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
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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
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"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;
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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 Series D Preferred Stock set forth opposite such Purchaser's name on
Exhibit A under the heading "Subsequent Closing", for an aggregate of
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$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.
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(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.
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(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
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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
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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.
(c) Procedure for Redemption. (i) Not more than 60 and not less
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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.
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(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 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 90/th/ 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
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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 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.
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(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.
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 ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ 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).
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(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).
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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 ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ upon one business day's written notice from the Purchasers
to the Company (the "Subsequent Closing Date").
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3.2.1 At the Subsequent Closing, subject to the terms and provisions
hereof, the Company shall deliver to the Purchasers the following:
(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).
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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
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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 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
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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.
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
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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.
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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.
(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
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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 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 ▇▇▇▇▇▇▇ ▇▇▇▇▇, 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;
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(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
(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.
12
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
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
13
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 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.
14
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 ▇▇▇▇▇▇▇ ▇▇▇▇▇ 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 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.
15
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.
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.
16
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.
(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
17
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 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
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, and
▇▇▇▇▇ ▇▇▇▇▇.
18
(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 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
19
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:
(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.
20
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 ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, any entity where a majority of
capital stock or other equity interest is held by either of Mr. Toll or ▇▇.
▇▇▇▇▇▇▇▇▇▇, their respective heirs, or any trust created for the benefit of
their heirs; and (ii) in the case of Brookwood New World Investors LLC, (A) its
members, (B) the members of its managing member and (C) the members, partners or
shareholders of any of the managing member's members, as to (C), not to exceed
twenty transferees. Any attempt 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 ORGINAL 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.
21
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.
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 ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP in
connection with the
22
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 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
23
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 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.
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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 ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ 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.
25
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.
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: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: CEO
---------------------------
PURCHASERS:
BET ASSOCIATES, L.P.
By: BRU Holding Co., LLC
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. Toll
-----------------------------
Name: ▇▇▇▇▇ ▇. Toll
--------------------------
Title:
--------------------------
Brookwood New World Investors, LLC
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Title: Chief Financial Officer
------------------------
27
EXHIBIT A
SCHEDULE OF PURCHASERS*
Name and Address Shares to be Purchased Shares to be Purchased at Aggregate
---------------- ---------------------- ------------------------- ---------
at Interim Closing 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
28
