As filed with the Securities and Exchange Commission on January 23, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BIG CITY BAGELS, INC.
(Exact name of registrant as specified in its charter)
New York 11-3137508
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
99 Woodbury Road
Hicksville, New York 11801
(516) 932-5050
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------
Mark Weinreb, Chairman of the Board
Big City Bagels, Inc.
99 Woodbury Road
Hicksville, New York 11801
(516) 932-5050 (Phone)
(516) 932-5056 (Telecopy)
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
----------------------
Copies to:
David Alan Miller, Esq.
Peter M. Ziemba, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
(212) 818-8800 (Phone)
(212) 818-8881 (Telecopy)
----------------------
Approximate date of commencement of proposed sale to the public: As
soon as possible after the effective date of the registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.|_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.|_| ___________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.|_| ____________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.|_|
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Amount of Dollar Amount Maximum Maximum Amount of
Title of Each Class of Securities to be to be Offering Price Aggregate Registration
Securities to be Registered Registered(1) Registered Per Security Offering Price Fee
<S> <C> <C> <C> <C> <C>
Common Stock issuable upon
conversion of Class A Preferred Stock. -- $3,286,000.00(2) -- $3,286,000.00 $969.37
Placement Agent Warrants.............. 125,000 -- $0.00(3) $0.00 $0.00
Common Stock issuable upon exercise
of Placement Agent Warrants........... 125,000 -- $1.125(4) $140,625.00 $41.48
Placement Agent Warrants.............. 75,000 -- $0.00(5) $0.00 $0.00
Common Stock issuable upon exercise
of Placement Agent Warrants........... 75,000 -- $1.125(4) $84,375.00 $24.89
Total Fee......................................................................................................... $1,036.24
====================================== ================
<FN>
(1) Pursuant to Rule 416, there also are being registered such additional
shares of Common Stock as may become issuable pursuant to the terms of
the antidilution provisions contained in the Placement Agent Warrants.
(2) Represents the stated value of 265,000 shares of Preferred Stock
($2,650,000) plus the maximum amount of dividends ($636,000) that may
be payable upon conversion of the Preferred Stock.
(3) Represents the excess of the market price of the Common Stock, as
reported by The Nasdaq Stock Market on January 16, 1998, over the
$1.3125 exercise price of the 125,000 Placement Agent Warrants.
(4) Represents the market price of the Common Stock, as reported by The
Nasdaq Stock Market on January 16, 1998, in accordance with Rule 457(c)
promulgated under the Securities Act of 1933, as amended ("Securities
Act").
(5) Represents the excess of the market price of the Common Stock, as
reported by The Nasdaq Stock Market on January 16, 1998, over the $5.00
exercise price of the 75,000 Placement Agent Warrants.
</FN>
</TABLE>
----------------------
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PRELIMINARY PROSPECTUS DATED JANUARY 23, 1998
SUBJECT TO COMPLETION
BIG CITY BAGELS, INC.
Common Stock
Common Stock Purchase Warrants
This Prospectus relates to shares of common stock, par value $.001 per
share ("Common Stock"), of Big City Bagels, Inc. ("Company") issuable upon
conversion of 265,000 shares of the Company's Class A Preferred Stock, $.001 par
value and $10.00 stated value ("Preferred Stock"), that may be offered for
resale for the account of the holders of the Preferred Stock. The Preferred
Stock accrues dividends at the rate of 8% per annum, payable in cash or in
shares of Common Stock at the election of the Company on the date the Preferred
Stock is converted into shares of Common Stock. The Preferred Stock and
dividends accrued thereon are convertible, at the election of the holder, into
shares of Common Stock at a conversion rate per share equal to the greater of
(i) 75% of the average closing bid price of the Common Stock for the five
consecutive trading days immediately prior to the date of conversion or (ii)
$0.2585. The shares of Preferred Stock then outstanding automatically convert
into shares of Common Stock on December 31, 2000. The Company may redeem the
Preferred Stock, in whole as a class and not in part, upon 30 days' prior
written notice, at a price payable in cash equal to the sum of (i) 125% of the
stated value of the shares being redeemed, plus (ii) the dividends accrued
through the redemption date.
This Prospectus also relates to 200,000 Common Stock Purchase Warrants
("Placement Agent Warrants" and, together with the Common Stock offered hereby,
the "Securities") and the shares of Common Stock issuable upon exercise of such
warrants that may be offered for resale for the accounts of the holders of the
Placement Agent Warrants. The Placement Agent Warrants entitle the holder
thereof to purchase 125,000 shares of Common Stock for $1.3125 per share and
75,000 shares of Common Stock for $5.00 per share, in both cases exercisable
until December 30, 2002.
All of the Securities offered hereby are being registered for the
respective accounts of the holders of the Preferred Stock and of the Placement
Agent Warrants (collectively, the "Selling Securityholders") set forth in this
Prospectus under the heading "Selling Securityholders." No period of time has
been fixed within which the Securities covered by this Prospectus may be offered
or sold. The Company will not receive any of the proceeds from the sale of the
Securities; however, it will receive an aggregate of $539,062.50 in gross
proceeds if the Placement Agent Warrants are fully exercised.
See "Use of Proceeds" and "Selling Securityholders."
All costs, expenses and fees in connection with the registration of the
Securities offered by this Prospectus will be borne by the Company. Such
expenses are estimated at $55,000. Brokerage commissions and discounts, if any,
attributable to the sale of the Securities for the accounts of the Selling
Securityholders will be borne by them.
The Common Stock of the Company is quoted on The Nasdaq SmallCap Market
under the symbol "BIGC." On January 16, 1998, the last sale price for the Common
Stock was $1.125.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS" AT PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is __________________, 1998
<PAGE>
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus in
connection with the offer described in this Prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Company or any of the Selling Securityholders. Neither the
delivery of this Prospectus nor any sale made under this Prospectus shall under
any circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof or since the date of any documents
incorporated herein by reference. This Prospectus does not constitute an offer
or solicitation in any state to any person to whom it is unlawful to make such
offer in such state.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION.............................................................................................2
DOCUMENTS INCORPORATED BY REFERENCE...............................................................................3
PROSPECTUS SUMMARY................................................................................................4
RISK FACTORS......................................................................................................7
USE OF PROCEEDS..................................................................................................10
SELLING SECURITYHOLDERS..........................................................................................10
PLAN OF DISTRIBUTION.............................................................................................11
LEGAL MATTERS....................................................................................................12
EXPERTS ........................................................................................................12
INDEMNIFICATION..................................................................................................12
</TABLE>
AVAILABLE INFORMATION
The Company has filed with the Commission, in Washington, D.C., a
Registration Statement on Form S-3 ("Registration Statement") under the
Securities Act of 1933, as amended ("Securities Act"), with respect to the
Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and exhibits thereto. For
further information with respect to the Company and the Securities, reference is
hereby made to the Registration Statement and exhibits. The statements contained
in this Prospectus as to the contents of any contract or other document filed as
an exhibit are not complete and the description of such contract or document is
qualified in its entirety by reference to such contract or document. The
Registration Statement, together with the exhibits, may be inspected at the
Commission's principal office in Washington, D.C. and copies may be obtained
upon payment of the fees prescribed by the Commission.
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company under the Exchange Act may be inspected and copied at the public
reference facilities of the Commission, Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following Regional
Offices: 7 World Trade Center, New York, New York 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies also can be obtained at
prescribed rates from the Commission's Public Reference Section, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains
a web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of such web site is http://www.sec.gov. The Common Stock is listed
on The Nasdaq SmallCap Market and information concerning the Company can be
inspected and copied at The Nasdaq Stock Market, 1735 K Street, N.W. Washington,
D.C. 20006.
2
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference into this Prospectus and made a part hereof:
(1) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996, filed with the Commission pursuant to Section 13(a) of the
Exchange Act;
(2) The Company's Quarterly Reports on Form 10-QSB for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997, filed with the
Commission pursuant to Section 13(a) of the Exchange Act; and
(3) The Company's proxy statement, dated June 4, 1997, for its annual
meeting of shareholders, filed with the Commission pursuant to Section 14(a) of
the Exchange Act and Rule 14a-6 thereunder.
The description of the Company's Common Stock is contained in the
Company's Registration Statement on Form 8-A declared effective by the
Commission on May 7, 1996, which registration statement is also incorporated
into this Prospectus by reference and made a part hereof.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and shall be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference in this Prospectus and filed with the Commission prior
to the date of this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein, or
in any other subsequently filed document which is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). A written or telephone request
should be directed to Big City Bagels, Inc., 99 Woodbury Road, Hicksville, New
York 11801, telephone number (516) 932-5050, Attention: Investor Relations.
3
<PAGE>
PROSPECTUS SUMMARY
The information set forth below is qualified in its entirety by the information
set forth in those documents incorporated herein by reference. Certain
statements contained in the Prospectus Summary and elsewhere in this Prospectus
regarding matters that are not historical facts, such as statements regarding
growth trends in the bagel industry and the Company's growth strategy and
expansion plans, are forward-looking statements (as such term is defined in the
Securities Act). Since such forward-looking statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such statements. Factors that could cause actual results to differ
materially include, but are not limited to, those discussed herein under "Risk
Factors" as well as those discussed elsewhere in this Prospectus.
The Company
Big City Bagels operates and franchises upscale bagel bakery cafes
under the Company's registered trademark "Big City Bagels(R)." These stores sell
a wide variety of oversized, fresh baked bagels, including unique specialty
bagels, and cream cheese spreads, muffins and other bakery products for take-out
and eat-in consumption. Big City Bagels stores also sell salads, sandwiches,
specialty coffees and other beverages. The Company owns six stores, which are
located in California, Arizona, New York and Utah. The Company also sells Big
City Bagels franchises. As of the date of this Prospectus, there are eleven
franchises open and operating in California, Colorado, Idaho and Minnesota and
the Company has sold franchises to open an additional 23 stores, which are in
various stages of development. The Company also sells its products wholesale to
commercial accounts and food service operators.
The Company seeks to ensure a high quality, consistent product by
controlling the preparation and distribution of its bagel dough. This control is
maintained by establishing regional commissaries in which bagel dough and other
products are prepared and then delivered to surrounding Company-owned stores and
franchises. The Company's bagels are then baked daily in accordance with the
Company's quality control guidelines using a traditional technique which
requires the bagels to be boiled and then baked. The Company currently owns and
operates a commissary located in Costa Mesa, California, which services most
existing Big City Bagels stores. The Company also has assisted one of its
franchisees, which entered into an area development agreement with the Company
to open stores in the Minneapolis/St. Paul, Minnesota area, in establishing a
commissary owned and operated by such franchisee in Minneapolis to service these
stores. This commissary is required to adhere to the Company's strict quality
control guidelines.
The Company's objective is to become a leading national bagel store
chain. The Company seeks to achieve this objective by: (i) expanding its
franchise operations, (ii) increasing the number of Company-owned stores by
opening additional stores and acquiring existing bagel stores or chains and
(iii) increasing revenues from sales to commercial and wholesale accounts. With
respect to its franchise operations, the Company believes that its consistent
product quality, visually-appealing, upscale store design and well-organized
business operations will enable the Company to attract experienced, multi-unit
franchisees to operate its stores. In order to attract potential franchisees,
the Company plans to open Company-owned flagship stores in strategic geographic
locations around the country. Such franchises would be serviced by regional
commissaries, which the Company plans to use as additional stores are opened.
The Company also intends to expand by acquiring existing bagel stores or chains
and possibly other retail enterprises that the Company believes will enhance its
operations. In determining whether to make an acquisition, the Company will
consider, among other things, the size, location and existing operations of the
acquisition candidate, as well as such candidate's potential to maximize growth
and increase revenues. Although the Company regularly evaluates possible
acquisition opportunities, as of the date of this Prospectus, the Company is not
a party to any agreements or commitments with respect to any acquisition.
The Company was incorporated in New York on December 14, 1992. Its
principal executive offices are located at 99 Woodbury Road, Hicksville, New
York 11801 and its telephone number is (516) 932-5050.
4
<PAGE>
Recent Developments
Private Placement
On December 31, 1997, the Company completed a private placement
("Private Placement") from which the Company received gross proceeds of
$2,650,000 through the sale of 265,000 shares of Preferred Stock to accredited
investors. Perrin, Holden & Davenport Capital Corp., a member of the National
Association of Securities Dealers, Inc. ("Placement Agent"), acted as exclusive
placement agent for the Company and received a commission of $265,000, or 10% of
the offering price of the Preferred Stock. The Company also issued to the
Placement Agent and its designee Placement Agent Warrants, which entitle the
holders thereof to purchase 125,000 shares of Common Stock for $1.3125 per share
(the average of the closing bid prices of the Common Stock for the five trading
days immediately preceding the closing date of the Private Placement) and 75,000
shares of Common Stock for $5.00 per share, in both cases exercisable until
December 30, 2002. Total costs of the Private Placement, including the Placement
Agent's commission and costs to register the Securities, are estimated at
$325,000.
The Company has agreed to register for resale by the Selling
Securityholders (i) the shares of Common Stock issuable upon conversion of the
Preferred Stock, (ii) the Placement Agent Warrants and (iii) the shares of
Common Stock issuable upon exercise of the Placement Agent Warrants under the
Securities Act pursuant to the Registration Statement of which this Prospectus
is a part.
Business
In September 1997, the Company entered into a seven-store area
development franchise agreement. The franchisee anticipates opening Big City
Bagels drive-thru stores throughout Fayetteville, North Carolina, with the first
location scheduled to open in March 1998. Also in September 1997, the Company
entered into a licensing agreement with Total Petroleum, Inc. (a public company
traded on the American Stock Exchange), pursuant to which the licensee will open
and operate full service Big City Bagels stores at Total Petroleum gasoline and
convenience store stations. Following a short trial, the licensee intends to
operate a minimum of seven full service Big City Bagels stores. The first store
opened in January 1998 in Superior, Colorado. Also in September 1997, the
Company terminated a twelve-store area development agreement it had entered into
in 1996 providing for the opening of stores in Texas. The franchisee under that
agreement had not opened a single store and, as a result, the Company terminated
its relationship.
In October 1997, the Company closed its Mesa, Arizona retail store. The
Company intends to sell one of its stores located in Park City, Utah to an
independent entity for $50,000 in January 1998.
In January 1998, the Company purchased a bagel store located in New
York City for approximately $275,000 in cash and 346,497 shares of Common Stock.
The Company has an exclusive option to purchase an additional store in New York
City until January 1999. The Company entered into consulting agreements with the
two former owners of the bagel store, pursuant to which they agreed to assist
the Company in operating this store and to open additional stores in New York
City. Also in January 1998, the Company renegotiated a twelve-store area
development agreement it had entered into in 1996 providing for the opening of
stores in Minnesota. The franchisee under that agreement has opened three stores
and now is not required to open any additional stores.
The Company entered into an agreement with Northwest Airlines to be the
exclusive supplier of bagels on Northwest flights. The agreement is for a
three-year term, although either party may terminate the agreement after the
second year.
5
<PAGE>
The following table sets forth by location the number of currently
opened Company-owned stores and franchises and the number of franchises that
have been sold but not yet opened:
<TABLE>
<CAPTION>
Stores Not Yet Opened
Location Stores Open Under Franchises Sold
<S> <C> <C>
Arizona......................................... 1(1) 3
California...................................... 9(2) 3
Colorado........................................ 1 6
Idaho........................................... 1 1
Minnesota....................................... 3 0
Nevada.......................................... 0 1
New York........................................ 1(1) 0
North Carolina.................................. 0 7
Utah............................................ 1(1) 0
Washington...................................... 0 2
--- --
Total.................................. 17 23
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<FN>
(1) Includes one Company-owned store.
(2) Includes three Company-owned stores.
</FN>
</TABLE>
6
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of risk.
Accordingly, in analyzing an investment in these securities, prospective
investors should carefully consider, along with other matters referred to
herein, the following risk factors.
Limited Revenues and Significant and Continuing Losses. Since inception
in December 1992, the Company has generated limited revenues and has incurred
significant losses, including net losses of $826,849 and $2,537,451,
respectively, for the years ended December 31, 1995 and 1996. In addition, the
Company incurred a net loss of $1,999,486 for the nine months ended September
30, 1997, compared to a net loss of $1,812,255 for the nine months ended
September 30, 1996. Losses are expected to continue at least through 1998.
Inasmuch as the Company will continue to have a high level of operating expenses
and will be required to make significant up-front expenditures in connection
with its proposed expansion (including salaries of executive, marketing and
other personnel), the Company anticipates that losses will continue until such
time, if ever, as the Company is able to generate sufficient revenues to finance
its operations and the costs of continuing expansion. There can be no assurance
that the Company will be able to generate significant revenues or achieve
profitable operations.
Possible Need for Financing. The Company anticipates, based on
currently proposed plans and assumptions relating to its operations, that its
present working capital, together with projected cash flow from operations, will
be sufficient to satisfy its anticipated cash requirements at least through the
end of 1998. Thereafter, the Company may need to seek additional financing. In
the event that the Company's plans change and it considers acquisitions
requiring substantial cash payments or its assumptions regarding its operations
change or prove to be inaccurate and its working capital and cash flow proves to
be insufficient to fund both the Company's operations and plans for expansion
(due to unanticipated expenses, delays, problems, difficulties or otherwise),
the Company may need to seek additional financing sooner than expected. There
can be no assurance that additional financing will be available to the Company
on commercially reasonable terms, or at all.
Dependence on Franchisees. The Company realizes a substantial portion
of its revenues from sales of bagel dough to franchisees, initial franchise and
area development fees and continuing royalty payments from its franchisees. The
Company is therefore substantially dependent upon its ability to attract, retain
and contract with suitable franchisees and the ability of franchisees to
successfully open and operate their franchises. Should the Company experience
difficulty in attracting suitable franchisees, or the franchisees encounter
business or operational difficulties, the Company's revenues will be materially
adversely affected. Such reduction in revenues also may negatively impact the
Company's ability to sell new franchises. Consequently, the Company's financial
prospects are directly related to the success of its franchisees in promoting
the Big City Bagels concept and the success of each store, over which the
Company has no direct control. There can be no assurance that the Company will
be able to successfully develop new franchises or that the Company's franchisees
will be able to successfully develop and operate stores.
Uncertainty of Expansion. Currently, 17 Big City Bagels stores are open
and operating. In addition, the Company has sold franchises for an additional 23
stores. The opening and success of Big City Bagels stores depends on various
factors, including customer acceptance of the Big City Bagels store concept in
new markets, the availability of suitable sites, the negotiation of acceptable
lease terms for new locations, the receipt of necessary permits and regulatory
compliance, the ability to meet construction schedules, the financial and other
capabilities of the Company and its franchisees, the ability of the Company to
successfully manage this anticipated expansion and to hire and train personnel,
and general economic and business conditions. Not all of the foregoing factors
are within the control of the Company or its franchisees.
The Company's plans for expansion include acquiring existing bagel
stores or chains and possibly other retail enterprises that the Company believes
will complement its operations. No assurance can be given that the Company will
be able to evaluate successfully the advisability of any particular acquisition
or that it will successfully integrate, convert, or operate any acquired
business. These acquisitions may not be subject to approval or review by the
7
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Company's shareholders. The Company's expansion also will require the
implementation of enhanced operational and financial systems as well as
additional management, operational and financial resources. Failure to implement
these systems and add these resources could have a material adverse effect on
the Company's results of operations and financial condition. There can be no
assurance that the Company will be able to manage its expanding operations
effectively or that it will be able to maintain or accelerate its growth.
Food Service Industry. Food service businesses often are affected by
changes in consumer tastes, national, regional and local economic conditions,
demographic trends, traffic patterns and the type, number and location of
competing businesses. Multi-unit food service chains such as the Company also
can be materially adversely affected by publicity resulting from poor food
quality, illness, injury or other health concerns or operating issues stemming
from one store or a limited number of stores. In addition, factors such as
inflation, increased food, labor and employee benefit costs, regional weather
conditions and the unavailability of experienced management and hourly employees
also may materially adversely affect the food service industry in general, and
the Company's results of operations and financial condition in particular.
Competition. The food service industry in general, and the take-out
sector in particular, are intensely competi tive. The Company competes against
well-established food service companies with greater product and name
recognition and larger financial, marketing and distribution capabilities than
those of the Company, as well as innumerable local food establishments that
offer similar products. In addition, the Company believes that the start-up
costs associated with opening a retail food establishment offering products
similar to those offered by the Company, on a stand-alone basis, are competitive
with the start-up costs associated with opening a Big City Bagels store and
accordingly, are not an impediment to entry of competitors into the retail bagel
business. There can be no assurance that the Company can compete successfully in
this complex market.
Government Regulation. The Company's franchise operations are subject
to regulation by the Federal Trade Commission (the "FTC") in compliance with the
FTC's rule entitled Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures, which requires, among other
things, that the Company prepare and update periodically a comprehensive
disclosure document in connection with the sale and operation of its franchises.
The Company and its franchisees also must comply with state franchising laws and
a wide range of other state and local rules and regulations applicable to their
business. Continued compliance with this broad federal, state and local
regulatory network is essential and costly and the failure to comply with such
regulations may have an adverse effect on the Company and its franchisees.
Violations of franchising laws and/or state laws and regulations regulating
substantive aspects of doing business in a particular state could subject the
Company and its affiliates to rescission offers, monetary damages, penalties,
imprisonment and/or injunctive proceedings. In addition, under court decisions
in certain states, absolute vicarious liability may be imposed upon franchisors
based upon claims made against franchisees. Even if the Company is able to
obtain coverage for such claims, there can be no assurance that such insurance
will be sufficient to cover potential claims against the Company.
Raw Material Cost Fluctuations; Dependence on Suppliers. As the Company
expands its Company-owned store operations, the Company's operating results and
financial condition may be materially adversely affected by fluctuations in the
cost of flour, its primary raw material. Such costs are determined by constantly
changing market forces over which the Company has no control. The Company has no
long-term contracts with any of its suppliers. The loss of any of its suppliers
could materially adversely affect the Company's business until alternative
arrangements were secured. Although the Company believes that arrangements
similar to those which the Company currently has with its suppliers could be
secured with other suppliers, there can be no assurance of this.
Dependence on Key Personnel. The Company's operations are dependent on
the efforts of Mark Weinreb, its Chairman of the Board and Chief Executive
Officer, and Jerry Rosner, its President. Although the Company has employment
agreements with each of Messrs. Weinreb and Rosner, the terms of such agreements
expire on December 31, 1998, and the loss of the services of either of these
officers could have a material adverse effect on the Company. There can be no
assurance that a suitable replacement could be found in the event of the death,
disability
8
<PAGE>
or resignation of either of Messrs. Weinreb or Rosner. The Company has obtained
key-person life insurance on the lives of Messrs. Weinreb and Rosner in the
amount of $2 million each.
Continuing Control by Management. Messrs. Mark Weinreb, Jerry Rosner,
Stanley Raphael and Stanley Weinreb, each of whom is also a director of the
Company, currently own, in the aggregate, approximately 43% of the Company's
outstanding Common Stock. In addition, these persons are parties to a
shareholder agreement, pursuant to which each of them has agreed to vote his
shares for the election of each of the others as a director of the Company as
long as each such other person owns at least 100,000 shares of Common Stock.
Accordingly, such shareholders, acting together, will be in a position to
effectively control, or at least strongly influence, the Company, including the
election of all of the directors of the Company.
No Dividends. The Company never has paid dividends on its Common Stock.
The Company intends to retain earnings, if any, for use in its business and does
not anticipate paying any cash dividends on its Common Stock in the foreseeable
future.
Volatility of Market Price. The trading price of the Common Stock could
be subject to wide fluctuations in response to quarterly variations in operating
results, failure to meet expectations of, or a change in recommendations by,
securities analysts, announcements of new products by the Company or its
competitors, government policy changes and other events or factors including
factors outside the Company's control. The market price of the Company's Common
Stock has been highly volatile to date and the market price of the Common Stock
may continue to be highly volatile in the future.
Possible Delisting of Securities from Nasdaq System. The Company's
Common Stock is listed on The Nasdaq SmallCap Market ("Nasdaq"). Effective
February 22, 1998, in order to continue to be listed on Nasdaq, a company must,
among other things, maintain $2 million in net tangible assets or,
alternatively, a $35 million market capitalization or $500,000 of net income,
and a minimum bid price of $1.00 per share. In addition, continued inclusion
requires the adoption of corporate governance requirements including, among
other things, a minimum of two independent directors. As of the date of this
Prospectus, the Company does not have two independent directors but intends to
meet this requirement prior to February 22, 1998. The failure to meet these
maintenance criteria in the future may result in the delisting of the Company's
securities from Nasdaq and trading, if any, in the Company's securities would
thereafter be conducted on the NASD OTC Bulletin Board. As a result of such
delisting, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Company's securities. In
addition, if the Common Stock were to become delisted from trading on Nasdaq and
the trading price of the Common Stock were to fall below $5.00 per share,
trading in the Common Stock also would be subject to the requirements of certain
rules promulgated under the Exchange Act, which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules require
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by such requirements may discourage them
from effecting transactions in the Company's securities, which could severely
limit the liquidity of the Company's securities and the ability of purchasers in
this Offering to sell such securities in the secondary market.
Potential Adverse Effect of Issuance of Preferred Stock Without
Shareholder Approval; Restriction on Issuance of Capital Stock. The Company's
Certificate of Incorporation authorizes the issuance of 1,000,000 shares of
Preferred Stock with such rights, preferences and designations as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without shareholder approval, to issue Preferred
Stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the Common
Stock and, in certain circumstances, depress the market price of the securities
offered hereby. In the event of issuance, the Preferred Stock could be utilized
under certain circumstances as a method of
9
<PAGE>
discouraging, delaying or preventing a change in control of the Company. The
Company currently has 265,000 shares of Preferred Stock outstanding. Although
the Company has no present intention of issuing additional shares of Preferred
Stock, there can be no assurance that the Company will not issue additional
shares of Preferred Stock in the future.
USE OF PROCEEDS
All of the Securities offered hereby are being registered for the
respective accounts of the Selling Securityholders. The Company will not receive
any of the proceeds from the sale of the Securities; however, it will receive an
aggregate of $539,062.50 in gross proceeds if the Placement Agent Warrants are
fully exercised. The Company is unable to estimate the number of Placement Agent
Warrants that may be exercised. The Company believes that the exercise of the
Placement Agent Warrants primarily will be dependent on the market price of a
share of Common Stock at the time of exercise and its relation to their exercise
price. See "Selling Securityholders."
The Company intends to use the net proceeds from the exercise of any of
the Placement Agent Warrants for working capital and general corporate purposes.
Pending application of the proceeds, the Company intends to place the funds in
interest-bearing investments such as bank accounts, certificates of deposit,
money market funds and United States government obligations.
SELLING SECURITYHOLDERS
The tables set forth below provide certain information with respect to
the beneficial ownership of the Company's Common Stock by the Selling
Securityholders as of January 16, 1998, and as adjusted to give effect to the
sale of all of the securities offered hereby. See "Plan of Distribution." Except
as otherwise indicated, the number of shares of Common Stock reflected in the
tables has been determined in accordance with Rule 13d-3 promulgated under the
Exchange Act. Under this rule, each Selling Shareholder is deemed to
beneficially own the number of shares of Common Stock issuable upon conversion
of the Preferred Stock and upon exercise of the Placement Agent Warrants since
such Preferred Stock and warrants are presently convertible or exercisable, as
the case may be. Accordingly, the number of shares of Common Stock set forth in
the column on each table entitled "Number of Shares of Common Stock Owned Prior
to Offering and Being Sold in Offering" includes the number of shares of Common
Stock issuable upon conversion of the Preferred Stock and upon exercise of the
Placement Agent Warrants. For purposes of presentation in the tables, it is
assumed that the Selling Securityholders will convert all of the shares of
Preferred Stock and exercise all of the Placement Agent Warrants indicated as
being owned and then resell all of the shares of Common Stock received upon
conversion or exercise thereof. Unless otherwise indicated, each of the Selling
Securityholders possesses sole voting and investment power with respect to the
securities shown and none of the Selling Securityholders has had a material
relationship with the Company or any of its predecessors or affiliates within
the past three years.
10
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of
Dollar Amount of Common Stock Owned
Preferred Stock Owned Prior to Offering and
Name Prior to Offering(1) Being Sold in Offering(2)
- ---- ----------------------- ----------------------------
<S> <C> <C>
Michael Ackerman...................................... $50,000 80,808
Brass Capital, L.L.C.................................. $50,000 80,808
Mendel Gluckowsky..................................... $25,000 40,404
Gross Foundation Inc.................................. $100,000 161,616
International Investment Group Equities Fund N.V...... $500,000 808,080
International Investment Group L.L.C.................. $200,000 323,232
Kadar Investment Company, Ltd......................... $175,000 282,828
Leon Kahn............................................. $50,000 80,808
Sara Liebowitz........................................ $300,000 484,848
Orlac Finance, Ltd.................................... $750,000 1,212,121
Jaime Radusky......................................... $50,000 80,808
Wilma C. Rossi & Joseph W. McGuire, JTWROS............ $50,000 80,808
Chava Scharf.......................................... $50,000 80,808
Starling Corporation.................................. $250,000 404,040
Rina Sugarman......................................... $50,000 80,808
<FN>
(1) Does not include dividends, which accrue at the rate of 8% per annum
and are convertible, at the election of the holder, into shares of
Common Stock at the same conversion rate as the Preferred Stock.
(2) Calculated, for purposes of presentation, by dividing the dollar amount
of Preferred Stock owned by each holder by an assumed conversion rate
of $0.61875 based on the average of the closing bid prices of the
Common Stock for the five trading days ended January 16, 1998.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Number of Shares
of Common Stock
Number of Warrants Owned Prior to
Owned Prior to Offering Offering and Being Sold
Name and Being Sold in Offering
------------------------- -------------------------
<S> <C> <C>
Perrin, Holden & Davenport Capital Corp........ 170,000 170,000
Donald Kleban.................................. 30,000 30,000
</TABLE>
PLAN OF DISTRIBUTION
The Selling Securityholders have advised the Company that sales of the
Securities may be effected from time to time in transactions (which may include
block transactions) on Nasdaq, in negotiated transactions, or a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The Selling
Securityholders have advised the Company that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their Securities. The Selling
Securityholders may effect such transactions by selling their Securities
directly to purchasers or to or through broker-dealers (including the Placement
Agent), which may act as agents or principals. Such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from the
Selling Securityholders and/or the purchasers of the Securities for whom such
broker-dealers may act as agents or to whom they sell as principal, or both. The
Selling Securityholders and any broker-dealers that act in connection with the
sale of the Securities might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act. The Selling
11
<PAGE>
Securityholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the Securities against certain
liabilities, including liabilities arising under the Securities Act.
The registration rights granted to the Selling Securityholders
generally provide that the Company and the Selling Securityholders indemnify
each other against certain liabilities, including liabilities under the
Securities Act. In the opinion of the Commission, such indemnification is
against public policy and is, therefore, unenforceable. See "Indemnification."
The Company has agreed to keep the Registration Statement, of which
this Prospectus is a part, effective until the earlier of the sale of all the
Securities or all the Securities may be sold by the holders thereof under Rule
144.
LEGAL MATTERS
Certain matters with respect to the legality of the issuance and sale
of the Securities offered hereby will be passed upon for the Company by Graubard
Mollen & Miller, New York, New York.
EXPERTS
The financial statements incorporated by reference in this Prospectus
have been audited by Richard A. Eisner & Company, LLP, independent auditors, to
the extent and for the periods set forth in their report incorporated herein by
reference, and are incorporated herein in reliance upon such report given upon
the authority of such firm as experts in auditing and accounting.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described above, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities is asserted by such director, officer or controlling person in
connection with the registration of the Shares, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The table below sets forth the estimated expenses (except the SEC
registration fee which is an actual expense) of the Registrant in connection
with the offer and sale of the shares of Common Stock covered by this
Registration Statement.
SEC registration fee.................................. $ 1,036.24
NASD filing fee....................................... $ 851.00
Accountant's fees and expenses........................ $ 10,000.00
Legal fees and expenses............................... $ 30,000.00
Printing and engraving expenses....................... $ 8,000.00
Miscellaneous......................................... $ 5,112.76
- --------
TOTAL $ 55,000.00
= =========
Item 15. Indemnification of Directors and Officers.
Sections 721 through 726, inclusive, of the New York Business
Corporation Law ("BCL") authorizes New York corporations to indemnify their
officers and directors under certain circumstances against expenses and
liabilities incurred in legal proceedings involving such persons because of
their being or having been officers or directors and to purchase and maintain
insurance for indemnification of such officers and directors.
Section 402(b) of the BCL permits a corporation, by so providing in its
certificate of incorporation, to eliminate or limit directors' personal
liability to the corporation or its shareholders for damages arising out of
certain alleged breaches of their duties as directors. The BCL, however,
provides that no such limitation of liability may affect a director's liability
with respect to any of the following: (i) acts or omissions made in bad faith or
which involved intentional misconduct or a knowing violation of law; (ii) the
declaration of dividends or other distributions or repurchase or redemption of
shares in violation of the BCL; (iii) the distribution of assets after
dissolution or making of loans to directors in violation of the BCL; or (iv) any
transaction from which the director derived a financial profit or other
advantage to which he was not legally entitled.
The Company's Restated Certificate of Incorporation provides that the
personal liability of the directors of the Company is eliminated to the fullest
extent permitted by Section 402(b) of the BCL. In addition, the By-Laws of the
Company provide in substance that, to the fullest extent permitted by New York
law, each director and officer shall be indemnified by the Company against
reasonable expenses, including attorney's fees, and any liabilities which he or
she may incur in connection with any action to which he or she may be made a
party by reason of his or her being or having been a director or officer of the
Company. The indemnification provided by the Company's By-Laws is not deemed
exclusive of or in any way to limit any other rights which any person seeking
indemnification may be entitled.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers, and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in a successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to the court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-1
<PAGE>
Pursuant to the Subscription Agreement between the Company and each of
the holders of Preferred Stock, the form of which is included as Exhibit 4.5 to
this Registration Statement, the officers and directors of the Company are
indemnified by such holders and such holders are indemnified by the Company,
against certain civil liabilities under the Securities Act.
Pursuant to the warrants issued by the Company to Perrin, Holden &
Davenport Capital Corp. ("PHD"), the placement agent for certain securities
described in this Registration Statement, the forms of which are included as
Exhibits 4.6 and 4.7 to this Registration Statement, the officers and directors
of the Company are indemnified by PHD and PHD and controlling persons of PHD are
indemnified by the Company, against certain civil liabilities under the
Securities Act.
Item 16. Exhibits.
(a) The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
Incorporated
by Reference No. in
Exhibit No. Description from Document Document
- ----------- ----------- ------------- --------
<S> <C> <C> <C>
2.1 Form of Agreement and Plan of Contribution among the Company A 2.1
and the partners of Pumpernickel Partners, L.P.
3.1 Restated Certificate of Incorporation A 3.1
3.1.2 Amendment to Restated Certificate of Incorporation B 3.1.2
3.1.3 Amendment to Certificate of Incorporation, as corrected *
3.2 Restated By-laws A 3.2
4.1 Form of Common Stock Certificate A 4.1
4.2 Form of Class A Warrant Certificate A 4.2
4.3 Form of Class A Warrant Agreement between Continental Stock A 4.3
Transfer & Trust Company and the Company
4.3.1 Form of Amendment to Form of Class A Warrant Agreement B 4.3.1
between Continental Stock Transfer & Trust Company and the
Company
4.4 Form of Class A Preferred Stock Certificate *
4.5 Form of Subscription Agreement between the Company and *
purchasers of Class A Preferred Stock
4.6 Form of warrant to purchase 125,000 shares of Common Stock at *
an exercise price of $1.3125 per share issued to Perrin, Holden &
Davenport Capital Corp. and its designee, dated December 31,
1997
4.7 Form of warrant to purchase 75,000 shares of Common Stock at an *
exercise price of $5.00 per share issued to Perrin, Holden &
Davenport Capital Corp. and its designee, dated December 31,
1997
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Incorporated
by Reference No. in
Exhibit No. Description from Document Document
- ----------- ----------- ------------- --------
<S> <C> <C> <C>
5.1 Opinion of Graubard Mollen & Miller *
10.1 Form of Financial Consulting Agreement between the Company A 10.1
and the Underwriter
10.2 Employment Agreement between the Company and Mark Weinreb A 10.2
10.2.1 Amendment to Employment Agreement between the Company and B 10.2.1
Mark Weinreb
10.3 Employment Agreement between the Company and Jerry Rosner A 10.3
10.3.1 Amendment to Employment Agreement between the Company and B 10.3.1
Jerry Rosner
10.4 1996 Performance Equity Plan A 10.4
10.5 Master Distribution Agreement, dated January 1, 1996, between A 10.5
the Company and Sysco Food Services of Los Angeles, Inc.
10.6 Form of Franchise Agreement A 10.6
10.7 Form of Area Development Agreement A 10.7
10.8 Form of Founders' Shareholder Agreement A 10.8
10.9.1 Consolidation Agreement and Promissory Note, dated April 30, A 10.9.1
1996, between the Company and Mark Weinreb
10.9.1(a) Agreement to Loan Funds and Amendment to Consolidation B
10.9.1(a) Agreement and Promissory Note, dated April 30, 1996,
between the Company and Mark Weinreb
10.9.2 Consolidation Agreement and Promissory Note, dated April 30, A 10.9.2
1996, between the Company and Stanley Weinreb
10.9.2(a) Agreement to Loan Funds and Amendment to Consolidation B
10.9.2(a) Agreement and Promissory Note, dated April 30, 1996,
between the Company and Stanley Weinreb
10.9.3 Consolidation Agreement and Promissory Note, dated April 30, A 10.9.3
1996, between the Company and Stanley Raphael
10.9.3(a) Agreement to Loan Funds and Amendment to Consolidation B
10.9.3(a) Agreement and Promissory Note, dated April 30, 1996,
between the Company and Stanley Raphael
23.1 Consent of Graubard Mollen & Miller (included in Exhibit 5.1) *
23.2 Consent of Richard A. Eisner & Company, LLP *
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Incorporated
by Reference No. in
Exhibit No. Description from Document Document
- ----------- ----------- ------------- --------
<S> <C> <C> <C>
24.1 Power of Attorney (included in signature page to Registration *
Statement)
99.1 Notice to Holders of Class A Warrants B 99.1
- -------------------
<FN>
* Filed herewith.
A The Company's Registration Statement on Form SB-2 (No.
333-2154) declared effective by the Commission on May 7, 1996.
B The Company's Registration Statement on Form SB-2 (No.
333-29297) declared effective by the Commission on July 9,
1997.
</FN>
</TABLE>
Item 17. Undertakings.
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement.
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Hicksville, State of New York, on January 20,
1998.
BIG CITY BAGELS, INC.
By: /s/ Mark Weinreb
-------------------------------------
Mark Weinreb, Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mark Weinreb his true and lawful
attorney-in-fact and agent, each acting alone, with full power of substitution
and re-substitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration Statement,
including post-effective amendments, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, and hereby ratifies and confirms all
that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Mark Weinreb Chairman of the Board, Chief Executive January 20, 1998
------------------ Officer and Chief Financial Officer (and
Mark Weinreb principal accounting officer)
/s/ Jerry Rosner President, Chief Operating Officer and January 20, 1998
-------------------- Director
Jerry Rosner
/s/ Stanley Weinreb Vice President and Director January 20, 1998
-------------------
Stanley Weinreb
/s/ Stanley Raphael Secretary and Director January 20, 1998
-------------------
Stanley Raphael
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
3.1.3 Amendment to Certificate of Incorporation, as
corrected
4.4 Form of Class A Preferred Stock Certificate
4.5 Form of Subscription Agreement between the Company
and purchasers of the Class A Preferred Stock
4.6 Form of warrant to purchase 125,000 shares of
Common Stock at an exercise price of $1.3125 per
share issued to Perrin, Holden & Davenport Capital
Corp. and its designee, dated December 31, 1997
4.7 Form of warrant to purchase 75,000 shares of
Common Stock at an exercise price of $5.00 per
share issued to Perrin, Holden & Davenport Capital
Corp. and its designee, dated December 31, 1997
5.1 Opinion of Graubard Mollen & Miller
23.1 Consent of Graubard Mollen & Miller (included in
Exhibit 5.1)
23.2 Consent of Richard A. Eisner & Company, LLP
II-7
<PAGE>
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF
BIG CITY BAGELS, INC.
----------------------------------
Pursuant to Section 805 of the
New York Business Corporation Law
----------------------------------
We, the undersigned, being, respectively, the Chairman of the Board and
Assistant Secretary of Big City Bagels, Inc. ("Corporation"), a corporation
organized and existing under the Business Corporation Law of the State of New
York hereby certify:
1. The name of the Corporation is Big City Bagels, Inc.
2. The Certificate of Incorporation of the Corporation was filed with
the Department of State of the State of New York on December 14, 1992.
3. Article FOURTH of the Certificate of Incorporation of the
Corporation relating to the number of shares the Corporation is authorized to
issue is hereby amended by the addition of a provision stating the number,
designation, relative rights, preferences and limitations of a series of
Preferred Stock, par value $.001 per share, to be designated Class A Preferred
Stock. Accordingly, Article FOURTH is hereby amended by the addition of a new
subsection, subsection (c), to read as follows:
(c) Class A Preferred Stock
(i) Designations and Amount. 350,000 shares of the Preferred Stock of
the Corporation, par value $ .001 per share, shall constitute a class of
Preferred Stock designated as "Class A Preferred Stock" ("Class A Preferred
Stock"). The Class A Preferred Stock shall have a stated value of $10.00 per
share ("Stated Value").
(ii) Redemption Rights. The Class A Preferred Stock shall be subject to
redemption, in whole as a class and not in part, by the Corporation, at the
Corporation's election, at any time, subject to the last sentence of this
section (c)(ii), upon 30 days' prior written notice being mailed, by first class
mail postage prepaid, to the addresses of the holders as recorded in the
Corporation's records, at a redemption price ("Redemption Price") payable in
cash equal to the sum of (z) 125% of the Stated Value of the shares being
redeemed, plus (y) the Preferred Dividend (as defined below) accrued and unpaid
thereon through the Redemption Date (as defined below). Payment of the
Redemption Price, calculated on a per share basis, must be tendered to the
holders of the Preferred Stock within 10 business days of the date fixed for
redemption by the Corporation ("Redemption Date"). After 3:00 p.m. Eastern Time
on the Redemption Date, the Class A Preferred Stock shall be deemed cancelled
and the holders thereof shall have no further rights as shareholders of the
Corporation, their sole right being the payment to them of the Redemption Price
upon their surrender to the Corporation of the certificates representing the
Class A Preferred Stock. The Corporation may redeem the outstanding Class A
Preferred Stock only at such time
1
<PAGE>
as the registration statement ("Registration Statement") covering the resale by
the holders thereof of the shares of Common Stock issuable upon conversion and
the shares of Common Stock issuable in lieu of cash payment of the Preferred
Dividend, has been declared effective by the Securities and Exchange Commission
("SEC") and the offering contemplated by the Registration Statement has been
approved by the Corporate Financing Department of NASD Regulation, Inc. ("NASD
CFD Approval") at the time notice of redemption is given by the Corporation to
the holders and remains effective until the Redemption date.
(iii) Dividends. The holders of shares of Class A Preferred Stock shall
be entitled to receive dividends at the rate of 8% per annum of Stated Value (or
$0.80 per share) of the Class A Preferred Stock ("Preferred Dividend") from the
date of issuance through the earlier of the Redemption Date or the Conversion
Date (as defined below), payable, at the election of the Company, either in cash
or in shares of Common Stock of the Company, on the next business day after the
Conversion Date, or as part of the Redemption Price, as set forth above, such
number of shares of Common Stock to be calculated in accordance with section
(vi)(B) hereof. No dividends, other than dividends payable solely in shares of
Common Stock of the Corporation, shall be declared or paid with respect to the
Common Stock of the Corporation while the Class A Preferred Stock is
outstanding.
(iv) Rights on Liquidation, Dissolution or Winding Up, Etc. In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, as a result of which the assets of the Corporation, whether
from capital, surplus or earnings, shall be distributed to the stockholders of
the Company, such assets shall be distributed simultaneously to both the holders
of the Common Stock and the holders of the Class A Preferred Stock, calculated
as if the Class A Preferred Stock (together with Preferred Dividends through the
record date for such distribution) was fully converted immediately prior to such
distribution.
(v) Voting Rights. The holders of Class A Preferred Stock shall not be
entitled to vote on any matter, except as may be required by law.
(vi) Conversion of Class A Preferred Stock.
(A) The holders of Class A Preferred Stock shall have the
right, at such holders' option, at any time or from time to time, to convert
each share of Class A Preferred Stock, together with the accrued Preferred
Dividends thereon through the Conversion Date, into the number of shares of
Common Stock calculated in accordance with section (vi)(B).
(B) The number of shares of Common Stock to be issued upon
conversion of the Class A Preferred Stock and payment of the Preferred Dividend
will be determined by dividing the Stated Value of the Class A Preferred Stock
being converted, plus the Preferred Dividend accrued and unpaid thereon through
the Conversion Date, by the greater of (i) 75% of the average Closing Bid Price
(as hereinafter defined) of the Common Stock for the five consecutive trading
days ending immediately prior to the date of the Written Notice (as hereinafter
defined) or (ii) $0.2585. Notwithstanding the foregoing, if the Registration
Statement has not been declared effective by the SEC and NASD CFD Approval has
not been obtained on or before the close of business on the 120th day following
the Closing (as defined in the last sentence of this section (vi)(B)), the
aforementioned rate of 75% shall be reduced by 1% to 74% and by 1% per 30-day
period thereafter (with no proration for partial periods; said 1% reduction, if
any, shall take effect at 12:01 a.m. on the 121st day following the Closing and
each of the following four successive 1% reductions, if any, shall take effect
on the 151st day following the Closing, the 181st day following
2
<PAGE>
the Closing, the 211th day following the Closing and on the 241st day following
the Closing, respectively, up to an aggregate reduction of 5%, as long as the
Registration Statement has not been declared effective and NASD CFD Approval has
not been obtained. The "Closing Bid Price" shall mean the closing bid price for
the Corporation's Common Stock, as reported by The Nasdaq Stock Market if the
Common Stock is quoted on the Nasdaq National Market or Nasdaq SmallCap Market,
or the last sales price of the Common Stock if the Common Stock is listed on a
national securities exchange, whichever is the principal trading market for the
Common Stock. If the Common Stock is not listed on a national securities
exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but
is traded in the over-the-counter market, the Closing Bid Price shall mean the
closing bid price for the Common Stock, as reported by the OTC Bulletin Board or
the National Quotation Bureau, Incorporated, or similar publisher of such
quotations. If the Closing Bid Price cannot be determined pursuant to the above,
the Closing Bid Price shall be such price as the Board of Directors of the
Company shall determine in good faith. For purposes of subsection (c) of Article
Fourth, the term "Closing Date" shall mean December 31, 1997.
(C) Before any holder of Class A Preferred Stock shall be
entitled to convert the same into shares of Common Stock, such holder shall give
written notice ("Written Notice") to the Corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. The Written Notice must be delivered via telecopier prior to 3:00
p.m. Eastern Time on any day and shall be deemed to be received by the
Corporation upon receipt by it or by its general counsel. If Written Notice is
delivered after 3:00 p.m. Eastern Time on any day, it shall be deemed to be
received the next following business day. The Corporation shall, as soon as
practicable, but not later than one business day after the date of receipt of
the Written Notice, issue and deliver to a location in New York City designated
by such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Simultaneously with
such delivery, such holder shall surrender the certificate or certificates for
the Class A Preferred Stock duly endorsed for transfer. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
which the Written Notice is received by the Corporation in accordance herewith
("Conversion Date"), and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock as of such
Conversion Date.
(D) The Corporation shall not be required to issue fractions
of shares of Common Stock upon conversion of the Class A Preferred Stock or
payment of the Preferred Dividend. If any fractions of a share would, but for
this section (vi)(D), be issuable upon any conversion of Class A Preferred Stock
or payment of the Preferred Stock, in lieu of such fractional share the Company
shall round up or down to the nearest whole number of shares.
(E) The Corporation shall reserve and shall at all times have
reserved out of its authorized but unissued shares of Common Stock sufficient
shares of Common Stock to permit the conversion of the then outstanding shares
of the Class A Preferred Stock and payment of the Preferred Dividend pursuant to
this section (vi). All shares of Common Stock which may be issued upon
conversion of shares of the Class A Preferred Stock and payment of the Preferred
Dividend pursuant to this section (vi) shall be validly issued, fully paid and
nonassessable. In order that the Corporation may issue shares of Common Stock
upon conversion of shares of the Class A Preferred Stock and payment of the
Preferred Dividend, the Corporation will endeavor to comply with all applicable
Federal and state securities laws and will endeavor to list such shares of
Common Stock to be issued upon conversion on each securities exchange on which
Common
3
<PAGE>
Stock is listed and endeavor to maintain such listing for such period of time as
either the Class A Preferred Stock or Common Stock underlying such Class A
Preferred Stock remains outstanding.
(F) If any of the following shall occur: (i) any
reclassification or change of outstanding shares of Common Stock issuable upon
conversion of shares of the Class A Preferred Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or (ii) any consolidation or
merger to which the Corporation is a party other than a merger in which the
Corporation is the continuing corporation and which does not result in any
reclassification of, or change in, outstanding shares of Common Stock, then in
addition to all of the rights granted to the holders of the Class A Preferred
Stock as designated herein, the Corporation, or such successor or purchasing
corporation, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation or merger ("Corporate Change"), provide
in its certificate of incorporation or other charter document that each share of
the Class A Preferred Stock shall be convertible into the kind and amount of
shares of capital stock and other securities and property (including cash)
receivable upon such Corporate Change by a holder of the number of shares of
Common Stock deliverable upon conversion of such share of the Class A Preferred
Stock and the payment of the Preferred Dividend thereon immediately prior to the
Corporate Change. If, in the case of any such Corporate Change, the stock or
other securities and property (including cash) receivable thereupon by a holder
of Common Stock includes shares of capital stock or other securities and
property of a corporation other than the corporation which is the successor of
the Corporation in such Corporate Change, then the certificate of incorporation
or other charter document of such other corporation shall contain such
additional provisions to protect the interests of the holders of shares of the
Class A Preferred Stock as the Board of Directors shall reasonably consider
necessary by reason of the foregoing. The provision of this section (vi)(F)
shall similarly apply to successive reclassifications, changes, consolidations
or mergers.
(G) If any Class A Preferred Stock is issued and outstanding
on the third anniversary of the Closing Date, such Class A Preferred Stock and
the Preferred Dividend thereon shall, without any action on the part of the
holder thereof, be automatically converted into Common Stock on that date on the
above terms.
(H) In the event any shares of Class A Preferred Stock shall
be converted pursuant to section (vi) hereof, the shares of Class A Preferred
Stock so converted shall be canceled.
(I) The Corporation will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
section (vi) and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Class A Preferred Stock against impairment.
4. This Amendment has been adopted by the Board of Directors of the
Corporation pursuant to authority conferred upon the Board of Directors by
Article FOURTH of the Certificate of Incorporation of the Corporation and
Section 502 of the New York Business Corporation Law.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
24th day of December, 1997, and affirm the statements contained herein are true
under penalties of perjury.
BIG CITY BAGELS, INC.
By: /s/ Mark Weinreb
------------------------------------
Mark Weinreb, Chairman and Chief
Executive Officer
By: /s/ Peter M. Ziemba
------------------------------------
Peter M. Ziemba, Assistant Secretary
5
<PAGE>
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF
BIG CITY BAGELS, INC.
----------------------------------
Pursuant to Section 105 of the
New York Business Corporation Law
----------------------------------
We, the undersigned, being, respectively, the Chairman of the Board and
Assistant Secretary of Big City Bagels, Inc. ("Corporation"), a corporation
organized and existing under the Business Corporation Law of the State of New
York hereby certify:
1. The name of the Corporation is Big City Bagels, Inc.
2. The date the Certificate of Amendment of the Certificate of
Incorporation to be corrected was filed with the Department of State of the
State of New York is December 24, 1997.
3. This Certificate of Correction is being filed to correct a
typographical error which caused the amount "$0.2585" to appear as "$0.35" in
new subsection (c) added to Article Fourth of the Certificate of Incorporation
by the Certificate of Amendment.
4. The provision of the Certificate of Amendment of the Certificate of
Incorporation which added a new subsection (c) to Article FOURTH is corrected to
read as follows:
"Article FOURTH of the Certificate of Incorporation of the Corporation
relating to the number of shares the Corporation is authorized to issue is
hereby amended by the addition of a provision stating the number, designation,
relative rights, preferences and limitations of a series of Preferred Stock, par
value $.001 per share, to be designated Class A Preferred Stock. Accordingly,
Article FOURTH is hereby amended by the addition of a new subsection, subsection
(c), to read as follows:
1
<PAGE>
"(c) Class A Preferred Stock
"(i) Designations and Amount. 350,000 shares of the Preferred Stock of
the Corporation, par value $ .001 per share, shall constitute a class of
Preferred Stock designated as "Class A Preferred Stock" ("Class A Preferred
Stock"). The Class A Preferred Stock shall have a stated value of $10.00 per
share ("Stated Value").
"(ii) Redemption Rights. The Class A Preferred Stock shall be subject
to redemption, in whole as a class and not in part, by the Corporation, at the
Corporation's election, at any time, subject to the last sentence of this
section (c)(ii), upon 30 days' prior written notice being mailed, by first class
mail postage prepaid, to the addresses of the holders as recorded in the
Corporation's records, at a redemption price ("Redemption Price") payable in
cash equal to the sum of (z) 125% of the Stated Value of the shares being
redeemed, plus (y) the Preferred Dividend (as defined below) accrued and unpaid
thereon through the Redemption Date (as defined below). Payment of the
Redemption Price, calculated on a per share basis, must be tendered to the
holders of the Preferred Stock within 10 business days of the date fixed for
redemption by the Corporation ("Redemption Date"). After 3:00 p.m. Eastern Time
on the Redemption Date, the Class A Preferred Stock shall be deemed cancelled
and the holders thereof shall have no further rights as shareholders of the
Corporation, their sole right being the payment to them of the Redemption Price
upon their surrender to the Corporation of the certificates representing the
Class A Preferred Stock. The Corporation may redeem the outstanding Class A
Preferred Stock only at such time as the registration statement ("Registration
Statement") covering the resale by the holders thereof of the shares of Common
Stock issuable upon conversion and the shares of Common Stock issuable in lieu
of cash payment of the Preferred Dividend, has been declared effective by the
Securities and Exchange Commission ("SEC") and the offering contemplated by the
Registration Statement has been approved by the Corporate Financing Department
of NASD Regulation, Inc. ("NASD CFD Approval") at the time notice of redemption
is given by the Corporation to the holders and remains effective until the
Redemption date.
"(iii) Dividends. The holders of shares of Class A Preferred Stock
shall be entitled to receive dividends at the rate of 8% per annum of Stated
Value (or $0.80 per share) of the Class A Preferred Stock ("Preferred Dividend")
from the date of issuance through the earlier of the Redemption Date or the
Conversion Date (as defined below), payable, at the election of the Company,
either in cash or in shares of Common Stock of the Company, on the next business
day after the Conversion Date, or as part of the Redemption Price, as set forth
above, such number of shares of Common Stock to be calculated in accordance with
section (vi)(B) hereof. No dividends, other than dividends payable solely in
shares of Common Stock of the Corporation, shall be declared or paid with
respect to the Common Stock of the Corporation while the Class A Preferred Stock
is outstanding.
"(iv) Rights on Liquidation, Dissolution or Winding Up, Etc. In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, as a result of which the assets of the Corporation, whether
from capital, surplus or earnings, shall be distributed to the stockholders of
the Company, such assets shall
2
<PAGE>
be distributed simultaneously to both the holders of the Common Stock and the
holders of the Class A Preferred Stock, calculated as if the Class A Preferred
Stock (together with Preferred Dividends through the record date for such
distribution) was fully converted immediately prior to such distribution.
"(v) Voting Rights. The holders of Class A Preferred Stock shall
not be entitled to vote on any matter, except as may be required by law.
"(vi) Conversion of Class A Preferred Stock.
"(A) The holders of Class A Preferred Stock shall have the
right, at such holders' option, at any time or from time to time, to convert
each share of Class A Preferred Stock, together with the accrued Preferred
Dividends thereon through the Conversion Date, into the number of shares of
Common Stock calculated in accordance with section (vi)(B).
"(B) The number of shares of Common Stock to be issued upon
conversion of the Class A Preferred Stock and payment of the Preferred Dividend
will be determined by dividing the Stated Value of the Class A Preferred Stock
being converted, plus the Preferred Dividend accrued and unpaid thereon through
the Conversion Date, by the greater of (i) 75% of the average Closing Bid Price
(as hereinafter defined) of the Common Stock for the five consecutive trading
days ending immediately prior to the date of the Written Notice (as hereinafter
defined) or (ii) $0.2585. Notwithstanding the foregoing, if the Registration
Statement has not been declared effective by the SEC and NASD CFD Approval has
not been obtained on or before the close of business on the 120th day following
the Closing (as defined in the last sentence of this section (vi)(B)), the
aforementioned rate of 75% shall be reduced by 1% to 74% and by 1% per 30-day
period thereafter (with no proration for partial periods; said 1% reduction, if
any, shall take effect at 12:01 a.m. on the 121st day following the Closing and
each of the following four successive 1% reductions, if any, shall take effect
on the 151st day following the Closing, the 181st day following the Closing, the
211th day following the Closing and on the 241st day following the Closing,
respectively, up to an aggregate reduction of 5%, as long as the Registration
Statement has not been declared effective and NASD CFD Approval has not been
obtained. The "Closing Bid Price" shall mean the closing bid price for the
Corporation's Common Stock, as reported by The Nasdaq Stock Market if the Common
Stock is quoted on the Nasdaq National Market or Nasdaq SmallCap Market, or the
last sales price of the Common Stock if the Common Stock is listed on a national
securities exchange, whichever is the principal trading market for the Common
Stock. If the Common Stock is not listed on a national securities exchange or
quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in
the over-the-counter market, the Closing Bid Price shall mean the closing bid
price for the Common Stock, as reported by the OTC Bulletin Board or the
National Quotation Bureau, Incorporated, or similar publisher of such
quotations. If the Closing Bid Price cannot be determined pursuant to the above,
the Closing Bid Price shall be such price as the Board of Directors of the
Company shall determine in good faith. For purposes of subsection (c) of Article
Fourth, the term "Closing Date" shall mean December 31, 1997.
3
<PAGE>
"(C) Before any holder of Class A Preferred Stock shall be
entitled to convert the same into shares of Common Stock, such holder shall give
written notice ("Written Notice") to the Corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. The Written Notice must be delivered via telecopier prior to 3:00
p.m. Eastern Time on any day and shall be deemed to be received by the
Corporation upon receipt by it or by its general counsel. If Written Notice is
delivered after 3:00 p.m. Eastern Time on any day, it shall be deemed to be
received the next following business day. The Corporation shall, as soon as
practicable, but not later than one business day after the date of receipt of
the Written Notice, issue and deliver to a location in New York City designated
by such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Simultaneously with
such delivery, such holder shall surrender the certificate or certificates for
the Class A Preferred Stock duly endorsed for transfer. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
which the Written Notice is received by the Corporation in accordance herewith
("Conversion Date"), and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock as of such
Conversion Date.
"(D) The Corporation shall not be required to issue fractions
of shares of Common Stock upon conversion of the Class A Preferred Stock or
payment of the Preferred Dividend. If any fractions of a share would, but for
this section (vi)(D), be issuable upon any conversion of Class A Preferred Stock
or payment of the Preferred Stock, in lieu of such fractional share the Company
shall round up or down to the nearest whole number of shares.
"(E) The Corporation shall reserve and shall at all times have
reserved out of its authorized but unissued shares of Common Stock sufficient
shares of Common Stock to permit the conversion of the then outstanding shares
of the Class A Preferred Stock and payment of the Preferred Dividend pursuant to
this section (vi). All shares of Common Stock which may be issued upon
conversion of shares of the Class A Preferred Stock and payment of the Preferred
Dividend pursuant to this section (vi) shall be validly issued, fully paid and
nonassessable. In order that the Corporation may issue shares of Common Stock
upon conversion of shares of the Class A Preferred Stock and payment of the
Preferred Dividend, the Corporation will endeavor to comply with all applicable
Federal and state securities laws and will endeavor to list such shares of
Common Stock to be issued upon conversion on each securities exchange on which
Common Stock is listed and endeavor to maintain such listing for such period of
time as either the Class A Preferred Stock or Common Stock underlying such Class
A Preferred Stock remains outstanding.
"(F) If any of the following shall occur: (i) any
reclassification or change of outstanding shares of Common Stock issuable upon
conversion of shares of the Class A Preferred Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or (ii) any consolidation or
merger to which the Corporation is a party other than a merger in which the
Corporation is the continuing corporation and which
4
<PAGE>
does not result in any reclassification of, or change in, outstanding shares of
Common Stock, then in addition to all of the rights granted to the holders of
the Class A Preferred Stock as designated herein, the Corporation, or such
successor or purchasing corporation, as the case may be, shall, as a condition
precedent to such reclassification, change, consolidation or merger ("Corporate
Change"), provide in its certificate of incorporation or other charter document
that each share of the Class A Preferred Stock shall be convertible into the
kind and amount of shares of capital stock and other securities and property
(including cash) receivable upon such Corporate Change by a holder of the number
of shares of Common Stock deliverable upon conversion of such share of the Class
A Preferred Stock and the payment of the Preferred Dividend thereon immediately
prior to the Corporate Change. If, in the case of any such Corporate Change, the
stock or other securities and property (including cash) receivable thereupon by
a holder of Common Stock includes shares of capital stock or other securities
and property of a corporation other than the corporation which is the successor
of the Corporation in such Corporate Change, then the certificate of
incorporation or other charter document of such other corporation shall contain
such additional provisions to protect the interests of the holders of shares of
the Class A Preferred Stock as the Board of Directors shall reasonably consider
necessary by reason of the foregoing. The provision of this section (vi)(F)
shall similarly apply to successive reclassifications, changes, consolidations
or mergers.
"(G) If any Class A Preferred Stock is issued and outstanding
on the third anniversary of the Closing Date, such Class A Preferred Stock and
the Preferred Dividend thereon shall, without any action on the part of the
holder thereof, be automatically converted into Common Stock on that date on the
above terms.
"(H) In the event any shares of Class A Preferred Stock shall
be converted pursuant to section (vi) hereof, the shares of Class A Preferred
Stock so converted shall be canceled.
"(I) The Corporation will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
section (vi) and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Class A Preferred Stock against impairment."
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
16th day of January 1998, and affirm the statements contained herein are true
under penalties of perjury.
BIG CITY BAGELS, INC.
By: /s/ Mark Weinreb
------------------------------------
Mark Weinreb, Chairman and Chief
Executive Officer
By: /s/ Peter M. Ziemba
------------------------------------
Peter M. Ziemba, Assistant Secretary
6
<PAGE>
CLASS A PREFERRED STOCK
PA- shares
no
BIG CITY BAGELS, INC.
================================================================================
Incorporated Under The Laws Of See Reverse Side For Certain Definitions
The State Of New York
TOTAL AUTHORIZED ISSUE 26,000,000 SHARES
25,000,000 SHARES PAR VALUE $.001 EACH 1,000,000 SHARES PAR VALUE $.001 EACH
COMMON STOCK PREFERRED STOCK
350,000 SHARES DESIGNATED AS CLASS A
PREFERRED STOCK
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT
BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO BIG CITY BAGELS, INC. TO THE EFFECT THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR SUCH STATE SECURITIES LAWS.
This is to Certify that ____________________________- is the owner of
(name)
_______________________________________________________________________________
(written)
FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A PREFERRED STOCK OF
BIG CITY BAGELS, INC. (the "Corporation")
transferable on the books of the Corporation by the holder hereof, in person or
by duly authorized attorney, upon surrender of this Certificate, properly
endorsed.
The Corporation will furnish without charge to each stockholder who so requests,
the powers, designations, preferences and relative, participating, optional, or
other special rights of the shares of Class A Preferred Stock and the
qualifications, limitations or restrictions of such preferences and/or rights.
IN WITNESS WHEREOF, the seal of the Corporation and the signatures of its duly
authorized officers.
Dated:__________________________________
__________________________ __________________________________
Stanley Raphael, Secretary Mark Weinreb, Chairman and Chief
Executive Officer
CORPORATE
SEAL
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust)
(Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
Act . . . . . . . . . . . . . . . . . . .
JT TEN - as joint tenants with right of (State)
of survivorship and not as tenants
in common
</TABLE>
Additional abbreviations may also be used though not in the
above list.
For value received, ________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------
represented by the within Certificate, and do hereby irrevocably constitute
and appoint
Attorney
- -------------------------------------------------------------------
to transfer the said Shares on the books of the within-named Corporation with
full power of substitution in the premises.
Dated _______________, 19__
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
In the presence of
- ------------------------
<PAGE>
SUBSCRIPTION AGREEMENT
=======================================================================
INSTRUCTIONS
1. COMPLETE AND SIGN AT PAGE 10 BOTH COPIES OF THIS
AGREEMENT.
1
<PAGE>
SUBSCRIPTION AGREEMENT
Big City Bagels, Inc.
99 Woodbury Road
Hicksville, NY 11801
Ladies and Gentlemen:
A. Subscription. I (sometimes referred to herein as the "Investor") hereby
subscribe for and agree to purchase the dollar amount of shares of Class A
Preferred Stock , $.001 par value ("Preferred Stock"), of Big City Bagels, Inc.,
a New York corporation ("Company"), on the terms and conditions set forth herein
as indicated on the signature page hereto. The per share offering price is
$10.00 ("Share Price") and the number of shares of Preferred Stock being
purchased by me will be calculated by dividing the above dollar amount by the
per share offering price. Perrin, Holden & Davenport Capital Corp. ("PHD" or
"Placement Agent") is acting as the exclusive placement agent for this offering.
1. Description of Preferred Stock. The rights of each share of
Preferred Stock are as set forth in the Certificate of Amendment which is
included as Exhibit A in the Disclosure Package given to you simultaneously with
this Agreement ("Disclosure Package").
2. Purchase.
(a) I hereby tender (i) the purchase price by check or by wire
transfer to an escrow account ("Account") maintained by the Escrow Agent
designated by the Company and the Placement Agent, Continental Stock Transfer &
Trust Company, pursuant to written instructions provided to me by the Placement
Agent, and (ii) two executed copies of this Subscription Agreement, one copy of
the Purchaser Questionnaire and one copy of the NASD Questionnaire to the
Placement Agent at Perrin, Holden & Davenport Capital Corp., 17 John Street, 3rd
Floor, New York, New York 10038, Attention: Mr. Jody Eisenman.
(b) The period of time in which the Company may accept
subscriptions in this offering will terminate on December 3, 1997, unless such
date is extended one or more times, without notice to the Investor, by PHD to a
date not later than December 17, 1997 ("Termination Date"). Prior to the earlier
of the closing, if any, with respect to my subscription, the rejection of my
subscription or the termination of this offering, my payment for the Preferred
Stock will be held by Escrow Agent in the Account subject to the terms and
conditions herein. If subscriptions for at least $3,000,000 of Preferred Stock
are not received and accepted by the Company by the Termination Date, or if the
Company does not obtain the approval of The Nasdaq Stock Market, Inc. for
listing of the Shares of Common Stock issuable upon conversion of at least
$1,100,000 stated value of the Preferred Stock ("Nasdaq Approval") and hold a
closing with respect to this offering of at least $1,100,000 stated value of
Preferred Stock and the Investor is included in that closing by December 31,
1997, unless such date is extended one or more times, without notice to the
Investor, by mutual consent of the Company and PHD to a date not later than
January 30, 1998, my payment will be returned to me without interest or
deduction. Upon the earlier of a closing for my subscription or the rejection of
my subscription, I will be notified promptly by the Company as to whether my
subscription has been accepted.
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3. Acceptance or Rejection of Subscription.
(a) The Company and PHD have the right to reject this
subscription for the Preferred Stock, in whole or in part for any reason and at
any time prior to a Closing (as defined in Section 4 hereof), notwithstanding
prior receipt by me of notice of acceptance of my subscription.
(b) In the event of the rejection of this subscription, my
subscription payment will be promptly returned to me without interest or
deduction and this Subscription Agreement shall have no force or effect. In the
event my subscription is accepted and the offering is completed, the funds
specified above shall be released to the Company and the certificates
representing the Preferred Stock will be promptly delivered to me.
4. Closing. The closing of this offering ("Closing") may occur at any
time, as determined jointly by the Company and PHD, either prior to, on or after
the Termination Date, if subscriptions have been accepted by the Company for
Preferred Stock aggregating at least $3,000,000 by the Termination Date, and
Nasdaq Approval has been obtained. By mutual consent of the Company and PHD, the
Closing may be held (and this offering thereupon concluded) with respect to an
amount of stated value of Preferred Stock less than $3,000,000, but not less
than $1,100,000 stated value. The Preferred Stock subscribed for herein shall
not be deemed issued to or owned by me until two copies of this Subscription
Agreement have been executed by me and countersigned by the Company and a
Closing with respect to such Preferred Stock has occurred.
5. Issuance of Securities. At each Closing, the Company will deliver
the certificates representing the Preferred Stock to me or my agent for deposit
into my personal securities account at PHD or for delivery to me. The
certificates representing the Preferred Stock and the common stock, $.001 par
value, of the Company ("Common Stock") into which the Preferred Stock is
convertible shall be legended as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT") OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE ACT OR
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SAID ACT AND COMPLIANCE WITHIN ANY APPLICABLE STATE SECURITIES
LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
After the Registration Statement, referenced in Section 6
hereinbelow, is declared effective by the Securities and Exchange Commission,
the Investor may deliver to the Company the certificate representing the Common
Stock of the Company issued to such Investor upon conversion of the Preferred
Stock and the Company will, within three days after receipt by the Company of
the foregoing, issue a new certificate representing and in exchange for the
aforementioned certificate, which new certificate shall be legended as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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THE SECURITIES MAY BE SOLD PURSUANT TO THE REGISTRATION
STATEMENT PROVIDED THAT (i) THE REGISTRATION STATEMENT IS
CURRENT AND EFFECTIVE, (ii) THE HOLDER COMPLIES WITH THE
PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND (iii) THE SALE IS IN COMPLIANCE WITH THE
PLAN OF DISTRIBUTION SET FORTH IN THE PROSPECTUS.
6. Registration Rights.
(a) The Company agrees with the Investor and PHD to register
under a registration statement ("Registration Statement") filed pursuant to the
Securities Act of 1933, as amended ("Securities Act") and such state "Blue Sky"
laws of those states as are reasonably selected by the Investor, the shares of
Common Stock into which the Preferred Stock may be converted and the warrants
and the shares of Common Stock underlying the warrants to be issued to PHD in
connection with this sale of securities by the Company (collectively, the
"Registrable Securities"), and to obtain the approval of the Corporate Financing
Department of NASD Regulation, Inc. ("NASD CFD Approval") for the offering
contemplated by the Registration Statement. The Company agrees to file the
Registration Statement on or before the 30-day anniversary of the Closing of the
Offering. The Company agrees to use its best efforts to have the Registration
Statement declared effective and obtain NASD CFD Approval with 60 days from the
Closing and undertakes to have the Registration Statement declared effective and
obtain NASD CFD Approval within 120 days from the Closing. If the Registration
Statement is not declared effective and NASD CFD Approval is not obtained by the
close of business on the 120th day following the Closing as provided in the
Certificate of Amendment, the conversion rate will be lowered. The Company shall
bear all the expenses and pay all the fees it incurs in connection with the
preparation, filing and modification or amendment of the Registration Statement.
The Company shall keep the Registration Statement effective and current until
all the securities registered thereunder are sold or until all such securities
may be sold by the holders thereof under Rule 144 without volume limitations.
Notwithstanding the foregoing, during any consecutive 365-day period, the
Company may suspend the availability of the Registration Statement for no more
than two periods of up to 20 consecutive days and for no more than an aggregate
of 40 days during any 365-day period, if the Company's Board of Directors
determines, based upon the opinion of legal counsel, that there is valid purpose
for such suspension.
To the extent permitted by law, the Company will indemnify and
hold harmless each holder of the Registrable Securities ("Holder"), the officers
and directors of each Holder and each person, if any, who controls such Holder
within the meaning of the Securities Act or Securities Exchange Act of 1934, as
amended ("Exchange Act") against any losses, claims, damages, or liabilities to
which they may become subject under the Securities Act, the Exchange Act or any
state securities law or regulation (including all reasonable attorneys' fees and
other expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever incurred by the indemnified party in any action or
proceeding between the indemnitor and indemnified party or between the
indemnified party and any third party or otherwise) to which any of them may
become subject under the Securities Act, the Exchange Act or any other statute
or common law or otherwise under the laws of foreign countries, arising from
such registration statement or based upon any untrue statement or alleged untrue
statement of a material fact contained in (i) any preliminary prospectus, the
registration statement or prospectus (as from time to time each may be amended
and supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which it included the Registrable
Securities; or (iii) any application or other document or written communication
(collectively called "application") executed
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<PAGE>
by the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Registrable Securities under the securities
laws thereof or filed with the Securities and Exchange Commission, any state
securities commission or agency, Nasdaq or any securities exchange; or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, unless such statement
or omission is made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to such Holder expressly for
use in any preliminary prospectus, such registration statement or prospectus, or
any amendment or supplement thereof, or in any application, as the case may be.
The Company agrees promptly to notify the Holder of the Registrable Securities
of the commencement of any litigation or proceedings against the Company or any
of its officers, directors or controlling persons in connection with the issue
and sale or resale of the Registrable Securities or in connection with any such
registration statement or prospectus.
7. Investor Agreements Representations and Warranties. I acknowledge,
represent and warrant to, and agree with, the Company and the Placement Agent as
follows:
(a) I am aware that my investment in the Company involves a
high degree of risk, and I carefully have read and fully understand the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1996, the Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997, the Company's Proxy Statement dated June 4, 1997 and the
Company's Prospectus dated July 9, 1997 (together with the three supplements
thereto dated September 26, 1997, October 21, 1997 and November 6, 1997), which
are included as Exhibits B, C, D and E, respectively, in the Disclosure Package.
(b) I acknowledge and am aware that there is no assurance as
to the future performance of the Company.
(c) I acknowledge that notwithstanding the Company's
commitment herein, there can be no assurance that the Company will file any
Registration Statement for the securities I am purchasing, that such
Registration Statement, if filed, will be declared effective or, if declared
effective, that the Company will be able to keep it effective until I sell the
Common Stock registered thereon.
(d) I am purchasing the Preferred Stock for my own account for
investment and not with view to or for sale in connection with the distribution
of the Preferred Stock, nor with any present intention of selling or otherwise
disposing of all or any part of the Preferred Stock. I understand that there may
not be any market for the Preferred Stock. I agree that (1) the purchase of the
Preferred Stock is a long-term investment, (2) I may have to bear the economic
risk of investment for an indefinite period of time because neither the
Preferred Stock nor the Common Stock underlying the Preferred Stock have been
registered under the Securities Act and, notwithstanding the Company's
commitment herein, may not be registered and, cannot be resold, pledged,
assigned, or otherwise disposed of unless they are subsequently registered under
said Securities Act and under applicable securities laws of certain states or an
exemption from such registration is available. I understand that the Company is
under no obligation to register the Preferred Stock and, except as set forth
herein, the Company is under no obligation to register the Common Stock
underlying the Preferred Stock on my behalf or to assist me in complying with
any exemption from such registration under the Securities Act or any state
securities laws. I hereby authorize the Company to place legends denoting the
restrictions on the Preferred Stock and the Common Stock to be issued hereunder
or conversion of the Preferred Stock, as the case may be.
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<PAGE>
(e) I recognize that the Preferred Stock, as an investment,
involves a high degree of risk including, but not limited to, the risk of
economic losses from operations of the Company and the total loss of my
investment. I believe that the investment in the Preferred Stock is suitable for
me based upon my investment objectives and financial needs, and I have adequate
means for providing for my current financial needs and contingencies and have no
need for liquidity with respect to my investment in the Company.
(f) I have been given access to full and complete information
regarding the Company and have utilized such access to my satisfaction for the
purpose of obtaining information in addition to, or verifying information
included in, the Disclosure Package, and I have either met with or been given
reasonable opportunity to meet with officers of the Company for the purpose of
asking questions of, and receiving answers from, such officers concerning the
terms and conditions of the offering of the Preferred Stock and the business and
operations of the Company and to obtain any additional information, to the
extent reasonably available. I have received all information and material
regarding the Company that I have requested.
(g) I have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Preferred Stock and have obtained, in my judgment, sufficient
information from the Company to evaluate the merits and risks of an investment
in the Company. I have not utilized any person as my purchaser representative as
defined in Regulation D promulgated by the Securities and Exchange Commission
pursuant to the Securities Act in connection with evaluating such merits and
risks.
(h) I have relied solely upon my own investigation in making a
decision to invest in the Company.
(i) I have received no representation or warranty from the
Company or the Placement Agent or any of their respective officers, directors,
employees or agents in respect of my investment in the Company and I have
received no information (written or otherwise) from them relating to the Company
or its business other than as set forth herein and in the Disclosure Package. I
am not participating in the offer as a result of or subsequent to: (I) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(j) I have had full opportunity to ask questions and to
receive satisfactory answers concerning the offering and other matters
pertaining to my investment and all such questions have been answered to my full
satisfaction. In addition, as required by Section 517.061(11)(a)(3), Florida
Statutes and by Rule 3-500.05(a) thereunder, if I am a Florida resident I may
have, at the offices of the Company, at any reasonable hour, after reasonable
notice, access to the materials set forth in the Rule which the Company can
obtain without unreasonable effort or expense.
(k) I have been provided an opportunity to obtain any
additional information concerning the offering and the Company and all other
information to the extent the Company possesses such information or can acquire
it without unreasonable effort or expense.
(l) I am an "accredited investor" as defined in Section 2(15)
of the Act and in Rule 501 promulgated thereunder.
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<PAGE>
(m) I understand that (i) the Preferred Stock and the
underlying securities have not been registered under the Securities Act, or the
securities laws of certain states in reliance on specific exemptions from
registration, (ii) no securities administrator of any state or the federal
government has recommended or endorsed this offering or made any finding or
determination relating to the fairness of an investment in the Company and (iii)
the Company is relying on my representations and agreements for the purpose of
determining whether this transaction meets the requirements of the exemptions
afforded by the Securities Act and certain state securities laws.
(n) I understand that historically the market price for, and
the trading volume of, the Company's Common Stock has been extremely volatile
and no representation or prediction has been given to me with respect to the
future price of the Company's Common Stock or the future liquidity of the market
for the Common Stock. I have been advised that as of November 7, 1997,
approximately 76% of the public float of the Common Stock is held by Depository
Trust Co. for Hanifen, Imhoff Clearing Corp., which is the clearing broker for,
among other firms, Monroe Parker Securities, Inc. (the underwriter of the
Company's initial public offering in May 1996) and D.L.
Cromwell Investments, Inc.
(o) I have been urged to seek independent advice from my
professional advisors relating to the suitability of an investment in the
Company in view of my overall financial needs and with respect to the legal and
tax implications of such investment.
(p) If the Investor is a corporation, company, trust, employee
benefit plan, individual retirement account, Keogh Plan, or other tax-exempt
entity, it is authorized and qualified to become an Investor in the Company and
the person signing this Subscription Agreement on behalf of such entity has been
duly authorized by such entity to do so.
(q) I hereby acknowledge and am aware that except for any
rescission rights that may be provided under applicable laws, I am not entitled
to cancel, terminate or revoke this subscription, and any agreements made in
connection herewith shall survive my death or disability.
(r) I hereby acknowledge that I have been told that (i) PHD is
being compensated as the Placement Agent and will receive a cash commission
equal to 10% of the aggregate purchase price of the Preferred Stock sold in the
offering to all Investors and will be issued five-year warrants to purchase
125,000 shares of Common Stock at an exercise price per share equal to the
average of the closing bid prices of the Common Stock on the five trading days
immediately preceding the Closing and warrants to purchase 75,000 shares of
Common Stock at an exercise price of $5.00 per share, and (ii) the warrants and
the Common Stock underlying the warrants issued to PHD is being registered under
the Securities Act on the same registration statement as the shares of Common
Stock which will be issuable on conversion of the Preferred Stock.
(s) I agree that prior to the conversion of all the Preferred
Stock purchased hereunder, I will not sell the Common Stock "short" on any
securities market on which the Common Stock is traded.
(t) The information I have furnished on the Purchaser
Questionnaire and NASD Questionnaire I have presented to the Company is true,
correct and complete.
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8. Indemnification. I hereby agree to indemnify and hold harmless PHD
and the Company, each of their respective officers, directors, shareholders,
employees, agents, and attorneys against any and all losses, claims, demands,
liabilities, and expenses (including reasonable legal or other expenses,
including reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever incurred by
the indemnified party in any action or proceeding between the indemnitor and
indemnified party or between the indemnified party and any third party or
otherwise) incurred by each such person in connection with defending or
investigating any such claims or liabilities, whether or not resulting in any
liability to such person, to which any such indemnified party may become subject
under the Securities Act, under any other statute, at common law or otherwise,
insofar as such losses, claims, demands, liabilities and expenses (a) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact made by me and contained in this Subscription Agreement, or (b)
arise out of or are based upon any breach by me of any representation, warranty,
or agreement made by me contained herein. PHD is a third-party beneficiary of
this Section, and this Section may not be modified or amended without the prior
written agreement of PHD.
9. Severability. In the event any part of this Subscription Agreement
are found to be void, the remaining provisions of this Subscription Agreement
shall nevertheless be binding with the same effect as though the void parts were
deleted.
10. Choice of Law and Jurisdiction. This Subscription Agreement will be
deemed to have been made and delivered in New York City and will be governed as
to validity, interpretation, construction, effect and in all other respects by
the internal laws of the State of New York. The Company and the Investor each
hereby (i) agrees that any legal suit, action or proceeding arising out of or
relating to this Subscription Agreement shall be instituted exclusively in New
York State Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York, (ii) waives any objection to the
venue of any such suit, action or proceeding and the right to assert that such
forum is not a convenient forum, proceeding, and (iii) irrevocably consents to
the jurisdiction of the New York State Supreme Court, County of New York, and
the United States District Court for the Southern District of New York in any
such suit, action or proceeding and the Company further agrees to accept and
acknowledge service or any and all process which may be served in any such suit,
action or proceeding in New York State Supreme Court, County of New York or in
the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
suit, action or proceeding.
11. Counterparts. This Subscription Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Subscription Agreement may be by actual or facsimile signature.
12. Benefit. This Subscription Agreement shall be binding upon and
inure to the benefit of the parties hereto (and PHD to the extent it is a
third-party beneficiary hereof) and their respective heirs, executors, personal
representatives, successors and assigns. PHD shall be deemed to be a third-party
beneficiary with respect to any sections hereof which so state or which
otherwise indicate that PHD would be entitled to rely on the representations,
warranties or covenants made by me therein.
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13. Notices and Addresses. All notices, offers, acceptance and any
other acts under this Subscription Agreement (except payment) shall be in
writing, and shall be sufficiently given if delivered to the addressees in
person, by Federal Express or similar courier delivery by facsimile delivery or,
if mailed, postage prepaid, by certified mail, return receipt requested, as
follows:
Investor: At the address designated on the signature
page of this Subscription Agreement.
The Company: Big City Bagels, Inc.
99 Woodbury Road
Hicksville, NY 11801
Attention:
Fax: (516) 932-5056
Placement Agent: Perrin, Holden & Davenport Capital Corp.
17 John Street, 3rd Floor
New York, New York 10038
Attention: Jody Eisenman
Fax: (212) 566-4977
in any case,
with a copy to: Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
Attention: David Alan Miller, Esq.
Fax: (212) 818-8881
or to such other address as any of them, by notice to the others may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile deliver.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
14. Oral Evidence. This Subscription Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior oral and written agreements between the parties hereto with
respect to the subject matter hereof. This Subscription Agreement may not be
changed, waived, discharged, or terminated orally but, rather, only by a
statement in writing signed by the party or parties against which enforcement or
the change, waiver, discharge or termination is sought.
15. Section Headings. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part, any of the terms or
provisions of this Subscription Agreement.
16. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained herein shall survive the
delivery of, and the payment for, the Preferred Stock.
17. Acceptance of Subscription. The Company may accept this
Subscription Agreement at any time for all or any portion of the Preferred Stock
subscribed for by executing a copy hereof as provided and notifying me within a
reasonable time thereafter.
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RESIDENTS OF ALL STATES: THE UNITS OFFERED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE UNITS ARE SUBJECT TO
RESTRICTION ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR
HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE
OFFERING OR THE ACCURACY OR ADEQUACY OF THIS CONFIDENTIAL INVESTMENT SUMMARY.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FOR FLORIDA RESIDENTS: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT ("FLORIDA
SECURITIES ACT") , AND THEY THEREFORE HAVE THE STATUS OF SECURITIES ACQUIRED IN
AN EXEMPT TRANSACTION UNDER SECTION 517.061 OF THE FLORIDA SECURITIES ACT. EACH
OFFEREE WHO IS A FLORIDA RESIDENT SHOULD BE AWARE THAT SECTION 517.061(11)(a)(5)
OF THE FLORIDA SECURITIES ACT PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE
PERSONS IN FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN
THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO
THE COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGREEMENT OR WITHIN THREE DAYS
AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER,
WHICH EVER OCCURS LATER.
THE AVAILABILITY OF THE PRIVILEGE TO VOID SALES PURSUANT TO SECTION
517.061(11)(a)(5) IS HEREBY COMMUNICATED TO EACH FLORIDA OFFEREE.
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Manner in Which Title is to be Held. (check one)
____ Individual Ownership
____ Community Property
____ Joint Tenant with Right of Survivorship (both parties
must sign)
____ Partnership
____ Tenants in common
____ Corporation
____ Trust
____ Other (please indicate)
Dollar amount subscribed for (@ $10 per share): $________________
INDIVIDUAL INVESTORS ENTITY INVESTORS
- ------------------------ --------------------------
Signature (Individual) Name of Entity, if any
By:
-----------------------
Signature
- ---------------------------------------- Its
Signature (all record holders should sign) Title
- ------------------------------------- --------------------------
Name(s) Typed or Printed Name Typed or Printed
Address to Which Correspondence Address to Which Correspondence
Should be Directed Should be Directed
- -------------------------------------- ----------------------------------
- -------------------------------------- ----------------------------------
Social Security Number Tax Identification
- ----------------------- -----------------------------
The foregoing subscription is accepted and the Company hereby agrees to be bound
by its terms.
Big City Bagels, Inc.
Dated: By:
---------------------------
Mark Weinreb, Chairman and
Chief Executive Officer
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EXHIBIT 4.6
THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF,
AGREES THAT IT WILL NOT SELL, TRANSFER OR
ASSIGN THIS WARRANT EXCEPT AS HEREIN
PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, December 30, 2002
WARRANT
For the Purchase of
_________ Shares of Common Stock
of
BIG CITY BAGELS, INC.
1. Warrant.
THIS CERTIFIES THAT, in consideration of $________ and other good and
valuable consideration, duly paid by or on behalf of
_______________________________ ("Holder"), as registered owner of this Warrant,
to Big City Bagels, Inc. ("Company"), Holder is entitled, at any time or from
time to time at or after December 31, 1997 ("Commencement Date"), and at or
before 5:00 p.m., Eastern Time December 30, 2002 ("Expiration Date"), but not
thereafter, to subscribe for, purchase and receive, in whole or in part, up to
_______________________________ (________) shares of Common Stock of the
Company, $.001 par value ("Common Stock"). If the Expiration Date is a day on
which banking institutions are authorized by law to close, then this Warrant may
be exercised on the next succeeding day which is not such a day in accordance
with the terms herein. During the period ending on the Expiration Date, the
Company agrees not to take any action that would terminate the Warrant. This
Warrant is initially exercisable at $1.3125 per share of Common Stock purchased;
provided, however, that upon the occurrence of any of the events specified in
Section 6 hereof, the rights granted by this Warrant, including the exercise
price and the number of shares of Common Stock to be received upon such
exercise, shall be adjusted as therein specified. The term "Exercise Price"
shall mean the initial exercise price or the adjusted exercise price, depending
on the context, of a share of Common Stock. The term "Securities" shall mean the
shares of Common Stock issuable upon exercise of this Warrant. This Warrant is
one of a series of warrants being issued in connection with the offering (the
"Offering") by the Company of Class A Preferred Stock, in which Perrin, Holden &
Davenport Capital Corp. ("PHD") has acted as the exclusive placement agent.
Capitalized terms used herein, but not otherwise defined, shall have the
meanings set forth in the Agency Agreement between PHD and the Company with
respect to the Offering. Notwithstanding anything to the contrary contained
herein, if PHD agrees to any modification to the warrant issued to PHD in
connection with the Offering with the same exercise price as this Warrant and/or
any restriction on the transfer of such warrant or the shares of Common Stock
issuable thereunder at the request or insistence of the Department of Corporate
Financing of NASD Regulation, Inc., the Holder hereof agrees to be bound by such
modification and/or restriction and will execute any further documents
appropriate to certify that the Holder is bound by such modification or
restriction.
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2. Exercise.
2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant and payment of the Exercise Price for the
Securities being purchased. If the subscription rights represented hereby shall
not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date,
this Warrant shall become and be void without further force or effect, and all
rights represented hereby shall cease and expire.
2.2 Legend. Each certificate for Securities purchased under this
Warrant shall bear a legend as follows, unless such Securities have been
registered under the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act") or
applicable state law. The securities may not be offered for sale, sold
or otherwise transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from registration
under the Act and applicable state law."
2.3 Conversion Right.
2.3.1 Determination of Amount. In lieu of the payment of the
Exercise Price in the manner provided by Section 2.1, the Holder shall have the
right (but not the obligation) to convert this Warrant, in whole or in part,
into Common Stock ("Conversion Right"), as follows: upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment by
the Holder of any of the Exercise Price) that number of shares of Common Stock
equal to the quotient obtained by dividing (x) the "Value" (as defined below) of
the portion of the Warrant being converted at the time the Conversion Right is
exercised by (y) the Market Price. The "Value" of the portion of the Warrant
being converted shall equal the remainder derived from subtracting (a) the
Exercise Price multiplied by the number of shares of Common Stock underlying the
portion of the Warrant being converted from (b) the Market Price of the Common
Stock multiplied by the number of shares of Common Stock underlying the portion
of the Warrant being converted. As used herein, the term "Market Price" at any
date shall be deemed to be the last reported sale price of the Common Stock on
the trading day immediately preceding such date, or, in case no such reported
sale takes place on the immediately preceding trading day, the average of the
last reported sale prices for the immediately preceding three trading days, in
either case as officially reported by the principal securities exchange on which
the Common Stock is listed or admitted to trading, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange or if any
such exchange on which the Common Stock is listed is not its principal trading
market, the last reported sale price as furnished by the National Association of
Securities Dealers, Inc. ("NASD") through the Nasdaq National Market or SmallCap
Market, or, if applicable, the OTC Bulletin Board, or if the Common Stock is not
listed or admitted to trading on any of the foregoing markets, or similar
organization, as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.
2.3.2 Exercise of Conversion Right. The Conversion Right may
be exercised by the Holder on any business day on or after the Commencement Date
and not later than the
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Expiration Date by delivering the Warrant with a duly executed exercise form
attached hereto with the conversion section completed. The Holder of this
warrant, if other than PHD, shall exercise the Conversion Right with respect to
this entire Warrant upon receipt of written demand by PHD to do so if PHD
exercises in full the Conversion Right with respect to the warrant issued to PHD
in connection with the Offering with the same exercise price as this Warrant.
3. Transfer.
3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Warrant on the books of the Company and shall execute
and deliver a new Warrant or Warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the aggregate number of
shares of Common Stock purchasable hereunder or such portion of such number as
shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (i)
the Company has received the opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the Act,
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange Commission and compliance with applicable state
law.
4. New Warrants to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Warrant may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon surrender
of this Warrant for cancellation, together with the duly executed exercise or
assignment form and funds (or conversion equivalent) sufficient to pay any
Exercise Price and/or transfer tax, the Company shall cause to be delivered to
the Holder without charge a new Warrant of like tenor to this Warrant in the
name of the Holder evidencing the right of the Holder to purchase the aggregate
number of shares of Common Stock and Warrants purchasable hereunder as to which
this Warrant has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
and of reasonably satisfactory indemnification, the Company shall execute and
deliver a new Warrant of like tenor and date. Any such new Warrant executed and
delivered as a result of such loss, theft, mutilation or destruction shall
constitute a substitute contractual obligation on the part of the Company.
5. Registration Obligation.
5.1 Filing of Registration Statement. The Company shall register under
the registration statement ("Registration Statement") to be filed for the
subscribers for shares of Class A Preferred
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Stock in the Offering, this Warrant and the shares of Common Stock underlying
this Warrant ("Registrable Securities"). The Company shall file the Registration
Statement on or before the 30- day anniversary of the Closing of the Offering.
The Company shall use its best efforts to have the Registration Statement
declared effective by March 2, 1998 and undertakes to have it declared effective
by April 30, 1998. The Company shall bear all the expenses and pay all the fees
it incurs in connection with the preparation, filing and modification or
amendment of the Registration Statement. The Company shall keep the Registration
Statement effective and current until all the Registrable Securities are sold or
until all such securities may be sold by the holders thereof under Rule 144,
without volume limitations. During any consecutive 365-day period, the Company
may suspend the availability of the Registration Statement for no more than two
periods of up to 20 consecutive days and for no more than an aggregate of 40
days during any 365-day period, if the Company's Board of Directors determines,
based upon the opinion of legal counsel, that there is a valid purpose for such
suspension.
5.2 General Terms
5.2.1 Indemnification.
(a) The Company shall indemnify the Holder(s) of
the Registrable Securities to be sold pursuant to any registration statement
hereunder and any underwriter or person deemed to be an underwriter under the
Act and each person, if any, who controls such Holders or underwriters or
persons deemed to be underwriters within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from such registration statement. The Holder(s) of the Registrable Securities to
be sold pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, against all
loss, claim, damage, expense or liability (including all reasonable attorneys'
fees and other expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Act, the Exchange Act or otherwise, arising from information furnished by or
on behalf of such Holders, in writing, for specific inclusion in such
registration statement.
(b) If any action is brought against a party hereto,
("Indemnified Party") in respect of which indemnity may be sought against the
other party ("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and Indemnifying
Party shall assume the defense of such action, including the employment and fees
of counsel reasonably satisfactory to the Indemnified Party. Such Indemnified
Party shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the employment of such counsel shall have been
authorized in writing by Indemnifying Party in connection with the defense of
such action, or (ii) Indemnifying Party shall not have employed counsel to
defend such action, or (iii) such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which may
result in a conflict between the Indemnified Party and Indemnifying Party (in
which case Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), in any of which events, the
reasonable fees and expenses of not more than one additional firm of attorneys
designated in writing by the Indemnified
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Party shall be borne by Indemnifying Party. Notwithstanding anything to the
contrary contained herein, if Indemnified Party shall assume the defense of such
action as provided above, Indemnifying Party shall not be liable for any
settlement of any such action effected without its written consent.
(c) If the indemnification or reimbursement provided
for hereunder is finally judicially determined by a court of competent
jurisdiction to be unavailable to an Indemnified Party (other than as a
consequence of a final judicial determination of willful misconduct, bad faith
or gross negligence of such Indemnified Party), then Indemnifying Party agrees,
in lieu of indemnifying such Indemnified Party, to contribute to the amount paid
or payable by such Indemnified Party (i) in such proportion as is appropriate to
reflect the relative benefits received, or sought to be received, by
Indemnifying Party on the one hand and by such Indemnified Party on the other or
(ii) if (but only if) the allocation provided in clause (i) of this sentence is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in such clause (i) but also the
relative fault of Indemnifying Party and of such Indemnified Party; provided,
however, that in no event shall the aggregate amount contributed by a Holder
exceed the profit, if any, earned by such Holder as a result of the exercise by
him of the Warrants and the sale by him of the underlying shares of Common
Stock.
(d) The rights accorded to Indemnified Parties
hereunder shall be in addition to any rights that any Indemnified Party may have
at common law, by separate agreement or otherwise.
5.2.2 Exercise of Warrants. Nothing contained in this Warrant
shall be construed as requiring the Holder(s) to exercise their Warrants prior
to or after the initial filing of any registration statement or the
effectiveness thereof.
6. Adjustments
6.1 Adjustments to Exercise Price and Number of Securities. The
Exercise Price and the number of shares of Common Stock underlying this Warrant
shall be subject to adjustment from time to time as hereinafter set forth:
6.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
6.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.
6.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.3, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on exercise of this
Warrant shall be decreased in proportion to such decrease in outstanding shares.
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6.1.3 Adjustments in Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of this Warrant is
adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted
(to the nearest cent) by multiplying such Exercise Price immediately prior to
such adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
6.1.4 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expiration of the right of exercise of this Warrant) to receive upon the
exercise hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Warrant immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by Sections 6.1.1 or 6.1.2, then such adjustment shall be
made pursuant to Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
6.1.5 Changes in Form of Warrant. This form of Warrant need
not be changed because of any change pursuant to this Section, and Warrants
issued after such change may state the same Exercise Price and the same number
of shares of Common Stock and Warrants as are stated in the Warrants initially
issued pursuant to this Agreement. The acceptance by any Holder of the issuance
of new Warrants reflecting a required or permissive change shall not be deemed
to waive any rights to a prior adjustment or the computation thereof.
6.2 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of this Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
7. Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Warrants shall
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be outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges (or, if applicable on
Nasdaq) on which the Common Stock is then listed and/or quoted.
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its shares of Common Stock
for the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor, or (iii) a merger or reorganization in which the Company is not the
surviving party, or (iv) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business shall be proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holders of such event and change ("Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
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9. Miscellaneous.
9.1 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.
9.2 Entire Agreement. This Warrant (together with the other agreements
and documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
9.3 Binding Effect. This Warrant shall inure solely to the benefit of
and shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
9.4 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflict of laws. The Company hereby
agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Warrant shall be brought and enforced in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum. Any
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 8 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The Company agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
9.5 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Warrant or any provision hereof or the right of the Company or
any Holder to thereafter enforce each and every provision of this Warrant. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Warrant shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the 31st day of December, 1997.
BIG CITY BAGELS, INC.
By:__________________________________
Name: Mark Weinreb
Title: Chairman and Chief Executive
Officer
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Form to be used to exercise Warrant:
Big City Bagels, Inc.
99 Woodbury Road
Hicksville, New York 11801
Date: _____________________, 19___
The undersigned hereby elects irrevocably to exercise the
within Warrant and to purchase ________ shares of Common Stock of Big City
Bagels, Inc. and hereby makes payment of $____________ (at the rate of
$_________ per share of Common Stock) in payment of the Exercise Price pursuant
thereto. Please issue the Common Stock as to which this Warrant is exercised in
accordance with the instructions given below.
or
The undersigned hereby elects irrevocably to convert its right
to purchase ____________ shares of Common Stock purchasable under the within
Warrant into __________ shares of Common Stock of Big City Bagels, Inc. (based
on a "Market Price" of $________ per share of Common Stock). Please issue the
Common Stock in accordance with the instructions given below.
---------------------------
Signature
- ---------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
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Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer
of the within Warrant):
FOR VALUE RECEIVED, ________________________________ does
hereby sell, assign and transfer unto _________________________________ the
right to purchase _____________________ shares of Common Stock of Big City
Bagels, Inc. ("Company") evidenced by the within Warrant and does hereby
authorize the Company to transfer such right on the books of the Company.
Dated:____________________, 19___
---------------------------
Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.
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EXHIBIT 4.7
THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF,
AGREES THAT IT WILL NOT SELL, TRANSFER OR
ASSIGN THIS WARRANT EXCEPT AS HEREIN
PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, DECEMBER 30, 2002
WARRANT
For the Purchase of
_________ Shares of Common Stock
of
BIG CITY BAGELS, INC.
1. Warrant.
THIS CERTIFIES THAT, in consideration of $______ and other good and
valuable consideration, duly paid by or on behalf of
_____________________________ ("Holder"), as registered owner of this Warrant,
to Big City Bagels, Inc. ("Company"), Holder is entitled, at any time or from
time to time at or after December 31, 1997 ("Commencement Date"), and at or
before 5:00 p.m., Eastern Time December 30, 2002 ("Expiration Date"), but not
thereafter, to subscribe for, purchase and receive, in whole or in part, up to
________________________________ (_________) shares of Common Stock of the
Company, $.001 par value ("Common Stock"). If the Expiration Date is a day on
which banking institutions are authorized by law to close, then this Warrant may
be exercised on the next succeeding day which is not such a day in accordance
with the terms herein. During the period ending on the Expiration Date, the
Company agrees not to take any action that would terminate the Warrant. This
Warrant is initially exercisable at $5.00 per share of Common Stock purchased;
provided, however, that upon the occurrence of any of the events specified in
Section 6 hereof, the rights granted by this Warrant, including the exercise
price and the number of shares of Common Stock to be received upon such
exercise, shall be adjusted as therein specified. The term "Exercise Price"
shall mean the initial exercise price or the adjusted exercise price, depending
on the context, of a share of Common Stock. The term "Securities" shall mean the
shares of Common Stock issuable upon exercise of this Warrant. This Warrant is
being issued in connection with the offering (the "Offering") by the Company of
Class A Preferred Stock, in which Perrin, Holden & Davenport Capital Corp.
("PHD") has acted as the exclusive placement agent. Capitalized terms used
herein, but not otherwise defined, shall have the meanings set forth in the
Agency Agreement between PHD and the Company with respect to the Offering.
Notwithstanding anything to the contrary contained herein, if PHD agrees to any
modification to the warrant issued to PHD in connection with the Offering with
the same exercise price as this Warrant and/or any restriction on the transfer
of such warrant or the shares of Common Stock issuable thereunder at the request
or insistence of the Department of Corporation Financing of NASD Regulation,
Inc., the Holder hereof agrees to be bound by such modification and/or
restriction and will execute any further documents appropriate to certify that
the Holder is bound by such modification or restriction.
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2. Exercise.
2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant and payment of the Exercise Price for the
Securities being purchased. If the subscription rights represented hereby shall
not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date,
this Warrant shall become and be void without further force or effect, and all
rights represented hereby shall cease and expire.
2.2 Legend. Each certificate for Securities purchased under this
Warrant shall bear a legend as follows, unless such Securities have been
registered under the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act") or
applicable state law. The securities may not be offered for sale, sold
or otherwise transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from registration
under the Act and applicable state law."
2.3 Conversion Right.
2.3.1 Determination of Amount. In lieu of the payment of the
Exercise Price in the manner provided by Section 2.1, the Holder shall have the
right (but not the obligation) to convert this Warrant, in whole or in part,
into Common Stock ("Conversion Right"), as follows: upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment by
the Holder of any of the Exercise Price) that number of shares of Common Stock
equal to the quotient obtained by dividing (x) the "Value" (as defined below) of
the portion of the Warrant being converted at the time the Conversion Right is
exercised by (y) the Market Price. The "Value" of the portion of the Warrant
being converted shall equal the remainder derived from subtracting (a) the
Exercise Price multiplied by the number of shares of Common Stock underlying the
portion of the Warrant being converted from (b) the Market Price of the Common
Stock multiplied by the number of shares of Common Stock underlying the portion
of the Warrant being converted. As used herein, the term "Market Price" at any
date shall be deemed to be the last reported sale price of the Common Stock on
the trading day immediately preceding such date, or, in case no such reported
sale takes place on the immediately preceding trading day, the average of the
last reported sale prices for the immediately preceding three trading days, in
either case as officially reported by the principal securities exchange on which
the Common Stock is listed or admitted to trading, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange or if any
such exchange on which the Common Stock is listed is not its principal trading
market, the last reported sale price as furnished by the National Association of
Securities Dealers, Inc. ("NASD") through the Nasdaq National Market or SmallCap
Market, or, if applicable, the OTC Bulletin Board, or if the Common Stock is not
listed or admitted to trading on any of the foregoing markets, or similar
organization, as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.
2.3.2 Exercise of Conversion Right. The Conversion Right may
be exercised by the Holder on any business day on or after the Commencement Date
and not later than the
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Expiration Date by delivering the Warrant with a duly executed exercise form
attached hereto with the conversion section completed. The Holder of this
warrant, if other than PHD, shall exercise the Conversion Right with respect to
this entire Warrant upon receipt of written demand by PHD to do so if PHD
exercises in full the Conversion Right with respect to the warrant issued to PHD
in connection with the Offering with the same exercise price as this Warrant.
3. Transfer.
3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Warrant on the books of the Company and shall execute
and deliver a new Warrant or Warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the aggregate number of
shares of Common Stock purchasable hereunder or such portion of such number as
shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (i)
the Company has received the opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the Act,
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange Commission and compliance with applicable state
law.
4. New Warrants to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Warrant may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon surrender
of this Warrant for cancellation, together with the duly executed exercise or
assignment form and funds (or conversion equivalent) sufficient to pay any
Exercise Price and/or transfer tax, the Company shall cause to be delivered to
the Holder without charge a new Warrant of like tenor to this Warrant in the
name of the Holder evidencing the right of the Holder to purchase the aggregate
number of shares of Common Stock and Warrants purchasable hereunder as to which
this Warrant has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
and of reasonably satisfactory indemnification, the Company shall execute and
deliver a new Warrant of like tenor and date. Any such new Warrant executed and
delivered as a result of such loss, theft, mutilation or destruction shall
constitute a substitute contractual obligation on the part of the Company.
5. Registration Obligation.
5.1 Filing of Registration Statement. The Company shall register under
the registration statement ("Registration Statement") to be filed for the
subscribers for shares of Class A Preferred
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Stock in the Offering, this Warrant and the shares of Common Stock underlying
this Warrant ("Registrable Securities"). The Company shall file the Registration
Statement on or before the 30- day anniversary of the Closing of the Offering.
The Company shall use its best efforts to have the Registration Statement
declared effective by March 2, 1998 and undertakes to have it declared effective
by April 30, 1998. The Company shall bear all the expenses and pay all the fees
it incurs in connection with the preparation, filing and modification or
amendment of the Registration Statement. The Company shall keep the Registration
Statement effective and current until all the Registrable Securities are sold or
until all such securities may be sold by the holders thereof under Rule 144,
without volume limitations. During any consecutive 365-day period, the Company
may suspend the availability of the Registration Statement for no more than two
periods of up to 20 consecutive days and for no more than an aggregate of 40
days during any 365-day period, if the Company's Board of Directors determines,
based upon the opinion of legal counsel, that there is a valid purpose for such
suspension.
5.2 General Terms
5.2.1 Indemnification.
(a) The Company shall indemnify the Holder(s) of
the Registrable Securities to be sold pursuant to any registration statement
hereunder and any underwriter or person deemed to be an underwriter under the
Act and each person, if any, who controls such Holders or underwriters or
persons deemed to be underwriters within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from such registration statement. The Holder(s) of the Registrable Securities to
be sold pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, against all
loss, claim, damage, expense or liability (including all reasonable attorneys'
fees and other expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Act, the Exchange Act or otherwise, arising from information furnished by or
on behalf of such Holders, in writing, for specific inclusion in such
registration statement.
(b) If any action is brought against a party hereto,
("Indemnified Party") in respect of which indemnity may be sought against the
other party ("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and Indemnifying
Party shall assume the defense of such action, including the employment and fees
of counsel reasonably satisfactory to the Indemnified Party. Such Indemnified
Party shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the employment of such counsel shall have been
authorized in writing by Indemnifying Party in connection with the defense of
such action, or (ii) Indemnifying Party shall not have employed counsel to
defend such action, or (iii) such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which may
result in a conflict between the Indemnified Party and Indemnifying Party (in
which case Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), in any of which events, the
reasonable fees and expenses of not more than one additional firm of attorneys
designated in writing by the Indemnified
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Party shall be borne by Indemnifying Party. Notwithstanding anything to the
contrary contained herein, if Indemnified Party shall assume the defense of such
action as provided above, Indemnifying Party shall not be liable for any
settlement of any such action effected without its written consent.
(c) If the indemnification or reimbursement provided
for hereunder is finally judicially determined by a court of competent
jurisdiction to be unavailable to an Indemnified Party (other than as a
consequence of a final judicial determination of willful misconduct, bad faith
or gross negligence of such Indemnified Party), then Indemnifying Party agrees,
in lieu of indemnifying such Indemnified Party, to contribute to the amount paid
or payable by such Indemnified Party (i) in such proportion as is appropriate to
reflect the relative benefits received, or sought to be received, by
Indemnifying Party on the one hand and by such Indemnified Party on the other or
(ii) if (but only if) the allocation provided in clause (i) of this sentence is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in such clause (i) but also the
relative fault of Indemnifying Party and of such Indemnified Party; provided,
however, that in no event shall the aggregate amount contributed by a Holder
exceed the profit, if any, earned by such Holder as a result of the exercise by
him of the Warrants and the sale by him of the underlying shares of Common
Stock.
(d) The rights accorded to Indemnified Parties
hereunder shall be in addition to any rights that any Indemnified Party may have
at common law, by separate agreement or otherwise.
5.2.2 Exercise of Warrants. Nothing contained in this Warrant
shall be construed as requiring the Holder(s) to exercise their Warrants prior
to or after the initial filing of any registration statement or the
effectiveness thereof.
6. Adjustments
6.1 Adjustments to Exercise Price and Number of Securities. The
Exercise Price and the number of shares of Common Stock underlying this Warrant
shall be subject to adjustment from time to time as hereinafter set forth:
6.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
6.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.
6.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.3, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on exercise of this
Warrant shall be decreased in proportion to such decrease in outstanding shares.
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6.1.3 Adjustments in Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of this Warrant is
adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted
(to the nearest cent) by multiplying such Exercise Price immediately prior to
such adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
6.1.4 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expiration of the right of exercise of this Warrant) to receive upon the
exercise hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Warrant immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by Sections 6.1.1 or 6.1.2, then such adjustment shall be
made pursuant to Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
6.1.5 Changes in Form of Warrant. This form of Warrant need
not be changed because of any change pursuant to this Section, and Warrants
issued after such change may state the same Exercise Price and the same number
of shares of Common Stock and Warrants as are stated in the Warrants initially
issued pursuant to this Agreement. The acceptance by any Holder of the issuance
of new Warrants reflecting a required or permissive change shall not be deemed
to waive any rights to a prior adjustment or the computation thereof.
6.2 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of this Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
7. Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Warrants shall
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be outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges (or, if applicable on
Nasdaq) on which the Common Stock is then listed and/or quoted.
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its shares of Common Stock
for the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor, or (iii) a merger or reorganization in which the Company is not the
surviving party, or (iv) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business shall be proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holders of such event and change ("Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
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9. Miscellaneous.
9.1 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.
9.2 Entire Agreement. This Warrant (together with the other agreements
and documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
9.3 Binding Effect. This Warrant shall inure solely to the benefit of
and shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
9.4 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflict of laws. The Company hereby
agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Warrant shall be brought and enforced in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum. Any
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 8 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The Company agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
9.5 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Warrant or any provision hereof or the right of the Company or
any Holder to thereafter enforce each and every provision of this Warrant. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Warrant shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the 31st day of December, 1997.
BIG CITY BAGELS, INC.
By:__________________________________
Name: Mark Weinreb
Title: Chairman and Chief Executive
Officer
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Form to be used to exercise Warrant:
Big City Bagels, Inc.
99 Woodbury Road
Hicksville, New York 11801
Date: _____________________, 19___
The undersigned hereby elects irrevocably to exercise the
within Warrant and to purchase ________ shares of Common Stock of Big City
Bagels, Inc. and hereby makes payment of $____________ (at the rate of
$_________ per share of Common Stock) in payment of the Exercise Price pursuant
thereto. Please issue the Common Stock as to which this Warrant is exercised in
accordance with the instructions given below.
or
The undersigned hereby elects irrevocably to convert its right
to purchase ____________ shares of Common Stock purchasable under the within
Warrant into __________ shares of Common Stock of Big City Bagels, Inc. (based
on a "Market Price" of $________ per share of Common Stock). Please issue the
Common Stock in accordance with the instructions given below.
---------------------------
Signature
- ---------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
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Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer
of the within Warrant):
FOR VALUE RECEIVED, ________________________________ does
hereby sell, assign and transfer unto _________________________________ the
right to purchase _____________________ shares of Common Stock of Big City
Bagels, Inc. ("Company") evidenced by the within Warrant and does hereby
authorize the Company to transfer such right on the books of the Company.
Dated:____________________, 19___
---------------------------
Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.
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EXHIBIT 5.1
GRAUBARD MOLLEN & MILLER
600 Third Avenue
New York, New York 10016-2097
January 23, 1998
Big City Bagels, Inc.
99 Woodbury Road
Hicksville, New York 11801
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-3
("Registration Statement") filed by Big City Bagels, Inc. ("Company") under the
Securities Act of 1933, as amended ("Securities Act") to which this opinion has
been filed as an exhibit, with respect to: (i) an indeterminable number of
shares of common stock, par value $.001 per share ("Common Stock") to be issued
by the Company upon conversion of 265,000 shares of Class A Preferred Stock, par
value $.001 per share and stated value $10.00 per share ("Preferred Stock") and
200,000 shares of Common Stock to be issued by the Company upon exercise of
200,000 warrants issued to Perrin, Holden & Davenport Capital Corp. and its
designee ("Placement Agent Warrants") and (ii) 200,000 Placement Agent Warrants.
We have examined such documents and considered such legal matters as we
have deemed necessary and relevant as the basis for the opinion set forth below.
With respect to such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as reproduced
or certified copies, and the authenticity of the originals of those latter
documents. As to questions of fact material to this opinion, we have, to the
extent deemed appropriate, relied upon certain representations of certain
officers and employees of the Company. Based upon the foregoing, it is our
opinion that:
(i) The shares of Common Stock to be issued upon conversion of the
Preferred Stock, when issued in accordance with the terms
thereof and in the manner provided in the Registration
Statement, will be legally issued, fully paid and
non-assessable.
(ii) The shares of Common Stock to be issued upon exercise of the
Placement Agent Warrants, when issued in accordance with the
terms of such warrants and in the manner provided in the
Registration Statement, will be legally issued, fully paid and
non-assessable.
(iii) The Placement Agent Warrants currently outstanding have been duly
authorized and legally issued.
In giving this opinion, we have assumed that, prior to their issuance,
all certificates for the Company's shares of Common Stock will be duly executed
on behalf of the Company by the Company's transfer agent and registered by the
Company's registrar, if necessary, and will conform, except as to denominations,
to specimens which we have examined.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, to the use of our name as your counsel, and to all
references made to us in the Registration Statement and in the Prospectus
forming a part thereof. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Graubard Mollen & Miller
-----------------------------
GRAUBARD MOLLEN & MILLER
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EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-3 of our report
dated February 26, 1997, relating to the financial statements of Big City
Bagels, Inc. appearing on page F-2 of the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996.
We also consent to the reference to us under the caption "Experts" in
the Prospectus.
RICHARD A. EISNER & COMPANY, LLP
New York, New York
January 20, 1998
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