DEBT CONVERSION AGREEMENT
EXHIBIT
10.1
This
DEBT CONVERSION
AGREEMENT (“Agreement”), dated as of April 29, 2010, by and between BROOKLYN CHEESECAKE & DESSERT
COMPANY, INC., a New York corporation (“BCKE”), XXXXXX X. XXXXXXX, an
individual resident of the state of New York (“Xxxxxxx”).
WHEREAS, on January 31, 2006,
the Company issued a demand Promissory Note to Xxxxxxx in an aggregate principal
amount of $995,818 (the “Note”), $195,818 of which was satisfied on March 28,
2006;
WHEREAS, Xxxxxxx has agreed to
forbear the payment of all accrued but unpaid interest on the Notes through the
date of this Agreement;
WHEREAS, as a result of the
Notes and the Company’s other outstanding indebtedness, the Company is highly
leveraged and had a negative net worth of approximately $13.6 million as of
March 31, 2010;
WHEREAS, the foregoing has
continued to negatively impact the Company’s operations, including its ability
to raise additional capital; and
WHEREAS, Xxxxxxx has agreed to
convert the principal amount of the Note into shares of common stock, par value
$.025 per share (“Common Stock”), of BCKE less amounts owed by him to the
Company for licensing fees ($815,000 - $23,232 = $791,768).
NOW THEREFORE, in
consideration of the premises and the mutual covenants and agreements of the
parties hereinafter set forth, the parties intending to be legally bound hereto
hereby agree as follows:
1. DEBT CONVERSION.
(a) Xxxxxxx,
agrees, subject to the conditions set forth herein, to convert the principal
amount of his Note into 6,334,144 ($791,768 / $.125) shares of the Company’s
Common Stock (the “Conversion Shares”).
(b) Xxxxxxx
hereby agrees to permanently forbear accrued interest of
$431,658.93.
(c) Subsequent
to the date of this Agreement, if the Company receives an offer to purchase its
equity securities from a potential investor (the “Potential Investor”), it shall
promptly provide written notice to Xxxxxxx including the price and other terms
and conditions of such offering (the “Offering Notice”). For fifteen
(15) days after receipt of the Offering Notice, Xxxxxxx shall have the option to
sell the Conversion Shares to the Potential Investor in the proposed offering at
the price and on the terms and conditions stated in the Offering
Notice. Xxxxxxx may exercise such option by delivering to the
Potential Investor the stock certificate evidencing ownership of the Conversion
Shares along with a stock power executed in blank and such other documentation
that the Potential Investor or the Company’s transfer agent may reasonably
request, in exchange for a cash payment equal to the number of Conversion Shares
multiplied by the price per share set forth in the Offering Notice, provided
that, if the Offering Notice is dated earlier than the six (6) month anniversary
of this Agreement, then Xxxxxxx shall only deliver to the Potential Investor an
irrevocable proxy to vote the Conversion Shares and the final sale of the
Conversion Shares, including the tender of the stock certificate evidencing
ownership of the Conversion Shares, the executed stock power and other
documentation by Xxxxxxx, shall not occur until one (1) day after the six (6)
month anniversary of the date of this Agreement.
(d) Subject
to the terms and conditions of this Agreement, the consummation of the
transaction contemplated by this Agreement shall take place at a closing
(“Closing”) to be held at 6:00 p.m., local time, on the date on which the last
of the conditions set forth in Section 4(c) and (d) below is fulfilled, at the
offices of Xxxxxxx X. Xxxxxxx, CPA, P.C., 0000 Xxxxxxx Xxxx Xxxxxx, 0xx Xxxxx,
Xxxxxxx, Xxx Xxxx, 00000, or at such other time, date or place as the parties
may agree upon in writing. At the Closing, Xxxxxxx shall deliver the
Note for cancellation and the Company shall deliver Xxxxxxx a certificate
evidencing ownership of the Conversion Shares. If Xxxxxxx has lost
his Note and is unable to deliver his Note at the Closing, he shall submit an
affidavit of loss and indemnity agreement so that the Note may be replaced and
deemed cancelled in accordance with the terms hereof. The Company
shall pay any documentary, stamp or similar issue or transfer tax due on such
Debt Conversion, except that Xxxxxxx shall pay any such tax due because the
Conversion Shares are issued in a name other than Xxxxxxx’x.
2. REPRESENTATIONS AND WARRANTIES OF
COMPANY. The Company hereby represents and warrants to Xxxxxxx
as follows:
(a) As
of the date hereof, the Company has 30,000,000 shares of Common Stock
authorized, of which 684,445 shares of Common Stock are issued and outstanding,
and 2,000,000 shares of preferred stock authorized, of which no shares are
issued and outstanding. All of the issued and outstanding shares of
the Company’s Common Stock are, and all shares reserved for issuance will be,
upon issuance in accordance with the terms specified in the instruments or
agreements pursuant to which they are issuable, duly authorized, validly issued,
fully paid and nonassessable. The Conversion Shares to be issued and delivered
to Xxxxxxx upon conversion of the Notes have been duly authorized and when
issued upon such conversion, will be validly issued, fully-paid and
non-assessable.
(b) The
Company has full legal power to execute and deliver this Agreement and to
perform its obligations hereunder. All acts required to be taken by the Company
to enter into this Agreement and to carry out the transactions contemplated
hereby have been properly taken, and this Agreement constitutes a legal, valid
and binding obligation of the Company, enforceable in accordance with its terms
and does not conflict with, result in a breach or violation of or constitute (or
with notice of lapse of time or both constitute) a default under any instrument,
contract or other agreement to which the Company is a party.
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(c) None
of the Company’s Articles of Incorporation, as amended, or Bylaws, or the laws
of New York, contains any applicable anti-takeover provision or statute which
would restrict the Company’s ability to enter into this Agreement or consummate
the transactions contemplated by this Agreement or which would limit any of
Xxxxxxx’x rights following consummation of the transaction contemplated by this
Agreement.
(d) No
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the
Company.
(e) The
Company has filed with the Securities and Exchange Commission (the “Commission”)
all periodic reports, registration statements and proxy statements required to
be filed by it prior to the date of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF
XXXXXXX. Xxxxxxx represents and warrants to the Company as
follows:
(a) Xxxxxxx
has full legal power to execute and deliver this Agreement and to perform its
obligations hereunder. All acts required to be taken by Xxxxxxx to enter into
this Agreement and to carry out the transaction contemplated hereby have been
properly taken; and this Agreement constitutes a legal, valid and binding
obligation of Xxxxxxx enforceable in accordance with its terms.
(b) Xxxxxxx
has reviewed the filings of the Company referred to in Section 2(e)
above.
(c) Xxxxxxx
has been given an opportunity to ask questions and receive answers from the
officers and directors of the Company and to obtain additional information from
the Company.
(d) Xxxxxxx
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the Company’s
securities and has obtained, in its judgment, sufficient information about the
Company to evaluate the merits and risks of an investment in the
Company.
(e) Xxxxxxx
is relying solely on the representations and warranties contained in Section 2
hereof and in certificates delivered hereunder in making their decision to enter
into this Agreement and consummate the transactions contemplated hereby and no
oral representations or warranties of any kind have been made by the Company or
its officers, directors, employees or agents to Xxxxxxx.
4. CONDITIONS.
(a) The
obligations of BCKE to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment of the following
conditions:
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(i) The
representations and warranties of Xxxxxxx set forth in Section 3 hereof shall be
true and correct on and as of the Closing date and a certificate certifying such
shall be delivered.
(ii) All
proceedings, corporate or otherwise, to be taken by Xxxxxxx in connection with
the consummation of the transactions contemplated by this Agreement shall have
been duly and validly taken and all necessary consents, approvals or
authorizations of any governmental or regulatory authority or other third party
required to be obtained by the Company or Xxxxxxx shall have been obtained in
form and substance reasonably satisfactory to the Company.
(iii) Xxxxxxx
shall have delivered to the Company for cancellation his Note or an affidavit of
loss and indemnity.
(b) The
obligations of Xxxxxxx to consummate the transaction contemplated by this
Agreement shall be subject to the fulfillment of the following
conditions:
(i) The
representations and warranties of the Company set forth in Section 2 hereof
shall be true and correct on and as of the Closing date and a certificate
certifying such shall be delivered.
(ii) All
proceedings, corporate or otherwise, to be taken by the Company in connection
with the consummation of the transactions contemplated by this Agreement shall
have been duly and validly taken and all necessary consents, approvals or
authorizations of any governmental or regulatory authority or other third party
required to be obtained by the Company or Xxxxxxx shall have been obtained in
form and substance reasonably satisfactory to Xxxxxxx.
(iii) All
of the transactions contemplated by the Merger Agreement and the Contribution
Agreement shall have been consummated.
5. FILINGS. Promptly
after execution of this Agreement, the Company shall file with the Commission a
Current Report on Form 8-K (the “Form 8-K”) with respect to the transactions
contemplated hereby. The Company shall provide Xxxxxxx with drafts of the Form
8-K and a reasonable opportunity to comment thereon. No party hereto shall make
any public announcements in respect of this Agreement or the transactions
contemplated herein inconsistent with the Form 8-K without the prior approval of
the other party as to the form and content thereof, which approval will not be
unreasonably withheld. Notwithstanding the foregoing, any disclosure may be made
by a party which its counsel advises is required by applicable law or
regulation, in which case the other party shall be given such reasonable advance
notice as is practicable in the circumstances and the parties shall use their
best efforts to cause a mutually agreeable release or announcement to be issued.
The parties may also make appropriate disclosure of the transactions
contemplated by this Agreement to their officers, directors, agents and
employees.
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6. TERMINATION. This
Agreement may be terminated no later than the Closing:
(a) At
the option of any party in the event that the Debt Conversion has not occurred
by May 31, 2010 and such delay was not as a result of any breach of this
Agreement by the terminating party;
(b) By
Xxxxxxx if the Company’s Board of Directors failed to recommend or withdrew or
modified in a manner adverse to Xxxxxxx its approval or recommendation of the
Debt Conversion;
(c) At
the option of any party if any other party has materially breached a term of
this Agreement and has not cured such breach within 30 days; or
(d) At
the option of any party if any competent regulatory authority shall have issued
an order making illegal or otherwise restricting, preventing, prohibiting or
refusing to approve the transactions contemplated hereby, and such order shall
have become final and non-appealable.
7. MISCELLANEOUS.
(a) Notices. Any
notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally or by a recognized courier service,
telegraphed, telexed, sent by facsimile transmission or sent by certified or
registered mail, postage prepaid. Any such notice shall be deemed
given and received (whether actually received or not) on the day it is delivered
personally or delivered by a recognized courier service as aforesaid, or
telegraphed, telexed or sent by facsimile transmission or, if mailed, four (4)
days after the date of deposit in the United States mails, as
follows:
If to BCKE:
Xxxxxxx X. Xxxxxxx, Chief Executive
Officer
Brooklyn Cheesecake & Dessert
Company, Inc.
0000 Xxxxxxx Xxxx Xxxxxx, 0xx
Xxxxx
Xxxxxxx, XX 00000
If to Xxxxxxx:
Xxxxxx X. Xxxxxxx
c/o Brooklyn Cheesecake & Dessert
Company, Inc.
0000 Xxxxxxx Xxxx Xxxxxx, 0xx
Xxxxx
Xxxxxxx, XX 00000
Any party
may by notice given in accordance with this Section to the other parties
designate another address or person for receipt of notices
hereunder.
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(b) Entire
Agreement. This Agreement (including the exhibits and
schedules attached hereto) constitutes the entire agreement among the parties,
and supersede all prior agreements, written or oral, with respect to the subject
matter of this Agreement.
(c) Waivers and
Amendments. This Agreement may be amended, superseded,
cancelled, renewed, or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in
exercising any right, power, or privilege hereunder shall operate as a waiver
thereof. Nor shall any waiver on the part of any party of any such
right, power, or privilege, nor any single or partial exercise of any such
right, power, or privilege, preclude any further exercise thereof or the
exercise of any other such right, power, or privilege. No waivers of
or exceptions to any term, condition, or provision of this Agreement, in any one
or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition, or provision.
(d) Governing
Law. This Agreement shall be governed by and construed in
accordance with the substantive laws, and not the choice of law provisions, of
the state of New York .
(e) Binding Effect, No
Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties' and their respective successors and permitted
assigns and legal representatives. Neither this Agreement nor any of
the rights, interests, or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other
parties.
(f) No Third Party
Beneficiaries. Nothing in this Agreement is intended or shall
be construed to give any Person, other than the parties hereto, any legal or
equitable right, remedy, or claim under or in respect of this Agreement or any
provision contained herein.
(g) Counterparts. This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.
(h) Exhibits and
Schedules. The exhibits and schedules attached hereto are a
part of this Agreement as if fully set forth herein. All references
herein to Articles, Sections, subsections, clauses, exhibits and schedules shall
be deemed references to such parts of this Agreement, unless the context shall
otherwise require.
(i) Headings. The
headings in this Agreement are for reference only, and shall not affect the
interpretation of this Agreement.
(j) Severability. The
parties hereto expressly agree that it is not the intention of any of them to
violate any public policy, statutory or common law rules, regulations or
decisions of any governmental or regulatory body. If any provision of
this Agreement is judicially or administratively interpreted or construed as
being in violation of any such provision, such sections, sentences, words,
clauses, or combinations thereof shall be inoperative and the remainder of this
Agreement shall remain binding upon the parties hereto.
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(k) Cooperation. The
parties agree to use their reasonable efforts and to cooperate with one another
to effect the transactions contemplated hereby within the terms and provisions
of this Agreement. Each of the parties hereto shall execute such
documents and other papers and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby.
(l) Survival of Representations,
Warranties, and Covenants. Notwithstanding any investigation
of any of the parties hereto, all representations and warranties made by the
parties in this Agreement or in any exhibit, schedule, certificate, writing,
filing, or other instrument made or delivered in connection herewith shall
survive the execution and delivery hereof and shall remain in full force and
effect for a period of six (6) months from and after the date of this
Agreement.
(m) No
Broker. Each party to this Agreement represents to the other
party that it has not incurred and will not incur any liability for brokerage
fees, finders' fees or agents' commissions in connection with this Agreement and
the transactions contemplated hereby, and agrees that it will indemnify and hold
harmless the other party against any claim for brokerage and finders' fees or
agents' commissions incurred by it in connection with the negotiation or
consummation of the transactions contemplated by this Agreement.
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed by their duly
authorized representatives as of the date first above written.
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COMPANY,
INC.
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By:
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/s/
Xxxxxxx X. Xxxxxxx
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Name:
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Title:
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/s/
Xxxxxx X. Xxxxxxx
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Xxxxxx
X.
Xxxxxxx
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