase of certain bonds (the "BONDS") known as
Xxxxxxxx/Xxxx Xxxxx Corporation 7.25% convertible subordinated bonds June 2004.
Reference is also made to that certain letter agreement (the "LETTER
AGREEMENT") entered into as of June 19, 2001, by and among the LLC, the Manager
and Greenlight, pursuant to which Greenlight consented to the pledge (the
"PLEDGE") by the Manager of the Bonds to Xxxxxxxx & Company, Inc. to secure a
loan to an unrestricted subsidiary of the Manager in the principal amount of $35
million. Pursuant to the Letter Agreement, Manager will issue to Greenlight the
number of shares of Series F Preferred Stock of Manager equal to (i) the excess
of the Contribution Amount over the Distributed Proceeds divided by (ii) $1000
per share of Series F Preferred Stock. In connection which such Letter
Agreement, we understand that there will be no Distributed Proceeds with respect
to the Bonds and, accordingly, we deem the Series F Preferred Stock to be
issuable as of the date on which the Manager made such determination with
respect to a third party in a similar situation as Greenlight. According to our
calculations, including accretion as of yesterday a total of 14,030 shares of
Series F Preferred Stock are issuable to us as follows: 6,160 shares to GCQP,
2,748 to GCLP and 5,121 to GCO. In addition, GCLP, GCQP and GCO are entitled to
Warrants to acquire Common Stock of the Manager exercisable at $0.01 per share
for 15.8% of the fully diluted equity of the company pursuant to the Letter
Agreement (21,935,000 shares pursuant to our calculations). The Warrants are
issuable to GCLP, GCQP
and GCO pro rata in the same ratios as those contemplated for the issuance of
the Series F Preferred Stock described above. All shares of Series F Preferred
Stock issuable pursuant to our rights described in this paragraph should be
deemed outstanding as of the date on which the Manager made the determination
that there would be no Distributed Proceeds for purposes of any consents of the
holders of the Series F Preferred Stock, including without limitation, consents
required in connection with the contemplated issuance by the Manager of Senior
Secured Notes Due 2008. Capitalized terms used herein this paragraph, but not
otherwise defined, have the meanings ascribed to them in the Letter Agreement.
In accordance with the Letter Agreement and the issuance of the Series
F Preferred Stock as described above, Manager must issue to GCLP, GCQP and GCO
warrants (the "DEBT WARRANTS") to purchase 2,748,314, 6,160,207 and 5,120,646
shares, respectively, of common stock of Manager at an exercise price of $0.01
per share, such warrants being in substantially the same form attached as
Exhibit B to the Letter Agreement.
Xxxxxxxxxx has been disappointed in the manner in which New World has
pursued potential transactions to increase shareholder value and we hope to
engage in a constructive dialogue to move the Company forward.
Sincerely,
/s/ XXXXX XXXXXXX
Xxxxx Xxxxxxx, Manager of Greenlight Capital,
LLC (on behalf of Greenlight Capital, L.P. and
Greenlight Capital Qualified L.P.) and on behalf of
Greenlight Capital, Inc., Investment Advisor of
Greenlight Capital Offshore, Ltd.
(GREENLIGHT CAPITAL, INC. LOGO)
