NOTE
THE SECURITY EVIDENCED BY THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND SUCH
SECURITIES MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION THEREUNDER OR AN EXEMPTION THEREFROM, UNLESS AN OPINION OF COUNSEL
IS FURNISHED REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO NEW WORLD COFFEE -
MANHATTAN BAGEL, INC. STATING THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE SECURITIES LAWS IS AVAILABLE. THIS NOTE AND THE
OBLIGATIONS OF THE COMPANY ARISING HEREUNDER ARE SUBORDINATED IN THE MANNER AND
TO THE EXTENT REFERRED TO IN SECTION 6 HEREOF, AND EACH HOLDER OF THIS NOTE, BY
ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS THEREOF.
New World Coffee - Manhattan Bagel, Inc.
[ ] 1 % Senior Subordinated Note
Dated:
FOR VALUE RECEIVED, the undersigned New World Coffee -Manhattan Bagel,
Inc., a Delaware Corporation (herein, together with any successor, referred to
as the "Company"), hereby promises to pay to ____________or registered assigns,
the principal sum of ___________ ($_______), subject to adjustment as herein
provided, on the later of January 18, 2004 and 120 days following the Mandatory
Redemption Date, with interest (computed on the basis of a 360 day year) on the
unpaid balance of such principal sum from the date hereof at the initial
interest rate of [ ]1% per annum, subject to adjustment as herein provided,
payable, in arrears, quarterly on the first day of January, April, July and
October of each year, commencing April 1 (which first interest payment shall be
for the period from and including January 18, 20[_] through and including March
31, 20[_], until the entire principal amount hereof shall have become due and
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or declaration or otherwise, and such per annum interest rate shall
be increased by 2% on each January 18 and July until the principal has been paid
in full (including on any overdue installment of principal (including any
overdue prepayment of principal) and (to the extent permitted by law) on any
overdue installment of interest until paid (whether or not any subordination
provision or other circumstance prevents such payment)).
The principal amount of the Note shall be increased by 1% on each of the
30th, 60th and 90th day following the Mandatory Redemption Date.
This Note is issued pursuant the (i) Series F Preferred Stock and Warrant
Purchase Agreement dated as of January 18, 2001 (as amended, the "First Purchase
Agreement") between the Company and the purchasers named therein, (ii) the
Exchange Agreement dated as of January 18, 2001 (as amended, the "Exchange
Agreement") between the Company and the parties named therein, (iii) the Second
Series F Preferred Stock and Warrant Purchase Agreement dated as of March 29,
2001 (the "Second Purchase Agreement") and (iv) the Third Series F Preferred
Stock and Warrant Purchase Agreement dated as of June [ ], 2001 and together
with the First Purchase Agreement and the Second Purchase Agreement, the
"Purchase Agreements") between the Company and the purchasers named therein, and
is one of the "Notes" contemplated in each such Agreement.
1. Payments
(a) If any payment of interest due hereunder becomes due and payable on a
day which is not a Business Day ("Business Day" means any day, other than a
Saturday, Sunday or legal holiday, on which banks in the location of the offices
of the Company are open for business), the due date thereof shall be the next
preceding day which is a Business Day, and the interest payable on such next
preceding Business Day shall be the interest which would otherwise have been
payable on the due date which was not a Business Day.
(b) Payments of principal and interest shall be made in lawful money of the
United States of America to the address or account designated by the holder
hereof for such purpose.
(c) All payments of principal and interest with respect to this Note and
each of the other Notes shall be made pro rata among the holders of the Notes in
proportion to the unpaid principal amount and amount of accrued but unpaid
interest, as applicable, with respect to each Note as of the date of each such
payment.
2. Exchange of Notes; Accrued Interest; Cancellation of Surrendered Notes;
Replacement.
(a) At any time at the request of any holder of this Note to the Company at
its offices the Company at its expense (except for any transfer tax or any other
tax arising out of the exchange) will issue and deliver to or upon the order of
the holder in exchange therefor new Notes, in such denomination or denominations
as such holder may request, in aggregate principal amount equal to the unpaid
principal amount of this Note and substantially in the form thereof, dated as of
the date to which interest has been paid on this Note (or, if no interest has
yet been so paid thereon, then dated the date this Note is so surrendered) and
payable to such person or persons or order as may be designated by such holder.
(b) In the event that this Note is surrendered to the Company upon a
prepayment the Company shall pay all accrued and unpaid interest on this Note or
such portion thereof and thereupon interest shall cease to accrue upon that
portion of the principal amount of this Note which was prepaid, and the right to
receive, and any right or obligation to make, any prepayment on such portion of
the principal amount shall terminate all upon the date of such prepayment and
upon presentation and surrender of this Note to the Company.
(c) Upon any prepayment if only a portion of the principal amount of this
Note is prepaid, then this Note shall be surrendered to the Company and the
Company shall simultaneously execute and deliver to or on the order of the
holder thereof, at the expense of the Company, a new Note or Notes in principal
amount equal to the unused or unpaid portion of this Note.
(d) This Note or portions thereof which have been prepaid shall be canceled
by the Company and no Notes shall be issued in lieu of the principal amount
prepaid.
(e) Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Note and, in the case of any such loss,
theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory to the Company (if requested by the Company and unsecured in the
case of the Purchaser or an institutional holder), or in the case of any such
mutilation, upon surrender of this Note (which surrendered Note shall be
canceled by the Company), the Company will issue a new Note of like tenor in
lieu of such lost, stolen, destroyed or mutilated Note as if the lost, stolen,
destroyed or mutilated Note were then surrendered for exchange.
3. Maximum Legal Rate. The Company shall not be obligated to pay and the
holder of this Note shall not collect interest at a rate in excess of the
maximum permitted by law or the maximum that will not subject Payee to any civil
or criminal penalties. If, because of the acceleration of maturity, the payment
of interest in advance, the scheduled increases in the interest rate or any
other reason, the Company is required to pay interest at a rate in excess of
such maximum rate, the rate of interest under such provisions shall immediately
and automatically be reduced to such maximum rate, and any payment made in
excess of such maximum rate, together with interest thereon at the rate provided
herein from the date of such payment, shall be immediately and automatically
applied to the reduction of the unpaid principal balance of this Note as of the
date on which such exceeds the unpaid principal balance, the amount of such
excess shall be refunded by Payee to Company. It is expressly stipulated and
agreed to be the intent of the Company and the holder of this Note at all times
to comply with applicable state law or applicable United States federal law (to
the extent that it permits the holder of this Note to contract for, charge,
take, reserve or receive a greater amount of interest than under state law) and
that this section shall control every other covenant and agreement in this Note,
the Purchase Agreements and the Exchange Agreement.
4. Protective Rights.
(a) The Company shall not, without the prior written consent of the holder
or holders of Notes representing at least sixty-seven percent (67%) in aggregate
principal amount of the outstanding Notes:
(i) pay or declare any dividend on any other type or class of securities,
other than a dividend payable in common stock or rights under the Rights Plan
and solely paid-in-kind dividends to the holders of the Series E Preferred
Stock;
(ii) repurchase or redeem any shares of capital stock of the Company;
(iii) authorize (i) a sale of any material asset of a value in excess of
$1,000,000 of the Company or any subsidiary or subsidiaries of the Company
(other than sales of stores owned by the Company or its subsidiaries), (ii) a
sale of any substantial portion of the assets of the Company or any subsidiary
or subsidiaries (other than sales of stores owned by the Company or its
subsidiaries), or (iii) a recapitalization or reorganization of the Company or
any subsidiary or subsidiaries of the Company (other than stock splits,
combinations and/or dividends;
(iv) take any action that results in the Company or any subsidiary or
subsidiaries of the Company incurring or assuming more than $1,000,000 of funded
indebtedness (other than (w) the $140,000,000 Senior Secured Increasing Rate
Notes due 2003 (which have been previously approved by the requisite holders of
the Series F Preferred Stock), (x) the $35,000,000 Secured Increasing Rate Note
issued on June 19, 2001, (y) borrowings of up to $7,500,000 for a revolving line
of credit and (z) up to $4,700,000 of indebtedness outstanding as of June 15,
2001);
(v) effect any of the following: (i) a consolidation or merger of the
Company with or into any other corporation (other than a merger in which the
Company is the surviving corporation and which will not result in more than 50%
of the capital stock of the Company being owned of record or beneficially by
persons other than the holders of such capital stock immediately prior to such
merger), except as contemplated by the Purchase Agreements, (ii) sell or
otherwise dispose of all or substantially all of the properties and assets of
the Company as an entirety to any other person or persons in a single
transaction or series of related transactions, except as contemplated by the
Purchase Agreements, or (iii) an acquisition of "beneficial ownership" by any
"person" or "group" of voting stock of the Company representing more than 50% of
the voting power of all outstanding shares of such voting stock, whether by way
of merger or consolidation or otherwise;
(vi) effect (i) an acquisition of another corporation or other entity, or a
unit or business group of another corporation or entity, by merger or otherwise,
except as contemplated by the Purchase Agreements or (ii) the purchase of all or
substantially all of the capital stock, other equity interests or assets of any
other entity or person, except as contemplated by the Purchase Agreements;
(vii) increase the number of directors of the Board of Directors of the
Company except as set forth herein; or
(viii) effect or allow fundamental change in the nature of the Company's
business.
5. Defaults.
(a) Any of the following shall constitute an "Event of Default":
(i) The Company defaults in the payment of (A) any part of the principal of
any Note, when the same shall become due and payable, whether at maturity or at
a date fixed for prepayment or by acceleration or otherwise, or (B) the interest
on any Note, when the same shall become due and payable, and such default in the
payment of interest shall have continued for five (5) Business Days; or
(ii) the Company defaults in the performance of any other agreement or
covenant contained in the Purchase Agreements, and such default shall not have
been remedied within thirty (30) days after written notice thereof shall have
been given to the Company by any holder of this Note (the Company to give
forthwith to all other holders of this Note at the time outstanding written
notice of the receipt of such notice, specifying the default referred to
therein); or
(iii) any material representation or warranty by the Company herein, in the
Purchase Agreements or in any certificate delivered by the Company pursuant
hereto proves to have been incorrect in any material respect when made; or
(iv) the Company or any Subsidiary shall make an assignment for the benefit
of creditors, or shall admit in writing its inability to pay its debts; or a
receiver or trustee is appointed for the Company or any Subsidiary or for
substantially all of its assets and, if appointed without its consent, such
appointment is not discharged or stayed within sixty (60) days; or proceedings
under any law relating to bankruptcy, insolvency or the reorganization or relief
of debtors are instituted by or against the Company or any Subsidiary, and, if
contested by it, are not dismissed or stayed within sixty (60) days; or any writ
of attachment or execution or any similar process is issued or levied against
the Company or any Subsidiary or any of its property and is not released,
stayed, bonded or vacated within sixty (60) days after its issue or levy; or the
Company or any Subsidiary takes corporate or limited liability company action in
furtherance of any of the foregoing.
(b) If an Event of Default occurs pursuant to any of clauses (i) through
(iii) of Section 5(a) of this Note then and in each such event and with the
concurrence of holders of 67% of the Notes any holder of this Note (unless all
Events of Default shall theretofore have been waived or remedied) at its option,
by written notice or notices to the Company, may declare this Note to be due and
payable. If an Event of Default occurs pursuant to clause (iv) of Section 5(a)
of this Note, this Note shall automatically and without further action become
due and payable. Upon any such declaration (or as to such clause (iv) upon its
occurrence) this Note shall forthwith immediately mature and become due and
payable.
However, the foregoing acceleration rights are subject to the following:
(i) if, at any time after the principal of this Note shall so become due
and payable and prior to the date of maturity stated in this Note, all interest
on this Note (with interest at the rate specified in this Note on any overdue
principal and, if applicable, on any overdue interest) shall be paid to the
holder of this Note by or for the account of the Company, then the Note holder,
by written notice or notices to the Company, may waive such Event of Default and
its consequences and rescind or annul any such declaration, but no such waiver
shall extend to or affect any subsequent Event of Default or impair any right or
remedy resulting therefrom;
(ii) if any holder or holders of Notes which, at the time, holds or hold at
least sixty-seven percent (67%) in aggregate principal amount of the Notes then
outstanding exercises the above rights of acceleration, then the Company shall
notify each other holder of Notes of the fact of such acceleration and each
other holder shall, without limiting any other rights hereunder, (A) have the
right for thirty (30) days after such notice from the Company to accelerate its
own Notes based on the Event or Events of Default on which such acceleration was
based (regardless of whether such Event or Events of Default are then
continuing), unless at the time there are no outstanding Events of Default and
any acceleration of any Notes has been rescinded or (B) be deemed automatically
(without any action by such holder) to have accelerated its Notes if such holder
has not received such notice of an acceleration from the Company within ten (10)
business days after such acceleration; provided that any such automatic
acceleration may take place regardless of whether the Event or Events of Default
on which the initial acceleration was based are then continuing but such
automatic acceleration shall not take place if at the time any and all
accelerations of any Notes have been rescinded or annulled pursuant to
subparagraph (i) above or otherwise;
(iii) any holder may at any time rescind and annul any acceleration with
respect to its own Notes; and
(iv) if any holder of a Note shall give any notice or take any other action
with respect to a claimed Event of Default, the Company, forthwith upon receipt
of such notice or obtaining knowledge of such other action, will give written
notice thereof to all other holders of the Notes then outstanding, describing
such notice or other action and the nature of the claimed Event of Default.
6. Subordination.
This Note shall be subject to the subordination provisions of the Amended
and Restated Affiliate Subordination Agreement dated as of March 29, 2001 among
the Company, the holder of this Note, the holders of Notes issued pursuant to
the Exchange Agreement and Fleet National Bank.
7. Board Representation.
The holders of Notes representing at least sixty-seven percent (67%) of the
aggregate principal amount of the outstanding Notes shall be entitled to
designate at least four members of the Board of Directors of the Company (the
"Series F Directors"), and the Company will use all reasonable efforts to cause
the election of such designees, provided that two of the Series F Directors
shall be designated by Xxxxxxx Xxxxx XXX, L.P. (each a "Xxxxxxx Designee"),one
of the Series F Directors shall be designated by BET Associates, L.P (the "BET
Designee") and one of the Series F Directors shall be designated by Brookwood
New World Investors, LLC (the "Brookwood Designee").
8. Home Office Payments.
As long as the Purchaser or any payee named in this Note delivered to the
Purchaser on the Closing Date, or any institutional holder which is a direct or
indirect transferee from the Purchaser or such payee, shall be the holder of
this Note, the Company will make payments (whether at maturity, upon mandatory
or optional prepayment, or otherwise) of principal, interest and premium, if
any, (i) by check payable to the order of the holder of any this Note duly
mailed or delivered to the Purchaser at such address as the Purchaser or such
other holder may designate in writing, or (ii) if requested by the Purchaser or
such other holder, by wire transfer to the Purchaser's or such other holder's
(or its nominee's) account at any bank or trust company in the United States of
America, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. If the Purchaser has provided an address for
payments by wire transfer, then the Purchaser shall be deemed to have requested
wire transfer payments under the preceding clause (ii). All such payments shall
be made in federal or other immediately available funds.
9. Miscellaneous.
The Company and all endorsers of this Note hereby waive presentment,
demand, protest and notice. The holder of this Note shall, promptly upon full
payment by the Company of the principal of and interest on this Note, together
with all costs and expenses, if any, due hereon, surrender this Note to the
Company for retirement and cancellation, provided, however, that to the extent
that the Company makes a payment or payments to the holder of this Note, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside, and/or required to be repaid to a
trustee, receiver, or any other party under the United States Bankruptcy Code,
as amended, any state or federal law, common law, or equitable causes (a
"Voidable Transfer") and the holder of this Note is required to repay or restore
any such Voidable Transfer or the amount or any portion thereof, or upon the
advice of its counsel is advised to do so, then as to any such Voidable Transfer
or the amount repaid or restored (including all reasonable costs, expenses and
attorneys' fees of the holder of this Note related thereto), the liability of
the Company shall automatically be revived, reinstated and restored and shall
exist in full force and effect as though such Voidable Transfer had never been
made.
10. Consent To Jurisdiction And Service Of Process.
The parties hereby consent to the jurisdiction of any state or federal
court located within the city, county and state of New York and irrevocably
agree that, subject to the election, all actions or proceedings relating to this
agreement or the related agreements may be litigated in such courts. The parties
accept for themselves and in connection with their properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and waive
any defense of forum non conveniens, and irrevocably agree to be bound by any
judgment rendered thereby (subject to any appeal available with respect to such
judgment) in connection with this Note. 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.
11. 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.
IN WITNESS WHEREOF, New World Coffee - Manhattan Bagel, Inc. has caused
this Note to be dated and to be executed and issued on its behalf by its duly
authorized officer.
NEW WORLD COFFEE -MANHATTAN BAGEL, INC.
By________________________________________
Name:
Title:
--------
1 The interest rate will be equal to
the dividend rate of the Series F
Preferred Stock in effect as of the
date of issuance of the Note.
