EXCHANGE AGREEMENT
EXCHANGE AGREEMENT dated as of January 18, 2001, by and among New World
Coffee - Manhattan Bagel, Inc., a Delaware corporation (the "Company"), and the
stockholders listed on Schedule I hereto (being hereinafter called individually
a "Stockholder" and collectively the "Stockholders").
WHEREAS, pursuant to the Series D Preferred Stock and Warrant Purchase
Agreement, dated as of August 11, 2000 (the "Series D Purchase Agreement") and
related documents, by and among the Company and the Stockholders, the
Stockholders purchased an aggregate 16,216.216 shares of Series D Preferred
Stock, $0.001 par value ("Series D Preferred Stock"), of the Company and
warrants to purchase 2,393,820 shares of the Company's Common Stock, par value
$.001 per share (the "Common Stock") (the "Original Warrants") (as set forth in
Schedule I hereto), and since such dates, payment in kind dividends have accrued
and been paid in part, which, with the original purchase, total 16,719.76 shares
of Series D Preferred Stock (the Series D Exchange Shares");
WHEREAS, simultaneously with the execution and delivery of this Agreement,
the Company and Xxxxxxx Xxxxx III, L.P. ("HD") entered into a certain Series F
Preferred Stock and Warrant Purchase Agreement pursuant to which the Company
issued and sold HD an aggregate of 20,000 shares of Series F Preferred Stock of
the Company, $.001 par value (the "Series F Preferred Stock") and 8,484,112
warrants to purchase the Common Stock of the Company (the "HD Transaction") the
proceeds of which are to be used to purchase certain 7.25% Convertible
Subordinated Notes ("Einstein Bonds") of Einstein/Noah Bagel Corporation
("Einstein"); and
WHEREAS, simultaneously with the consummation of the HD Transaction, the
Company wishes to issue an aggregate of 16,398.33 shares of Series F Preferred
Stock (the "Series F Exchange Shares") and warrants to purchase an aggregate of
6,526,356 shares of Common Stock (the "New Warrants") to the Stockholders in
exchange for all of the shares of Series D Preferred Stock and the Original
Warrants owned by each Stockholder, and the Stockholders wish to exchange such
shares of Series D Preferred Stock and Original Warrants held by them for the
shares of Series F Exchange Shares and the New Warrants on the terms and subject
to the conditions hereinafter set forth;
WHEREAS, the Company is currently negotiating the terms of a certain Bond
Purchase Agreement and related documents (the "Greenlight Documents") with
Greenlight Capital, L.P. and related entities (the "Greenlight Capital
Entities") pursuant to which the Greenlight Capital Entities will invest
$10,000,000 in the aggregate into an entity formed for the purpose of acquiring
Einstein Bonds;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
SECTION 1. Exchange of Series D Exchange Shares and Original Warrants for
Series F Exchange Shares and New Warrants.
(a) On and as of the date hereof (as defined below), the Company shall
issue to each of the Stockholders the number of shares of Series F Exchange
Shares and New Warrants (substantially in the form annexed hereto as Exhibit C)
set forth opposite the name of such Stockholder on Schedule I annexed hereto
under the columns labeled "Series F Exchange Shares" and "New Warrants".
(b) In exchange for the issuance of the shares of Series F Exchange Shares
and New Warrants provided for in paragraph (a) above, and in full payment
therefore as aforesaid, each Stockholder shall, on the date hereof, (i) assign,
transfer and deliver to the Company all of such Stockholder's right, title and
interest in and to the shares of Series D Exchange Shares and the Original
Warrants held by such Stockholder as specified in Schedule I hereto, and (ii) in
that connection, deliver to the Company each certificate representing such
Series D Exchange Shares and the Original Warrants, duly endorsed for transfer.
SECTION 2. Warrant Step-Up.
(a) If within one year from the date hereof (i) the Company has not
redeemed the Series F Exchange Shares in accordance with the terms set forth in
the Certificate of Designation, Preferences and Rights or Series F Exchange
Shares in the form annexed hereto as Exhibit A (the "Certificate of
Designation"), (ii) the Company has redeemed the Series F Exchange Shares by the
issuance of the Notes in the form annexed hereto as Exhibit B (the "Notes") but
has not paid such Notes in full, or (iii) the closing of (A) the Company's
acquisition of 70% or more of the outstanding stock of Einstein, (B) the
Company's acquisition of all or substantially all of the assets of Einstein or
(C) the acquisition by Einstein of all or substantially all of the assets or
capital stock of the Company ("Einstein Combination") has not occurred and the
Series F Exchange Shares have not been redeemed in full in accordance with
Section 3 of the Certificate of Designation, the Company will issue pro-rata to
the Stockholders warrants substantially in the form annexed hereto as Exhibit C
representing an additional 1.154% of the Fully Diluted Common Stock of the
Company outstanding on such first anniversary date and on each June 30 and
December 31 following such first anniversary of the date hereof, which
percentage shall be reduced pro rata based upon Series F Exchange Shares
redeemed or the Notes repaid as applicable. The term "Fully Diluted Common
Stock" shall mean the fully diluted Common Stock of the Company, determined by
taking into account all options, warrants and other convertible securities of
the Company, but not including any outstanding warrants or options with a strike
price greater than $3.00 per share and not including the warrants issued under
this Section 2(a).
(b) For purposes of this Section 2, at the time of each such issuance of
the warrants referred to in Section 2(a) above, the number of shares subject to
such warrants shall be calculated to result in the applicable percentage of
Fully Diluted Common Stock before such issuance of warrants.
(c) The issuance of any additional warrants pursuant to this Section 2
shall be treated as an adjustment to the Stockholders' basis in the Series F
Exchange Shares.
SECTION 3. Representations and Warranties of the Company. The Company
represents and warrants to the Stockholders as follows:
(a) Organization, Qualifications and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has the necessary corporate power and
authority to own and hold its properties and to carry on its business as
currently conducted and to execute, deliver and perform this Agreement and the
transactions contemplated hereby. The Company has the corporate power and
authority to issue and deliver the Series F Exchange Shares and New Warrants
pursuant to this Agreement.
(b) Authorization, Validity, Etc. The execution, delivery and performance
by the Company of this Agreement and the issuance and delivery by the Company of
the shares of Series F Exchange Shares and the New Warrants pursuant hereto have
been duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government, the
Certificate of Incorporation or By-laws of the Company, or any provision of any
indenture, agreement or other instrument by which the Company or any of its
properties or assets is bound or affected, or conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company. The execution, delivery and
performance of this Agreement by the Company constitutes its valid and binding
obligations enforceable against the Company in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting creditors' rights generally, and
(ii) general principles of equity that restrict the availability of equitable
remedies.
(c) The Series F Exchange Shares are duly authorized by the Company and,
when issued and delivered in exchange for the Series D Exchange Shares and the
Original Warrants will be validly issued and outstanding, fully paid and
nonassessable shares of Series F Exchange Shares of the Company. The issuance,
sale and delivery of the Series F Exchange Shares is not subject to any
preemptive rights of shareholders of the Company, and is not subject to any
right of first refusal or other similar right in favor of any person.
(d) The Company has delivered to the Stockholders, true and correct copies
of all documents pertaining to the HD Transaction and all representations and
warranties contained therein are true and correct in all material respects.
(e) The Company has received the necessary consent from Fleet National Bank
to the transactions contemplated herein and in the HD Transaction.
SECTION 4. DELIVERIES AT CLOSING.
(a) Deliveries by the Company. At the closing of the transactions
contemplated hereby (the "Closing"), the Company shall deliver to each of the
Stockholders the following:
(i) Certificates representing the Series F Exchange Shares to be delivered
to each Stockholder;
(ii) Warrant Certificates representing the number of New Warrants to be
delivered to each Stockholder;
(iii) A Certificate of the Secretary of the Company, dated as of the date
hereof, substantially in the form annexed hereto as Exhibit D.
(iv) An opinion of counsel to the Company addressed to the Stockholders
dated as of the date hereof, substantially in the form annexed hereto as Exhibit
E.
(v) An Amended and Restated Registration Rights Agreement (the "Amended and
Restated Registration Rights Agreement") dated as of the date hereof in the form
annexed hereto as Exhibit F executed by the Company;
(vi) A Stockholders' Agreement (the "Stockholders' Agreement") dated as of
the date hereof in the form annexed hereto as Exhibit G duly executed by the
Company; and
(vii) A copy of the Certificate of Designation as filed with the Delaware
Secretary of State.
(b) Deliveries by the Stockholders. At the Closing, each of the
Stockholders shall deliver to the Company the following:
(i) A Certificate representing the Series D Exchange Shares held by such
Stockholder, duly endorsed for transfer; and
(ii) The Warrant Certificate representing all of the Original Warrants held
by such Stockholder.
(iii) Amended and Restated Registration Rights Agreement duly executed by
the Stockholders; and
(iv) Stockholders' Agreement duly executed by the Stockholders.
SECTION 5. Representations and Warranties of the Stockholders. Each
Stockholder, severally and not jointly, represents and warrants to, and agrees
with, the Company as follows:
(a) Title to Shares. Such Stockholder is the lawful owner, of record and
beneficially, of the number of Series D Exchange Shares set forth opposite its
name on Schedule I hereto, which shares are free and clear of all liens, charges
and encumbrances and are not subject to any options, rights of first refusal,
pre-emptive rights or claims of any kind whatsoever in favor of any person.
(b) Investment Representations. Such Stockholder is acquiring the Series F
Exchange Shares, the New Warrants and the Common Stock issuable upon exercise of
the New Warrants for its own account for the purpose of investment and not with
a view to or for sale in connection with any distribution thereof. Such
Stockholder understands that it must bear the economic risk of such
Stockholder's investment for an indefinite period of time because the Series F
Exchange Shares, the New Warrants and the Common Stock issuable upon exercise of
the New Warrants are not registered under the Securities Act or any applicable
state securities laws, and may not be resold unless subsequently registered
under the Securities Act and such other laws or unless an exemption from such
registration is available. Such Stockholder also understands that, except as
provided in the Amended Registration Rights Agreement, it is not contemplated
that any registration will be made under the Securities Act or that the Company
will take steps which will make the provisions of Rule 144 or Rule 144A under
the Securities Act available to permit resale of the Series F Exchange Shares,
the New Warrants and the Common Stock issuable upon exercise of the New
Warrants. Such Stockholder agrees not to pledge, transfer, convey or otherwise
dispose of any of the shares of Series F Exchange Shares, the New Warrants and
the Common Stock issuable upon exercise of the New Warrants, except in a
transaction that is the subject of either (i) an effective registration
statement under the Securities Act and any applicable state securities laws,
(ii) an opinion of counsel to the effect that such registration is not required,
or (c) as provided for in the Stockholders Agreement.
(c) Authorization, Etc. (i) The execution, delivery and performance by the
Stockholder of this Agreement and the surrender and delivery by such Stockholder
of the Series D Exchange Shares and the Old Warrants pursuant hereto have been
duly authorized by all requisite partnership or limited liability company
action, as the case may be, and will not violate any provision of law, any order
of any court or other agency of government, the organizational documents of such
Stockholder, or any provision of any indenture, agreement or other instrument by
which such Stockholder or any of its properties or assets is bound or affected,
or conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of
such Stockholder.
SECTION 7 Protective Provisions.
(a) The Company covenants and agrees that, without the prior approval of
the holders of two-thirds of the outstanding shares of Series F Preferred Stock:
(i) The Company shall not sell or transfer its interest in any Einstein
Bond (or securities into which such Einstein Bond is convertible) other than in
connection with an Einstein Combination, unless the price received by the
Company, net of any cash fees and expenses, is at least equal to 60% of such
bond's face value.
(ii) There shall be no application of the proceeds from the sale of the
Einstein Bonds (or securities into which such bonds are convertible) for any
purpose other than the repayment of outstanding senior debt or the redemption of
the Series F Preferred Stock. The holders of the Series F Exchange Shares
including but not limited to the Stockholders, shall have the right of first
offer, in proportion to their respective interests, to purchase any Einstein
Bonds that the Company desires to sell or transfer.
(iii) Proceeds received by the Company as the result of the HD Transaction
may be used only to purchase at one time Einstein Bonds (with a maximum price,
including cash fees and expenses, of 60% of the face value of each such bond)
having ay least aggregate face amount of $30 million and expenses associated
with the issuance of the Series F Preferred Stock and the Acquisition of
Einstein, including fees incurred with the HD Transaction payable to HD or to
the Stockholders in accordance with Section 8(d) below, subject to the
reasonable approval of the Einstein Supervisory Committee of the Company's Board
of Directors (the "Einstein Supervisory Committee"). The Einstein Supervisory
Committee shall be comprised of two (2) designees of the management of the
Company (the "Management Designees") and one (1) designee of the Stockholders.
The initial Management Designees shall be R. Xxxxx Xxxxxx and Xxxxx Xxxxx and
the Stockholders' designee shall be Xxx Xxxxx.
(b) Contemporaneously with the Closing, the Company shall deposit proceeds
in an amount sufficient to purchase Einstein Bonds in the minimum amount
specified in Section 7(a)(iii) with the Company's broker(s) who shall be
authorized to purchase Einstein Bonds in accordance with the requirements of
Sections 7(a)(iii) and 7(c). (c) The Company shall utilize its best efforts to
apply the proceeds first toward the purchase of all Einstein Bonds held by the
three bondholders currently represented on the Einstein Unsecured Creditors
Committee. (d) The Company shall amend its bylaws to provide that the
authorization of at least 75% of the Board of Directors shall be required to
authorize the filing of a petition under the United States Bankruptcy Code. (e)
Subject to the performance of this Agreement and the accuracy of the
representations and warranties contained herein, the Stockholders hereby consent
to the HD Transaction.
SECTION 8. Miscellaneous.
(a) Survival of Agreements. All covenants, agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and the issuance, sale and delivery of the Series F Exchange Shares
and New Warrants pursuant hereto, and all statements contained in any
certificate or other instrument delivered by the Company hereunder shall be
deemed to constitute representations and warranties made by the Company. The
Series D Purchase Agreement is hereby terminated, provided, however, that the
representations and warranties of the Company contained in Section 5 in the
Series D Purchase Agreement shall survive termination.
(b) Each Stockholder agrees that it will not sell, assign or transfer any
share of Series F Preferred Stock, any New Warrant or common stock issuable upon
exercise of any New Warrant to any person other than: (i) in the case of BET
Associates, L.P., any such transfer to Xxxxx Xxxx, Xxxxxxx Xxxxxxxxxx, any
entity where a majority of capital stock or other equity interest is held by
either Mr. Toll or Xx. Xxxxxxxxxx, their respective heirs, or any trust created
for the benefit of their heirs; and (ii) in the case of Brookwood New World
Investors LLC, (A) its members, (B) the members of its managing member, and (C)
the members, partners or shareholders of any of the managing member's members,
as to (C), not to exceed twenty transferees. Any attempt transfer shares not in
compliance with this Section 8(b) shall be null and void. Certificates
evidencing the shares will include the following legend:
"THE TRANSFERABILITY OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
FURTHER RESTRICTED BY THE TERMS OF THE EXCHANGE AGREEMENT DATED JANUARY 12,
2001, A DUPLICATE OF THE ORIGINAL OF WHICH IS MAINTAINED AT THE PRINCIPAL
EXECUTIVE OFFICE OF THE COMPANY."
(c) The Company shall not consummate the transactions contemplated by the
Greenlight Documents without the prior consent of the Stockholders.
(d) Subject to the consummation of the HD Transaction, the Company shall
pay each Stockholder a transaction fee in the amount of $187,500.
(e) Subject to the consummation of the HD Transaction, the Company shall
reimburse the Stockholders for their reasonable attorney's fees incurred as a
result of said transaction, provided such amount in the aggregate does not
exceed $50,000.
(f) Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, or sent by recognized courier service addressed as
follows:
(i) if to the Company, at
New World Coffee - Manhattan Bagel, Inc.
000 Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: R. Xxxxx Xxxxxx, Chief Executive Officer
with a copy to
Ruskin, Moscou, Xxxxx & Faltischek, P.C.
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
(ii) if to any Stockholder, at its address set forth in
Schedule I hereto, with a copy to the counsel noted
on said Schedule I:
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
(g) CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PARTIES HEREBY
CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN XXX
XXXX, XXXXXX XXX XXXXX XX XXX XXXX AND IRREVOCABLY AGREE THAT, SUBJECT TO THE
ELECTION, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE RELATED
AGREEMENTS MAY BE LITIGATED IN SUCH COURTS. THE PARTIES ACCEPT FOR THEMSELVES
AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM
NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY (SUBJECT TO ANY APPEAL AVAILABLE WITH RESPECT TO SUCH JUDGMENT) IN
CONNECTION WITH THIS AGREEMENT OR THE NOTES. NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE PARTIES TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST
EACH OTHER IN THE COURTS OF ANY OTHER JURISDICTION.
(h) WAIVER OF JURY TRIAL. THE PARTIES AND THE COMPANY HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE RELATED AGREEMENTS OR ANY DEALINGS AMONG THEM
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO THE
RELATED AGREEMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
(i) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Stockholders have executed this
Agreement as of the day and year first above written.
New World Coffee-Manhattan Bagel, Inc.
By /s/ R. Xxxxx Xxxxxx
-------------------
R. Xxxxx Xxxxxx
Chief Executive Officer
STOCKHOLDERS:
BET Associates, L.P.
By:BRU Holding Co., LLC, its
General Partner
By:/s/ Xxxxx Xxxx
--------------
Brookwood New World Investors, LLC
By:Brookwood New World Co., LLC,
its Managing Member
By:/s/ Xxxxxx X. Xxxxx
-------------------
SCHEDULE I - STOCKHOLDERS ORIGINAL WARRANTS
Series D Series F
Preferred Original Preferred New
Shareholder Stock Warrants Stock Warrants
----------- ----- -------- ----- --------
BET Associates, L.P. 8,366.63 1,196,910 8,213.01 3,263,178
Brookwood New World 8,353.13 1,196,910 8,185.32 3,263,178
Investors, LLC
EXHIBIT A
CERTIFICATE OF DESIGNATION
EXHIBIT B
FORM OF NOTE
EXHIBIT C
FORM OF WARRANT
EXHIBIT D
SECRETARY'S CERTIFICATE
EXHIBIT E
OPINION OF COUNSEL
EXHIBIT F
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
EXHIBIT G
STOCKHOLDERS' AGREEMENT
