STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT dated as of January 18, 2001, by and among NEW WORLD
COFFEE - MANHATTAN BAGEL, INC., a Delaware corporation (the "Company") and the
several holders (the "Stockholders") listed on Schedule I hereto of Series F
Preferred Stock, $.001 par value of the Company (the "Series F Preferred
Stock").
WHEREAS, the Company and certain purchasers (the "Series F Purchasers")
have entered into a Series F Preferred Stock and Warrant Purchase Agreement
dated as of January 18, 2001 (the " Purchase Agreement"), pursuant to which the
Series F Purchasers will purchase from the Company an aggregate of 20,000 shares
of Series F Preferred Stock of the Company and warrants (the "Warrants") to
purchase shares (the "Warrant Shares") of Common Stock, $.001 par value (the
"Common Stock"), of the Company;
WHEREAS, simultaneously with the closing of the transactions contemplated
by the Purchase Agreement, the holders of Series D Preferred Stock (the "Series
D Purchasers", together with the Series F Purchasers, the "Stockholders") have
entered into an Exchange Agreement (the "Exchange Agreement") with the Company
pursuant to which such Series D Preferred Holders have agreed to exchange the
shares of Series D Preferred Stock, $.001 par value (the "Series D Preferred
Stock"), and warrants issued pursuant to a Series D Preferred Stock and Warrant
Purchase Agreement dated August 11, 2000 for the respective number of shares of
Series F Preferred Stock and Warrants set forth opposite its name on Schedule I
hereto;
WHEREAS, as an inducement to the Stockholders to consummate the
transactions contemplated by the Purchase Agreement and the Exchange Agreement,
the Company and each of the Stockholders have agreed to enter into this
Agreement; and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1. Election of Directors; Number of Directors. (a) At any annual or
special stockholders meeting called for such purpose, and whenever the
stockholders of the Company act by written consent with respect to election of
directors, each Stockholder agrees to vote or otherwise give such Stockholder's
consent in respect of all shares of voting capital stock of the Company (whether
now or hereafter acquired) owned by such Stockholder or as to which such
Stockholder is entitled to vote, and the Company shall take all necessary and
desirable actions within its control, in order to cause:
(i) the authorized number of directors on the Board of Directors of the
Company (the "Board") to be established and remain at nine (9);
(ii) the election to the Board of:
(A) two directors (the "Xxxxxxx Xxxxx Designees") designated by Xxxxxxx
Xxxxx III, L.P. ("Xxxxxxx Xxxxx"), one of which directors shall initially be
Xxxxxxx Xxxxx and the other director shall initially remain unnamed; provided,
however, (i) in the event that (X) the shares of Series F Preferred Stock held
by Xxxxxxx Xxxxx are redeemed for cash in accordance with the Certificate of
Designation or (Y) the Notes to be issued in accordance with the Certificate of
Designation are paid in full, Xxxxxxx Xxxxx shall be entitled to designate only
one director and (ii) in the event that (X) Xxxxxxx Xxxxx owns less than 2% of
the voting stock of the Company and (Y) the events described in clause (i) above
have occurred, it shall no longer have the right to designate directors
hereunder; and
(B) one director (the "Brookwood Designee") designated by Brookwood New
World Investors, LLC ("Brookwood"), which director shall initially be Xxx Xxxxx;
provided, however, that (X) the shares of Series F Preferred Stock held by
Brookwood are redeemed for cash in accordance with the Certificate of
Designation or (Y) the Notes to be issued in accordance with the Certificate of
Designation are paid in full, Brookwood shall no longer have the right to
designate a director hereunder; and
(C) one director (the "BET Designee", together with the Xxxxxxx Designees
and the Brookwood Designee, the "Series F Designees") designated by BET
Associates, L.P., which director shall initially be Xxxxxxx Xxxxxxxxxx;
(D) one director (the "Management Director") who shall be the Chief
Executive Officer of the Company and, in the event that there are two Xxxxxxx
Xxxxx Designees, there shall be one additional Management Director; provided,
however, that if by the first anniversary hereof, the Company has not (i)
consummated an Acquisition of Einstein (as defined in the Purchase Agreement) or
(ii) does not control or is not scheduled to control the Board of Directors of
Einstein/Noah Bagel Corporation, then there shall only be one Management
Director;
(E) three individuals other than an employee or officer of the Company or
its subsidiaries or any other individual having a relationship which, in the
reasonable opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director, which
individual shall be designated by the non-investor directors (the "Independent
Directors"), which Independent Directors shall initially be Xxxxx Xxxxx, Xxxxxx
XxXxxx and Xxxxx Xxxxxx;
all of which persons shall hold office, subject to their earlier removal in
accordance with clause (iii) below, the By-laws of the Company and applicable
corporate law, until their respective successors shall have been elected and
shall have qualified;
(iii) the removal from the Board (with or without cause) of any of the
Series F Designee upon the written request of the Stockholder that designated
such Series F Designee; and
(iv) upon any vacancy in the Board as a result of any of the Series F
Designee ceasing to be a member of the Board, whether by resignation or
otherwise, the election to the Board of a replacement such Series F Designee to
be designated as provided in clause (ii) above.
(b) The Company shall establish and maintain an Audit Committee and a
Compensation Committee (collectively, the "Committees") as soon as practicable
after the date hereof. Each Committee shall consist of a maximum of three (3)
members. One of the Xxxxxxx Xxxxx Directors may, at his or her election, serve
on any Committee. In such event, the Xxxxxxx Xxxxx Director may only be removed
from such Committees, and any such vacancy may be filled, by the entity who
designated the Xxxxxxx Xxxxx Director.
(c) The Board shall meet on a quarterly basis until otherwise agreed by the
Board. The Company will reimburse all such directors for all expenses reasonably
incurred in connection with attending meetings of the Board.
SECTION 2. (a) Preemptive Rights. The Company hereby grants to each
Stockholder the right to purchase such Stockholder's Proportionate Percentage
(as hereinafter defined) of any future Eligible Offering (as hereinafter
defined). For purposes of this Section 2(a):
"Proportionate Percentage" means, with respect to any Stockholder as of any
date, the result (expressed as a percentage) obtained by dividing (i) the number
of shares of Common Stock issuable or issued upon exercise of warrants to
purchase Common Stock of the Company owned by such Stockholder as of such date,
by (ii) the total number of shares of Common Stock outstanding as of such date.
"Eligible Offering" means an offer by the Company to sell to investors
(including any of its stockholders) for cash, cash equivalents or indebtedness,
any securities of the Company, including, without limitation, (i) shares of
capital stock of the Company, or any security convertible into or exchangeable
for, or carrying rights or options to purchase, capital stock of the Company,
(ii) notes, debentures, bond or other evidences of indebtedness of the Company,
and (iii) any combination or derivative of the foregoing, other than an offering
by the Company:
(i) to its full-time employees, and/or officers and/or directors and/or
consultants and/or advisors of options or warrants to purchase shares of Common
Stock representing up to 15% of the fully-diluted Common Stock of the Company in
connection with or pursuant to any stock option or restricted stock option plan
approved and adopted by the Company, whether currently in existence or created
hereafter, or shares issuable upon the exercise thereof; or
(ii) in connection with any merger of, or acquisition by, the Company; or
(iii) in an underwritten public offering registered under the Securities
Act; or
(iv) to a bank or other institutional investor in connection with, and in
consideration for, the issuance of debt.
(b) The Company shall, before issuing any securities pursuant to an
Eligible Offering, give written notice thereof to each Stockholder (the
"Offering Notice"). Such notice shall specify the security or securities the
Company proposes to issue and the consideration that the Company intends to
receive therefor. For a period of fifteen (15) days following the date of such
notice, each Stockholder shall be entitled, by written notice to the Company, to
elect to purchase all or any part of such Stockholder's Proportionate Percentage
of the securities being sold in the Eligible Offering, provided, however, that
if two or more securities shall be proposed to be sold as a "unit" in an
Eligible Offering, any such election must relate to such unit of securities. In
the event that elections pursuant to this Section 2(b) shall not be made with
respect to any securities included in an Eligible Offering within such fifteen
(15) day period, then the Company may issue such securities to investors, but
only for a consideration payable in cash not less than, and otherwise on no more
favorable terms to the investors than, that set forth in the Company's notice
and only within ninety (90) days after the end of such fifteen (15) day period.
In the event that any such offer is accepted by one or more Stockholders within
the fifteen (15) day period designated above, the Company shall sell to such
Stockholder or Stockholders, and such Stockholder or Stockholders shall purchase
from the Company, for the consideration and on the terms set forth in the notice
as aforesaid, the securities that such Stockholder or Stockholders shall have
elected to purchase.
(c) Right of Co-Sale. In the event all of the securities being sold in the
Eligible Offering are not purchased pursuant to paragraph (b) above, then each
Stockholder shall have the right and option to elect to sell, at the price and
on the terms stated in the Offering Notice, all or part of that number of
securities being offered which is equal to the product obtained by multiplying
(i) the aggregate number of shares or securities covered by the proposed sale by
(ii) such Stockholder's Proportionate Percentage. Notwithstanding the foregoing,
this provision shall not apply to an Eligible Offering (X) in which the proceeds
are used to redeem the Series F Preferred Stock or the notes issuable in
accordance with the terms of the Series F Preferred Stock or (Y) if the
Company's investment banking firm determines that the exercise by the
Stockholder of its rights pursuant to this paragraph (c) would materially impact
the Company's ability to sell the Requisite Number of Securities (as hereinafter
defined), it being agreed that "materially impact" shall mean the inability to
sell at least 75% of the Requisite Number of Securities. For purposes hereof,
"Requisite Number of Securities" shall mean the number of securities that the
Company's investment banking firm determines is necessary for the Company to
issue in order to fund working capital and other general corporate uses of the
Company.
(d) Preemptive Right Procedures. With respect to any election pursuant to
paragraph (a) above, the closing of such sale of securities in an Eligible
Offering shall take place at the office of counsel for the purchasing
Stockholder no later than sixty (60) days following the delivery date of the
Offering Notice, or such other place and earlier date as may be agreed by all
parties to the transaction. At such closing, as payment in full for the
securities being purchased in an Eligible Offering, and against delivery hereof,
the purchasing Stockholder shall deliver to the Company a certified, official
bank or attorney client trust check, payable to the order of the Company the
purchase price of such securities, or shall transfer such purchase price by wire
transfer to the account specified by the Company in writing.
(e) Co-Sale Procedures. With respect to any election pursuant to paragraph
(c) above:
(i) Any such election shall be made by written notice (a "Co-Sale Notice")
to the Company within ten (10) business days after receipt by such Stockholder
of the notice required by Section 2(b) above. Thereupon, the Stockholder shall
not sell any of the securities to be sold in an Eligible Offering except at the
price and on the terms stated in the Company's Offering Notice and, if a
Stockholder shall have delivered a Co-Sale Notice in respect thereof as
aforesaid, unless such Stockholder shall have been afforded the opportunity to
sell the shares in respect of which such Co-Sale Notice shall have been
delivered, at said price and on said terms;
(ii) Upon electing to participate in a proposed sale pursuant to paragraph
(c) above, each Stockholder shall deliver to the Company, as its agent, for
transfer to the proposed acquiror, one or more certificates, duly endorsed for
transfer or accompanied by stock transfer powers duly endorsed for transfer,
with all stock transfer taxes paid and stamps affixed, which represent the
number and the type of securities that such Stockholder shall have so elected to
sell; and
(iii) The stock certificate or certificates delivered by each Stockholder
to the Company pursuant to subparagraph (ii) above shall be transferred by the
Company to the acquiror in consummation of the sale of the securities pursuant
to the terms and conditions specified in the Offering Notice, and the Company
shall promptly thereafter remit to such Stockholder that portion of the proceeds
to which such Investor is entitled by reason of such participation.
SECTION 3. Legend on Stock Certificates. Each certificate representing
Warrants, Warrant Shares issuable upon the exercise of the Warrants or shares of
Series F Preferred Stock, as the case may be, held by any Stockholder shall
conspicuously bear the following legend until such time as the shares
represented thereby are no longer subject to the provisions hereof:
"[THE SHARES EVIDENCED BY THIS CERTIFICATE] [THE SECURITY EVIDENCED BY THIS
CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE OF SUCH SECURITY] ARE SUBJECT
TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF JANUARY 18,
2001 AMONG THE ISSUER AND THE OTHER PARTIES THERETO, AS MAY BE AMENDED FROM TIME
TO TIME IN ACCORDANCE WITH ITS TERMS. COPIES MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
COMPANY."
The Company covenants that it shall keep a copy of this Agreement on file
at the address listed in Section 8 for the purpose of furnishing copies to the
holders of record of Warrants, Warrant Shares or Series F Preferred Stock, as
the case may be.
SECTION 4. Representations and Warranties. Each Stockholder represents and
warrants to the Company and the other Stockholders as follows:
(a) The execution, delivery and performance of this Agreement by such
Stockholder will not violate any provision of law, any order of any court or
other agency of government, or any provision of any indenture, agreement or
other instrument to which such Stockholder or any of its or his properties or
assets is bound, or conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
such Stockholder.
(b) This Agreement has been duly executed and delivered by such Stockholder
and constitutes the legal, valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms.
(c) The shares of Series F Preferred Stock, the Warrants or the Warrant
Shares listed in Schedule I hereto, as the case may be, opposite the name of
such Stockholder constitute all the shares of the capital stock of the Company
owned by such Stockholder or that such Stockholder has acquired or may acquire
pursuant to the Purchase Agreement and the Exchange Agreement.
SECTION 5. Headings. Headings of articles, sections and paragraphs of this
Agreement are inserted for convenience of reference only and shall not affect
the interpretation or be deemed to constitute a part hereof.
SECTION 6. Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein shall, for any reason, be held to be invalid, illegal or unenforceable,
such illegality, invalidity or unenforceability shall not affect any other
provisions of this Agreement.
SECTION 7. Benefits of Agreement. Nothing expressed by or mentioned in this
Agreement is intended or shall be construed to give any person other than the
parties hereto and their respective successors and permitted assigns and
transferees any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective successors and
permitted assigns and transferees. Anything herein to the contrary
notwithstanding, each Stockholder shall have the right to assign its interests
hereunder to any transferee, provided that such transferee shall agree in
writing with the parties hereto to be bound by, and to comply with, all
applicable provisions of this Agreement and to be deemed to be a Stockholder for
purposes of this Agreement.
SECTION 8. Notices . Any notice or other communications required or
permitted hereunder shall be deemed to be sufficient and received if contained
in a written instrument delivered in person or by courier or duly sent by first
class certified mail, postage prepaid, or by facsimile addressed to such party
at the address or facsimile number set forth below:
(1) if to the Company, to:
New World Coffee-Manhattan Bagel, Inc.
000 Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: 000-000-0000
Attention: Chief Executive Officer
with a copy to:
Ruskin, Moscou, Xxxxx & Faltischek, P.C.
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxxx Xxxxxx
(2) if to any Stockholders, to the address of such Stockholder appearing in
Schedule I hereto;
or, in any case, at such other address or facsimile number as shall have been
furnished in writing by such party to the other parties hereto. All such
notices, requests, consents and other communications shall be deemed to have
been received (a) in the case of personal or courier delivery, on the date of
such delivery, (b) in the case of mailing, on the fifth business day following
the date of such mailing and (c) in the case of facsimile, when received.
SECTION 9. Modification. Except as otherwise provided herein, neither this
Agreement nor any provision hereof may be modified, changed, discharged or
terminated except by an instrument in writing signed by the party against whom
the enforcement of any modification, change, discharge or termination is sought
or by the agreement of (i) the majority of voting power of shares of capital
stock of the Company owned by the Stockholders, including the holders of 66-2/3%
of the outstanding shares of Series F Preferred Stock and (ii) the Company; or
if such modification, change, discharge or termination would adversely affect
the rights of one party hereto without equally affecting all of the other
parties hereto, such modification, change, discharge or termination requires the
consent of such adversely affected party.
SECTION 10. Counterparts. This Agreement may be executed in any number of
counterparts (and may be delivered by facsimile), and each such counterpart
hereof shall be deemed to be an original instrument, but all such counterparts
together shall constitute but one agreement.
SECTION 11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflict of law provisions thereof.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as a sealed instrument, all as of the day and year first above written.
COMPANY: NEW WORLD COFFEE - MANHATTAN
BAGEL, INC.
By:/s/ Xxxxx Xxxxxx
----------------
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
STOCKHOLDERS: XXXXXXX XXXXX III, L.P.
By: /s/ Xxxxxxx Xxxxx
-----------------
Name: Xxxxxxx Xxxxx
Title:
BET ASSOCIATES, L.P.
By: BRU Holding Co., LLC
Its General Partner
By: /s/ Xxxxx Xxxx
--------------
Name: Xxxxx Xxxx
Title:
BROOKWOOD NEW WORLD INVESTORS LLC
By: Brookwood New World Co., LLC,
Its Managing Member
By: /s/ Xxxxxx X. Xxxxx
-------------------
Name: Xxxxxx X. Xxxxx
Title: Chairman and CEO
SCHEDULE I
STOCKHOLDERS
Series F
Stockholder Preferred Stock Warrant
----------- --------------- -------
Xxxxxxx Xxxxx III, L.P. 20,000 8,484,112
BET Associates, L.P. 8,213.01 3,263,178
Brookwood New World Investors, LLC 8,185/32 3,263,178
