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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: August 3, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period______________________to___________________________
Commission File Number: 0-25002
WHAT A WORLD !, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
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<S> <C>
Delaware 59-3200879
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
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10901-B Roosevelt Boulevard
Suite 100
St. Petersburg, Florida 33716
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: (813) 577-9366
N/A
- ------------------------------------------------------------------------------
(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last
Report)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: At September 16, 1996, there
were 2,118,125 shares outstanding of common stock, $.01 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [ X ] No
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WHAT A WORLD!, INC.
INDEX
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PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements (Unaudited):
Condensed Balance Sheets - February 3, 1996 and August 3, 1996............ 3
Condensed Statements of Operations for the Thirteen Weeks Ended
July 29,1995 and August 3, 1996 and the Twenty Six Weeks Ended
July 29, 1995 and August 3,1996......................................... 4
Condensed Statements of Cash Flows for the Twenty Six Weeks Ended
July 29, 1995 and August 3, 1996......................................... 5
Notes to Condensed Financial Statements................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 7
PART II. OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders............. 10
Item 5. Other Information............................................... 10
Item 6. Exhibits and Reports on Form 8-K................................ 11
SIGNATURES................................................................ 12
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WHAT A WORLD!, INC.
CONDENSED BALANCE SHEETS
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February 3, August 3,
ASSETS 1996 1996
------ ----------- ---------
(Unaudited)
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CURRENT ASSETS:
Cash and cash equivalents $1,386,998 $ 346,608
Certificate of deposit 100,000 100,000
Construction allowance receivable 267,000 0
Inventories 978,229 1,144,959
Prepaid expenses and other current assets 179,829 130,904
---------- -----------
Total current assets 2,912,056 1,722,471
PROPERTY AND EQUIPMENT, net 2,653,755 2,495,675
OTHER ASSETS 25,093 31,930
---------- -----------
Total assets $5,590,904 $ 4,250,076
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $1,033,907 495,208
Current maturities of capital lease obligations 64,999 65,189
---------- -----------
Total current liabilities 1,098,906 560,397
DEFERRED RENT 644,173 721,285
CAPITAL LEASE OBLIGATIONS 156,614 123,194
STOCKHOLDERS' EQUITY:
Common stock 21,181 21,181
Additional paid-in capital 4,538,782 4,538,782
Accumulated deficit (868,752) (1,714,763)
---------- -----------
Total stockholders' equity 3,691,211 2,845,200
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Total liabilities and stockholders' equity $5,590,904 $ 4,250,076
========== ===========
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The accompanying notes are an integral part of these balance sheets.
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WHAT A WORLD!, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
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13 Weeks Ended 26 Weeks Ended
July 29, 1995 August 3, 1996 July 29, 1995 August 3, 1996
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
NET SALES $ 641,356 $1,318,009 $1,292,223 $2,521,133
COST OF SALES 329,068 685,673 665,513 1,309,639
---------- ---------- ---------- ----------
GROSS PROFIT 312,288 632,336 626,710 1,211,494
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 610,394 989,122 1,249,346 2,067,326
---------- ---------- ---------- ----------
LOSS FROM OPERATIONS (298,106) (356,786) (622,636) (855,832)
INTEREST AND OTHER INCOME 39,878 10,722 83,578 23,051
INTEREST EXPENSE (5,959) (6,937) (12,345) (13,230)
---------- ---------- ---------- ----------
33,919 3,785 71,233 9,821
---------- ---------- ---------- ----------
NET LOSS $ (264,187) $ (353,001) $ (551,403) $ (846,011)
========== ========== ========== ==========
NET LOSS PER WEIGHTED
AVERAGE COMMON AND
COMMON EQUIVALENT SHARE $ (.12) $ (.17) $ (.26) $ (.40)
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 2,118,125 2,118,125 2,118,125 2,118,125
</TABLE>
The accompanying notes are an integral part of these statements.
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WHAT A WORLD!, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
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26 Weeks Ended
July 29,1995 August 3 , 1996
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OPERATING ACTIVITIES:
Net loss $ (551,403) $ (846,011)
Adjustments to reconcile net loss to net cash and
cash equivalents used in operating activities-
Depreciation and amortization 170,239
Loss on Sale of Equipment 81,948 4,114
Changes in operating assets and liabilities-
Decrease in construction allowance
receivable 40,000 267,000
Decrease (increase) in inventories 96,823 (166,730)
(Increase) decrease in prepaid expenses and
other current assets (38,714) 48,925
Increase in other assets (1,237) (6,837)
Decrease in accounts payable and
accrued expenses (117,603) (538,699)
Increase in deferred rent 20,263 77,112
---------- ----------
Net cash and cash equivalents used in
operating activities (469,923) (990,887)
INVESTING ACTIVITIES:
Purchases of property and equipment (32,173)
Proceeds from Sale of Equipment (12,705) 15,900
Net cash and cash equivalents
used in investing activities (12,705) (16,273)
---------- ----------
FINANCING ACTIVITIES:
Payments made on capital lease obligations (21,806) (33,230)
---------- ----------
Net cash and cash equivalents used
in financing activities (21,806) (33,230)
---------- ----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (504,434) (1,040,390)
CASH AND CASH EQUIVALENTS, beginning of period 2,952,129 1,386,998
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $2,447,695 $ 346,608
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 11,991 $ 13,230
</TABLE>
The accompanying notes are an integral part of these statements.
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WHAT A WORLD!, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
August 3, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying unaudited condensed interim financial statements of What A
World!, Inc. (the "Company") have been prepared in accordance with the
instructions to Form 10-QSB and do not include all of the information and notes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. These financial statements should be read in conjunction with
the financial statements and notes thereto for the year ended February 3, 1996,
which are included in the Company's Annual Report on Form 10-KSB filed on May
3, 1996.
Due to the seasonal nature of the Company's business, results for interim
periods are not necessarily indicative of the results that may be expected for
the entire fiscal year.
Fiscal Year
The Company's Fiscal Year ends on the Saturday closest to January 31.
Net Loss per Weighted Average Common and Common Equivalent Share
Net loss per weighted average common and common equivalent share is computed by
dividing net loss by the weighted average number of shares of common stock
outstanding and dilutive common equivalent shares from stock options and
warrants using the treasury stock method.
2. 1994 STOCK OPTION PLAN:
Following the approval by the Board of Directors and Stockholders, effective
May 21,1996, the 1994 Stock Option Plan (Stock Option Plan) was amended to add
300,000 shares to the previously authorized 260,000 shares that were subject to
options under the Stock Option Plan. The amendment, accordingly, results in a
total of 560,000 shares of common stock available to grant under the Stock
Option Plan.
During the quarter ended August 3, 1996, the Company granted 230,000 options to
certain officers and employees at an exercise price of $1.68 per share under
the Stock Option Plan. The Company also granted 70,000 options to certain
officers and employees and a consultant on August 26, 1996, at an exercise
price of $1.00 per share under the Stock Option Plan. The options are
exercisable in accordance with a specified schedule in the Stock Option
Agreements that begins at the date of grant and ends ten years from such date.
The Company recognized no compensation expense for these options.
As of August 3, 1996, 450,000 options were outstanding under the Stock Option
Plan.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company was organized in July 1993 and opened its first permanent store in
August 1993. Six of the Company's twelve permanent stores have been in
operation for over one year and the other six permanent stores were opened
between September 1995 and December 1995. Accordingly, the Company has a
limited operating history upon which an evaluation of its performance and
prospects can be made.
The Company operated six permanent stores at July 29, 1995 as compared to
twelve permanent stores at August 3, 1996.
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements as a result of certain factors, including, but not
limited to, the success of the Company's efforts to modify its product
assortment, the Company's ability to improve its merchandise presentation, the
Company's development of the temporary store concept during the Christmas
selling season, the timely introduction of new products, the modification of
the Company's cost structure and the seasonal impact of the Company's business.
RESULTS OF OPERATIONS
Net sales for the 13 weeks ended August 3, 1996 (the "Second Quarter of Fiscal
1996") increased by approximately $677,000 over net sales for the comparable 13
weeks ended July 29, 1995 (the "Second Quarter of Fiscal 1995"). Net sales also
increased by $1,229,000 for the 26 weeks ended August 3, 1996 over the 26 weeks
ended July 29, 1995. The increases are principally a result of additional sales
from six stores opened after the Second Quarter of Fiscal 1995.
Comparable store sales (sales of stores opened for the same months during the
comparable period in the prior year) decreased 10.9% in the Second Quarter of
Fiscal 1996 and decreased 14.1% in the first 26 weeks of fiscal 1996. The
Company has been adjusting its product assortment to respond to the increased
competition and the changing demands of its customers. Management has taken
steps to improve its merchandise mix, which has resulted in improved sales
trends. Merchandising efforts to increase the sale of key products will
continue through more attractive in-store presentations. Management will
continue to implement further modifications to the product assortment which
will include the introduction of new products and the continued focus on top
selling items; however, there can be no assurance that these actions or any
further actions will positively impact sales or profitability.
Gross Profit for the Second Quarter of Fiscal 1996 was approximately $632,000 or
48.0% of net sales, compared with approximately $312,000 or 48.7% of net sales
for the Second Quarter of Fiscal 1995. Gross Profit for the first 26 weeks of
fiscal 1996 was approximately $1,211,000, or 48.1% of net sales, as compared to
approximately $627,000, or 48.5% of net sales in the first 26 weeks of fiscal
1995. The decrease in gross profit as a percentage of net sales was principally
a result of markdowns which were taken during the Second Quarter of Fiscal 1996
and the first 26 weeks of fiscal 1996 in an effort to refine the product
assortment.
Comparable store gross profit (gross profit of stores opened for the same months
during the comparable period in the prior year) for the Second Quarter of Fiscal
1996 decreased approximately $43,000 to approximately $269,000, or 47.1% of net
sales, from approximately $312,000, or 48.7% of net sales, in the Second Quarter
of Fiscal 1995. Comparable store gross profit for the first 26 weeks of fiscal
1996 decreased approximately $107,000 to approximately $520,000, or 46.8% of net
sales, from approximately $627,000, or 48.5% of net sales, in the comparable 26
weeks of fiscal 1995. The decrease in comparable store gross profit as a
percentage of sales has resulted primarily from inventory markdowns.
7
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Selling, general and administrative expenses ("SG&A") increased to
approximately $989,000 in the Second Quarter of Fiscal 1996 and to
approximately $2,067,000 from approximately $610,000 and $1,249,000 for the
Second Quarter of Fiscal 1995 and the first 26 weeks of fiscal 1995,
respectively. The primary components of SG&A are store occupancy costs (which
include rent, utilities, common area charges, real estate taxes and other
expenses associated with the operation of a retail store in a regional mall),
store management and sales staff payroll, depreciation expense and corporate
payroll. The increase in SG&A was, for the most part, the result of increases
in store operating expenses, including store personnel compensation and
occupancy costs associated with additional permanent store openings. Included
in the $989,000 of SG&A for the Second Quarter of Fiscal 1996 was approximately
$186,000 of corporate overhead expenses as compared to $228,000 of corporate
overhead expense incurred in the Second Quarter of Fiscal 1995. The decrease
in corporate overhead is a result of management's efforts to reduce costs. In
an effort to increase sales volume while adding minimal additional SG&A
throughout the fiscal year, and in order to capitalize on the seasonal nature
of the Company's business, the Company plans to operate 10-12 seasonal stores
during the 1996 Christmas selling season.
Interest and other income for the Second Quarter of Fiscal 1996 and in the
first 26 weeks of fiscal 1996 was approximately $11,000 and $23,000,
respectively as compared to approximately $40,000 and $84,000 from comparable
periods in 1995. The decreases are primarily as a result of reduced levels of
cash equivalents due to new store openings.
Interest expense for the Second Quarter of Fiscal 1996 and in the first 26 weeks
of fiscal 1996 was approximately $7,000 and $13,000 respectively as compared to
approximately $6,000 and $12,000 from comparable periods in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing capital requirements are anticipated to be for
merchandise inventory purchases and to fund its ongoing operations, including
its temporary store operation and any new permanent store openings.
The Company had working capital of approximately $1.1 million and $1.8 million
at August 3, 1996 and February 3, 1996, respectively. In order to fund its
capital and operating requirements, the Company has in the past been primarily
dependent on cash proceeds received from the Company's initial public offering
in November 1994 (the "Offering") and, prior thereto, the Company was dependent
primarily on cash proceeds from sales of equity securities to David B.
Cornstein, the Company's Chairman of the Board of Directors, David F. Miller,
the Company's current President, and Edward J. Munley, the Company's former
President, each of whom is a director and founder of the Company (collectively,
the "Original Stockholders"), and on loans from others.
On August 28, 1996, Mr. Miller, Mr. Cornstein, and Hugh H. Jones, Jr., also a
member of the Company's Board of Directors, entered into a commitment to lend
the Company, for working capital purposes, as needed, and to fund the opening
of approximately 10 to 12 temporary stores, up to an aggregate of $600,000 at
an interest rate of 12% per annum (the "Working Capital Commitment"). All
amounts outstanding under the Working Capital Commitment will be due and
payable, together with accrued interest thereon, on January 3, 1997 and such
loans are secured by a first priority lein on substantially all of the assets
of the Company. To date no funds have been drawn under the Working Capital
Commitment. As partial consideration for the Working Capital Commitment, the
Company granted to the lenders options to purchase an aggregate of 200,000
shares at an exercise price of $1.00, exercisable until August 31, 2001.
In connection with the Working Capital Commitment, the Company granted to the
lenders certain demand and piggyback registration rights relating to the
securities underlying such warrants.
During the first 26 weeks of fiscal 1996, cash decreased by approximately
$1,040,000 to approximately $347,000. The overall decrease in cash resulted
primarily from cash used in operations of approximately $991,000. The Company
repaid approximately $33,000 in indebtedness during the period.
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During the first 26 weeks of fiscal 1995, cash decreased by approximately
$504,000 to approximately $2,448,000. The overall decrease in cash resulted
primarily from cash used in operations of approximately $470,000. The Company
repaid approximately $22,000 in indebtedness during the period.
Except as contemplated above, the Company currently does not maintain any lines
of credit or cash borrowings to finance its capital requirements. The Company
maintains a $100,000 letter-of-credit to serve as collateral for primarily all
of the Company's capital lease obligations. The letter-of-credit expires in
December 1996, at which time it will be considered for renewal.
During the first 26 weeks of fiscal 1996, the Company's inventories increased by
approximately $167,000 to approximately $1,145,000 from approximately $978,000
at February 3, 1996. The increase is primarily a result of the Company
adjusting inventory quantities to levels which management believes will improve
sales volume. During the first 26 weeks of fiscal 1995, the Company's
inventories decreased by approximately $97,000 to approximately $549,000 from
approximately $645,000 at January 28, 1995. The decrease was primarily a result
of the Company modifying inventory quantities to appropriate seasonal levels.
The most significant inventory needs are expected to be in November/December.
Primarily all of the Company's merchandise purchases are initially financed by
trade credit and the Company generally pays for its inventory 30-45 days after
receipt. Accordingly, the Company's most significant cash needs in payment for
inventory purchases are expected to be in December/January.
In light of the Company's experience during the 1995 Christmas selling season,
which included the operation of three temporary stores, and in order to
capitalize on the seasonal nature of the Company's business, the Company's plan
of expansion will focus on the increased utilization of temporary stores during
the Christmas selling season. The Company plans to operate 10 to 12 temporary
stores during the 1996 Christmas selling season. The average expected cost
associated with the opening of a temporary store is approximately $15,000
(excluding inventory), which primarily includes the costs of fixtures, cash
register equipment and licensing and permitting. Expected inventory to open
such temporary stores is approximately $60,000 per store which will primarily
be financed through trade credit, although there can be no assurance that
start-up costs associated with the temporary stores will not be in excess of
the Company's estimates. Management intends to closely monitor the results of
operations from the temporary stores during the 1996 Christmas selling season
and further consider an increased expansion of its temporary store program for
future Christmas selling seasons. However, if permanent locations are
identified which meet the Company's criteria and complement the Company's
expansion plan, the Company may open additional permanent stores. The cost of
leasehold improvements and fixtures for a typical permanent store (net of
landlord allowances) is approximately $180,000. Total initial inventory cost
per permanent store is approximately $90,000.
The Company expects to continue to use its cash available from operations and
the proceeds from the Working Capital Commitment to finance its losses from
operations and any new temporary or permanent store expansion. At the Company's
current level of operations, its permanent stores are not generating sufficient
cash flow to support its current corporate overhead expense, and the Company
anticipates operating at a net loss for fiscal 1996.
Except as noted above, the Company has no current arrangements with respect to,
or sources of, additional financing, and it cannot be anticipated that any of
the officers, directors or stockholders will provide any additional portion of
the Company's future financing requirements. Following the expiration of the
Working Capital Commitment on January 3, 1997, there can be no assurance that
additional financing will be available to the Company on commercially
reasonable terms, or at all. Any inability to obtain additional financing
could have a materially adverse effect on the Company, including possibly
requiring the Company to significantly curtail, and possibly causing the
Company to cease, its operations. In addition, any equity financing may
involve substantial dilution to the interests of the Company's then-existing
stockholders. Further, there can be no assurance that the Company will achieve
profitability or positive cash flow.
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SEASONALITY AND QUARTERLY FLUCTUATIONS
As is the general pattern in the retail industry where disproportionately
higher sales levels are generated during the Christmas selling season, the
Company's business is, and is expected to continue to be, highly seasonal, with
a substantial portion of its revenues derived from product sales during the
months of November and December. Seasonality factors may cause the Company's
operating results to fluctuate significantly from quarter to quarter. If for
any reason the Company's sales were substantially below those normally expected
in the fourth quarter of any fiscal year, the Company's operating results for
such fiscal year would be materially adversely affected. The Company's results
of operations may also fluctuate significantly from quarter to quarter as a
result of a number of other factors, including the timing of new store openings
(and expenses incurred in connection therewith) by either the Company or its
competitors, the marketing activities of its competitors and the emergence of
new market entrants.
TAX LOSS CARRYFORWARDS
The Company's status as an S Corporation terminated upon the consummation of
the Offering. Any pro-rata net operating losses incurred by the Company prior
to such termination are not available to offset future taxable income of the
Company.
EFFECTS OF INFLATION
Inflation has not had a material effect on the Company's operations. The
Company anticipates that it will be able to diminish the effects of
inflationary cost increases by increasing its prices.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Stockholders of the Company was held on May 21, 1996,
pursuant to notice, at which Messrs. David B. Cornstein, David F. Miller,
Edward J. Munley, James Martin Kaplan and Hugh H. Jones, Jr. were re-elected
directors of the Company to serve until their respective successors are duly
elected and qualified.
In addition, a proposal was approved by the Stockholders of the Company at the
Annual Meeting to amend the 1994 Stock Option Plan to increase the number of
shares of Common Stock of the Company subject to options thereunder from
260,000 to 560,000 shares. Options under said plan are available for grant to
employees (including officers), directors, consultants and other persons who
perform substantial services for or on behalf of the Company. The proposal was
approved by the affirmative vote of the holders of 1,059,159 shares of the
Company's Common Stock; the holders of 73,500 shares of the Company's Common
Stock voted against the proposal.
ITEM 5. OTHER INFORMATION
Pursuant to the requirements of Nasdaq, to be eligible for continued listing on
the Nasdaq Small Cap Market, the Common Stock must maintain a minimum bid price
of $1.00 per share or, as an alternative if the bid price is less than $1.00,
maintain capital and surplus of $2,000,000 and a market value of public float of
at least $1,000,000. (According to Nasdaq, the foregoing alternative listing
criteria is under review and it is probable that such alternative requirement
will be eliminated.) On July 9, 1996, the Company was notified by Nasdaq that
the Company's Common Stock failed to maintain a closing bid price greater than
or equal to $1.00 during a period of ten consecutive trade dates prior to
the date of the notice, and that the public float alternative requirement has
also not been met. If the Company is unable to demonstrate, on or
before the 90-day period ended October 8, 1996, compliance with either
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requirement, it must submit by that date its proposal for achieving compliance.
Should the Company fail to submit the necessary information in the time frame
set forth by Nasdaq or if the submission is deemed to not warrant continued
listing, Nasdaq will issue a formal notice of deficiency which will specify
the delisting date for the Company's securities. In such event, trading, if
any, in the Company's securities would thereafter be conducted in the
non-Nasdaq over-the-counter market. As a result of such delisting, an
investor could find it more difficult to dispose of, or obtain accurate
quotations as to the market value of, the Company's securities. Delisting of
the Company's securities may result in lower prices for the Company's
securities than might otherwise prevail. The Company received a similar notice
from Nasdaq on April 29, 1996 and met the requirement relating to the minimum
bid price per share.
In addition, if the Common Stock were to become delisted from trading on Nasdaq
and the trading price of the Common Stock were to remain below $5.00 per share,
trading in the Common Stock would also be subject to the requirements of
certain rules promulgated under the Securities Exchange Act of 1934, as amended,
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
market 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 type of transactions, the broker dealers 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 broker-dealers from effecting
transactions in the Company's securities which could severely limit the market
liquidity of the Company's securities, the ability of security holders to sell
the Company's securities in the secondary market and the Company's ability to
obtain additional financing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Form of Seasonal Secured Revolving Note dated August 28, 1996 in
favor of each of David B. Cornstein, Hugh H. Jones, Jr., and David
F. Miller.
10.2 Form of Warrant and Registration Agreement dated as of August 28, 1996
in favor of each of David B. Cornstein, Hugh H. Jones, Jr., and David
F. Miller.
10.3 Security Agreement dated as of August 28, 1996 in respect of Seasonal
Secured Revolving Notes.
11 Statement re Computation of Per Share Earnings (not required because
the relevant computations can be clearly determined from material
contained in the financial statements included herein).
27 Financial Data Schedule (For SEC Use Only)
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the thirteen
weeks ended August 3, 1996.
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Signatures
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
What A World!, Inc.
Date: September 17, 1996 By: /s/ David F. Miller
------------------ ----------------------------
David F. Miller
President
(Principal Executive Officer)
Date: September 17, 1996 By: /s/ Brian S. Lappin
------------------- ----------------------------
Brian S. Lappin
Vice President of Finance
(Principal Financial and
Accounting Officer)
12
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EXHIBIT 10.1
SEASONAL SECURED REVOLVING NOTE
$
--------
Note No.___ August 28, 1996
FOR VALUE RECEIVED, WHAT A WORLD!, INC. ("Borrower"), a Delaware
corporation, promises to pay to the order of __________ ("Lender"), the
aggregate principal sum of __________________ DOLLARS ($________), or so much
thereof as shall be advanced by Lender (or reborrowed by Borrower) shall be
outstanding, from time to time, at the address of Lender at _____________ , or
at such other place as the holder hereof may designate in writing, in lawful
money of the United States of America.
The entire unpaid principal balance of this Note, together with any
accrued and unpaid interest thereon, shall be due and payable in full, in the
manner herein set forth, on January 3, 1997 ("Final Payment Date").
All borrowings and payments shall be made by the Borrower upon five (5)
days prior written notice to Lender, except for the principal and interest
payment due on the Final Payment Date which shall be made on such Date.
The payment of principal and interest by Borrower and the performance by
Borrower of the other obligations under this Note are secured by that certain
Security Agreement of even date
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herewith (as may from time to time be amended or supplemented, the "Security
Agreement") by Borrower in favor of David B. Cornstein, as agent, for his
benefit and for the ratable benefit of the Lenders (as such term is defined in
the Security Agreement).
Interest will be calculated on the unpaid principal balance at the close
of each day computed on the basis of the actual number of days elapsed over a
360-day year at the rate of twelve percent (12.0%) per annum. Borrower shall
not pay to Lender any interest on this Note unless a proportionate amount of
interest owing on any other Seasonal Notes (as such term is defined in the
Security Agreement) is paid contemporaneously with such payment.
Any amount payable hereunder which is not paid when due in accordance with
this Note shall bear interest to the extent permitted by applicable law until
paid in full at a rate per annum equal to fifteen percent (15.0%).
Borrower shall not borrow or repay any principal under this Note from or to
Lender unless a proportionate amount is borrowed or repaid, as the case may be,
under any other Notes referred to in the Security Agreement simultaneously with
such borrowing or repayment. Lender shall be required to provide funds
hereunder only if and to the extent proportionate amounts are provided under any
other Notes.
- 2 -
<PAGE> 3
Prior to the Maturity Date, interest shall be payable monthly in arrears
on the last business day of each month until the Maturity Date, whereupon all
accrued and unpaid interest shall be immediately due and payable.
All payments hereunder shall be applied first to the payment of interest
accrued and then to principal.
The principal amount of each loan made by Lender and the amount of each
repayment of principal and payment of interest made by Borrower shall be
recorded by Lender on the schedule attached hereto or in the regularly
maintained data processing or other records of Lender. The aggregate unpaid
principal amount of all loans set forth in such schedule or in such records
shall be presumptive evidence of the principal amount owing and unpaid on this
Note. Failure, however, by Lender to make any such entry shall not limit or
otherwise affect Borrower's obligations under this Note, the Security Agreement
or otherwise.
The following shall constitute an "Event of Default" within the meaning of
this Note:
(i) the failure of Borrower to make any payment of principal
or interest on this Note on the date when such payment is due;
(ii) Borrower defaults on any payment of principal or interest
on any other obligation for borrowed money or
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<PAGE> 4
other indebtedness; or Borrower defaults in the performance of any
other agreement, term or condition contained in any agreement under
which any such obligation is created which would permit the holder
or holders of such obligation to cause such obligations to become
due prior to any stated maturity;
(iii) the failure by Borrower to perform any covenant or
agreement under this Note or the Security Agreement (collectively,
the "Loan Documents");
(iv) any representation or warranty made by Borrower in any of
the Loan Documents shall be false in any material respect on the
date made;
(v) Borrower shall make a general assignment for the benefit
of its creditors;
(vi) the adjudication in bankruptcy of Borrower, or the filing
of a voluntary petition by Borrower under
any of the provisions of any state or federal bankruptcy laws;
(vii) the filing of any answer or other pleading admitting the
material allegations of any petition filed against Borrower in any
bankruptcy, insolvency or other such proceeding;
(viii) the filing of a petition against Borrower under any of
the provisions of any state or federal bankruptcy laws and the
failure of such petition to be dismissed within forty five days; or
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<PAGE> 5
(ix) the petition for, or the appointment of, or possession
by, a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of Borrower or any
substantial part of its properties or assets.
In the event of the occurrence of an Event of Default, the unpaid
principal amount of this Note and all interest accrued but unpaid thereon shall
automatically, without any action by Lender, become immediately due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby waived.
In the event this Note is referred to an attorney at law for collection
after the occurrence of any Event of Default, then, in addition to principal
and interest, Lender shall be entitled to collect all costs of collection
efforts (including attorneys' fees), whether or not suit on this Note is filed,
and all such costs and expenses shall be payable on demand and the payment of
which shall be secured by the Security Agreement.
Borrower covenants and agrees to use the proceeds of this Note solely for
the opening of temporary stores, the repayment of trade payables and the
purchase of inventory and related expenses necessary for the 1996 Christmas
season.
- 5 -
<PAGE> 6
This Note may not be changed orally, but only by an agreement in writing
signed by the party against whom such agreement is sought to be enforced.
This Note may not be assigned by Borrower, except with the prior written
consent of Lender. The terms and provisions of this Note shall inure to the
benefit of, and be binding upon, the respective permitted successors and
assigns of Lender and Borrower.
Borrower, for itself and its successors and assigns, hereby waives
presentment, protest, demand, diligence, notice of dishonor and of nonpayment,
and waives and renounces all rights to the benefits of any statute of
limitations and any moratorium, appraisement and exemption now provided or
which may hereafter be provided by any federal or state statute, including, but
not limited to, exemptions provided by or allowed under applicable bankruptcy
laws, both as to Borrower and as to all of its property, whether real or
personal, against the enforcement and collection of the obligations evidenced
by this Note and any and all extensions, renewals and modifications hereof.
This Note shall be governed by and construed and enforced in accordance
with the laws of the State of New York. Any legal action or proceeding against
Borrower under, arising out of or in any manner relating to the Loan Documents
may be brought in any
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<PAGE> 7
state or federal court of competent jurisdiction in the State of New York and
Borrower expressly and irrevocably consents to the non-exclusive jurisdiction of
any such court. If any term or provision of this Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions herein
shall in no way be affected thereby. In no event shall charges constituting
interest hereunder exceed the rate permitted under any applicable law or
regulation, and if any provision hereof is in contravention of any such law or
regulation, such provision shall be deemed amended to conform thereto.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has
executed this Note as of the day and year first above written.
WHAT A WORLD!, INC.
By:
---------------------------
David F. Miller
President
Attest:
- ----------------------
- 7 -
<PAGE> 8
SCHEDULE OF
LOANS AND PAYMENTS
OF PRINCIPAL AND INTEREST
<TABLE>
<CAPTION>
Unpaid
Amount Principal Principal Interest
Date of Loan Paid Balance Payment
- ---- ------- --------- --------- --------
<S> <C> <C> <C> <C>
</TABLE>
- 8 -
<PAGE> 1
EXHIBIT 10.2
WARRANT AND REGISTRATION AGREEMENT
This WARRANT AND REGISTRATION AGREEMENT (the "Agreement"), dated as of
August 28, 1996, is made by and between What A World!, Inc, a Delaware
corporation (the "Company"), and __________ (the "Warrantholder").
In consideration of the foregoing and for the purpose of more formally
defining the terms and provisions of the warrant hereinafter described
("Warrant") to purchase [ ] Common Shares (the "Shares"), subject to
adjustment pursuant to Section 8 hereof, and the respective rights and
obligations thereunder, the Company and the Warrantholder, for value received,
hereby agree as follows:
Section 1. Transferability and Form of Warrant.
1.1 Registration. The Warrant shall be registered on the books of the
Company when issued.
1.2 Transfer. The Warrant shall be transferable only on the books of the
Company maintained at its principal office in St. Petersburg, Florida, or
wherever its principal executive offices may then be located upon delivery
thereof duly endorsed by the Warrantholder or its duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver a new Warrant to the person entitled thereto. All
transfers shall be made subject to the provisions of Section 11 hereof. In the
event the Warrant or any portion thereof is transferred, the subsequent holder
thereof shall have no greater rights than those afforded the Warrantholder
hereunder.
1.3 Division of Warrant. Subject to all Federal and state securities laws,
the Warrant may be divided or combined, upon request to the Company by the
Warrantholder, into a certificate or certificates representing the right to
purchase the same aggregate number of Shares. Unless the context indicates
otherwise, the term "Warrantholder" shall include any transferee or transferees
of the Warrant pursuant to this subsection 1.3, and the term "Warrant" shall
include any and all Warrants outstanding pursuant to this Agreement, including
those evidenced by a certificate or certificates issued upon division, exchange,
substitution or transfer pursuant to this Agreement.
1.4 Form of Warrant. The text of the Warrant and of the form of election
to purchase Shares shall be substantially as set forth in Exhibit A attached
hereto. The price per Share and the
<PAGE> 2
number of Shares issuable upon exercise of the Warrant are subject to adjustment
upon the occurrence of certain events, all as hereinafter provided. The Warrant
shall be executed on behalf of the Company by its Chairman of the Board,
President or a Vice President, under its corporate seal reproduced thereon, and
attested by its Secretary or an Assistant Secretary.
A Warrant bearing the signature of an individual who was at any time the
proper officer of the Company shall bind the Company, notwithstanding that such
individual shall have ceased to hold such office prior to the delivery of such
Warrant or did not hold such office on the date of this Agreement.
The Warrant shall be dated as of the date of signature thereof by the
Company either upon initial issuance or upon division, exchange, substitution
or transfer.
1.5 Legend on Shares. Each certificate for Shares initially issued upon
exercise of the Warrant, unless at the time of exercise such Shares are
registered under the Securities Act of 1933, as amended (the "Securities Act"),
shall bear the following legend:
"The Shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be sold, exchanged, hypothecated or transferred
in any manner in the absence of such registration or an exemption
therefrom. The Shares are subject to the terms of a certain
Warrant and Registration Agreement dated as of August __, 1996 with
What A World!, Inc., pursuant to which they were issued."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act of the Shares represented thereby) shall also bear the above
legend unless, in the opinion of counsel satisfactory to the Company, the
securities represented thereby need no longer be subject to such restrictions.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may
be exchanged for another certificate or certificates entitling the
Warrantholder to purchase a like aggregate number of Shares as the certificate
or certificates surrendered then entitled such Warrantholder to purchase. Any
Warrantholder desiring to exchange a Warrant certificate shall make such
request in writing delivered to the Company, and shall surrender, properly
endorsed, the certificate evidencing the Warrant to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant certificate as so requested.
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<PAGE> 3
Section 3. Term of Warrant; Exercise of Warrant.
Subject to the terms of this Agreement, the Warrantholder shall have the
right, at any time during the period ending at 5:00 p.m., New York time, on
August 31, 2001 (the "Termination Date"), to purchase from the Company up to
the number of fully paid and nonassessable Shares which the Warrantholder may
at the time be entitled to purchase pursuant to this Agreement, upon surrender
to the Company, at its principal office in St. Petersburg, Florida, or wherever
its principal executive offices may then be located, of the certificate
evidencing the Warrant to be exercised, together with the purchase form on the
reverse thereof duly filled in and signed, and upon payment to the Company of
the Warrant Price (as defined in and determined in accordance with the
provisions of Sections 7 and 8 hereof), for the number of Shares in respect of
which such Warrant is then exercised, but in no event for less than 25 Shares,
unless the Warrant entitles the Warrantholder on exercise to less than 25
Shares, in which event the Warrant can be exercised for such lesser number of
Shares.
Payment of the aggregate Warrant Price shall be made in cash or by check.
Upon surrender of the Warrant and payment of such Warrant Price as aforesaid,
the Company shall issue and cause to be delivered with all reasonable dispatch
to or upon the written order of the Warrantholder and in such name or names as
the Warrantholder may designate a certificate or certificates for the number of
full Shares so purchased upon the exercise of the Warrant, together with cash,
as provided in Section 9 hereof, in respect of any fractional Shares otherwise
issuable upon such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Shares as of the date of the
surrender of the Warrant and the payment of the Warrant Price, as aforesaid,
notwithstanding that the certificates representing the Shares shall not
actually have been delivered or that the stock transfer books of the Company
shall then be closed. The Warrant shall be exercisable, at the election of the
Warrantholder, either in full or from time to time in part and, in the event
that a certificate evidencing the Warrant is exercised in respect of less than
all of the Shares specified therein at any time prior to the Termination Date, a
new certificate evidencing the remaining Warrant will be issued by the Company.
Section 4. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance of the Shares hereunder.
Section 5. Mutilated or Missing Warrant. In case the certificate or
certificates evidencing the Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate
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<PAGE> 4
or certificates, or in lieu of and substitution for the certificate or
certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company of such loss,
theft or destruction of such Warrant and of a bond of indemnity, if requested,
also satisfactory in form and amount, at the applicant's cost. Applicants for
such substitute Warrant certificate shall also comply with such other
reasonable requirements and pay such other reasonable charges as the Company
may prescribe.
Section 6. Reservation of Shares. There has been reserved, and the
Company shall at all times keep reserved so long as all or any portion of the
Warrant remains outstanding, out of its authorized Common Shares, such number
of Shares as shall be subject to purchase under such portion of the Warrant
which remains outstanding. Every transfer agent for the Common Shares and
other securities of the Company issuable upon the exercise of the Warrant will
be irrevocably authorized and directed at all times to reserve such number of
authorized Shares and other securities as shall be requisite for such purpose.
The Company will keep a copy of this Agreement on file with every transfer
agent for the Common Shares and other securities of the Company issuable upon
the exercise of the Warrant. The Company will supply such transfer agent with
duly executed stock and other certificates for such purpose and will provide or
otherwise make available any cash which may be payable as provided in Section 9
hereof.
Section 7. Warrant Price. The price per Share (the "Warrant Price") at
which Shares shall be purchasable upon the exercise of the Warrant shall be
$1.00, subject to further adjustment pursuant to Section 8 hereof.
Section 8. Adjustment of Warrant Price and Number of Shares.
8.1 General. The number of Shares purchasable upon the exercise of the
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
(a) In case the Company shall (i) pay a dividend in Common Shares
or make a distribution in Common Shares, (ii) subdivide its outstanding Common
Shares, (iii) combine its outstanding Common Shares into a smaller number of
Common Shares or (iv) issue by reclassification of its Common Shares other
securities of the Company, the number of Shares purchasable upon exercise of
the Warrant immediately prior thereto shall be adjusted so that the
Warrantholder shall be entitled to receive the kind and number of Shares or
other securities of the Company which it would have owned or would have been
entitled to receive after the happening of any of the events described above,
had the Warrant
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<PAGE> 5
been exercised immediately prior to the happening of such event or any record
date with respect thereto. Any adjustment made pursuant to this subsection
8.1(a) shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all of the holders of its Common
Shares, without any charge to such holders, entitling them to subscribe for or
purchase Common Shares at a price per share which is lower at the record date
mentioned below than the Warrant Price, the number of Shares thereafter
purchasable upon the exercise of the Warrant shall be determined by multiplying
the number of Shares theretofore purchasable upon the exercise of the Warrant
by a fraction, of which the numerator shall be the number of Common Shares
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible securities plus the number of additional Common Shares offered
for subscription or purchase, and of which the denominator shall be the number
of Common Shares outstanding immediately prior to the issuance of such rights,
options, warrants or convertible securities plus the number of Common Shares
which the aggregate offering price of the total number of Common Shares offered
would purchase at the Warrant Price. Such adjustment shall be made whenever
such rights, options, warrants or convertible securities are issued, and shall
become effective immediately and retroactively after the record date for the
determination of shareholders entitled to receive such rights, options, warrants
or convertible securities.
(c) In case the Company shall distribute to all or substantially
all of the holders of its Common Shares evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or issue, to all or
substantially all of such holders, without any charge to such holders, rights,
options, warrants or convertible securities containing the right to subscribe
for or purchase Common Shares (excluding those referred to in paragraph (b)
above), then in each case the number of Shares thereafter purchasable upon the
exercise of the Warrant shall be determined by multiplying the number of Shares
theretofore purchasable upon exercise of the Warrant by a fraction, of which
the numerator shall be the Warrant Price on the date of such distribution, and
of which the denominator shall be the Warrant Price on such date minus the then
fair value of the portion of the assets or evidences of indebtedness so
distributed or of such rights, options, warrants or convertible securities
applicable to one share. Such adjustment shall be made whenever any such
distribution is made and shall become effective on the date of distribution
retroactive to the record date for the determination of shareholders entitled
to receive such distribution.
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<PAGE> 6
(d) No adjustment in the number of Shares purchasable hereunder
shall be required unless such adjustment would require an increase or decrease
of at least one percent in the aggregate number of Shares then purchasable upon
the exercise of the Warrant or, if the Warrant is not then exercisable, the
number of Shares purchasable upon the exercise of the Warrant on the first date
thereafter that the Warrant becomes exercisable; provided however, that any
adjustments which by reason of this subsection 8.1(d) are not required to be
made immediately shall be carried forward and taken into account in any
subsequent adjustment.
(e) Whenever the number of Shares purchasable upon the exercise of
the Warrant is adjusted as herein provided, the Warrant Price payable upon
exercise of the Warrant shall be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Shares purchasable upon the exercise of the Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Shares so purchasable immediately thereafter.
(f) Whenever the number of Shares purchasable upon the exercise of
the Warrant or the Warrant Price is adjusted as herein provided, the Company
shall cause to be promptly mailed to the Warrantholder in accordance with the
provisions of Section 14 hereof, notice of such adjustment or adjustments and a
certificate of the Chief Financial Officer of the Company, setting forth the
number of Shares purchasable upon the exercise of the Warrant and the Warrant
Price after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.
(g) For the purpose of this subsection 8.1, the term "Common
Shares" shall mean (i) the class of shares designated as the Common Shares of
the Company at the date of this Agreement or (ii) any other class of shares
resulting from successive changes or reclassifications of such Common Shares
including changes in par value, or from par value to no par value per share.
In the event that at any time, as a result of an adjustment made pursuant to
this Section 8, the Warrantholder shall become entitled to purchase any shares
of the Company other than Common Shares, thereafter the number of such other
shares so purchasable upon exercise of the Warrant and the Warrant Price of
such shares shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the Shares contained in this Section 8.
(h) Upon the expiration of any rights, options, warrants or
conversion privileges referred to in this Section 8, if such shall not have been
exercised, the number of Shares purchasable upon exercise of the Warrant and
the Warrant Price, to
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<PAGE> 7
the extent the Warrant has not then been exercised, shall, upon such expiration,
be readjusted and shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (A) the fact that the only Common Shares so issued
were the Common Shares, if any, actually issued or sold upon the exercise of
such privileges, options, warrants or conversion rights and (B) the fact that
such Common Shares, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the consideration, if any,
actually received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion rights whether or not exercised;
provided, however, that no such readjustment shall have the effect of increasing
the Warrant Price by an amount in excess of the amount of the adjustment
initially made in respect of the issuance, sale or grant of such rights,
options, warrants or convertible rights.
8.2 No Adjustment of Dividends. Except as provided in subsection 8.1, no
adjustment in respect of dividends shall be made during the term of the Warrant
or upon the exercise thereof.
8.3 No Adjustment in Certain Cases. No adjustments shall be made
hereunder in connection with the issuance of Common Shares, or warrants to
purchase Common Shares: (a) pursuant to the underwriting agreement relating to
the Company's initial public offering of securities consummated on the date
hereof ("Initial Public Offering") or the issuance of Common Shares upon
exercise of the underwriter's warrant issued in connection with the Initial
Public Offering, (b) in connection with the exercise of options or warrants
outstanding as of the date hereof or (c) in connection with the grant of
incentive stock compensation to employees, officers, directors and/or
consultants of the Company pursuant to any stock option plan of the Company.
8.4 Preservation of Purchase Rights upon Reclassification, Consolidation,
etc. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale or conveyance to another person
of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchaser, as
the case may be, shall execute with the Warrantholder an agreement that the
Warrantholder shall have the right thereafter upon payment of the Warrant Price
in effect immediately prior to such action to purchase upon exercise of the
Warrant the kind and amount of shares and other securities and property which
the Warrantholder would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had the Warrant
been exercised immediately prior to such action. In the event of a merger in
which the Company is the surviving corporation, the right to purchase Shares
under the Warrant shall terminate on the date of such merger and thereupon
- 7 -
<PAGE> 8
the Warrant shall become null and void but only if the controlling corporation
shall agree to substitute for the Warrant other warrants which entitle the
holders thereof to purchase, upon exercise thereof, the kind and amount of
shares and other securities and property which the Warrantholder would have
owned or had been entitled to receive had the Warrant been exercised immediately
prior to such merger.
The adjustments required by this Subsection 8.4 shall be effected in a
manner which shall be as nearly equivalent as may be practicable to the
adjustments provided for elsewhere in this Section 8. The provisions of this
Subsection 8.4 shall similarly apply to successive consolidations, mergers,
sales or conveyances.
8.5 Statement on Warrant. Irrespective of any adjustments in the Warrant
Price or the number or kind of shares purchasable upon the exercise of the
Warrant, the Warrant certificate or certificates theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in the Warrant initially issuable pursuant to this Agreement.
Section 9. Fractional Shares. The Company shall not be required to issue
fractional Shares on the exercise of the Warrant. If any fraction of a Share
would, except for the provisions of this Section 9, be issuable on the exercise
of the Warrant (or specified portion thereof), the Company shall pay an amount
in cash equal to the then Current Market Price multiplied by such fraction.
For purposes of this Agreement, the term "Current Market Price" shall mean (i)
if the Common Shares are traded in the over-the-counter market and not in the
NASDAQ National Market System or on any national securities exchange, the
average mean between the per share closing bid and asked prices of the Common
Shares on the 30 consecutive trading days immediately preceding the date in
question, as reported by NASDAQ or an equivalent generally accepted reporting
service, or (ii) if the Common Shares are traded in the NASDAQ National Market
System or on a national securities exchange, the average for the 30 consecutive
trading days immediately preceding the date in question of the daily per share
closing prices of the Common Shares in the NASDAQ National Market System or on
the principal securities exchange on which they are listed, as the case may be.
The closing price referred to in clause (ii) above shall be the last reported
sales price or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices, in either case in the
NASDAQ National Market System or on the principal securities exchange on which
the Common Shares are then listed.
Section 10. No Rights as Shareholder; Notices to Warrantholder. Nothing
contained in this Agreement or in the Warrant shall be construed as conferring
upon the Warrantholder, or its transferees, any rights as a shareholder of the
Company,
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<PAGE> 9
including the right to vote, receive dividends, consent or receive notices as a
shareholder in respect of any meeting of shareholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
the expiration of the Warrant and prior to the exercise thereof, any of the
following events shall occur:
(a) any action which would require an adjustment pursuant to Section 8.1
or 8.4; or
(b) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation, merger or sale of its property, assets and
business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in
writing of such event to the Warrantholder as provided in Section 14 hereof at
least 20 days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the shareholders entitled to any
relevant dividend, distribution, subscription rights or other rights or for the
determination of shareholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be.
Section 11. Restrictions on Transfer; Registration Rights.
(a) The Warrantholder agrees that prior to making any disposition of the
Warrant or any of the Shares, the Warrantholder or holder of Shares shall give
written notice to the Company describing briefly the manner in which any such
proposed disposition is to be made and no such disposition shall be made if the
Company has notified the Warrantholder or holder of Shares that, in the opinion
of counsel reasonably satisfactory to the Warrantholder or holder of Shares, a
registration statement or other notification or post-effective amendment
thereto (hereinafter collectively a "Registration Statement") under the
Securities Act is required with respect to such disposition and no such
Registration Statement has been filed by the Company with, and declared
effective, if necessary, by the Securities and Exchange Commission
("Commission").
As used herein, the term "Registrable Security" means each of the Shares
and any Common Shares issued upon any stock split or stock dividend in respect
thereof; provided, however, that with respect to any particular Registrable
Security, such security shall cease to be a Registrable Security when, as of
the date of determination, (i) it has been effectively registered under the
Securities Act and disposed of pursuant thereto, (ii) registration under the
Securities Act is no longer required for the
- 9 -
<PAGE> 10
immediate public distribution of all or any portion of such security or (iii) it
has ceased to be outstanding. The term "Registrable Securities" means any and/or
all of the securities falling within the foregoing definition of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Shares, such adjustment shall be made in the definition of "Registrable
Security" as is appropriate in order to prevent any dilution or enlargement of
the rights granted pursuant hereto.
(b) The Company shall be obligated to the Warrantholder, and the holders
of the Shares, to file a Registration Statement only as follows:
(i) Whenever, during the seven year period following the date
hereof, the Company proposes to file with the Commission a
Registration Statement, including any post-effective amendment to
the registration statement filed in connection with equity or debt
securities of the Company or any such securities of the Company
held by its securityholders (other than pursuant to a Form S-4
relating to a merger or acquisition, pursuant to a Form S-8 or
successor form or a Form S-3 used solely in conjunction with the
resale by affiliates or control persons of shares registered on a
Form S-8, or any comparable registration statement), it shall, at
least 30 days prior to such filing, give written notice of such
proposed filing to the Warrantholder, and each holder of
Registrable Securities, at their respective addresses appearing on
the records of the Company, and shall offer to include and shall
include in such filing all or a portion of such Registrable
Securities upon receipt by the Company, not less than 10 days prior
to the proposed filing date, of a request therefor setting forth
the facts with respect to such proposed disposition, subject to the
right of the managing underwriter, in any such offering that is
underwritten, to limit the number of Registrable Securities that
may be included in such offering on a pro rata basis with any other
person on whose behalf securities are being registered.
(ii) In addition to any Registration Statement pursuant to
subparagraph (i) above, the Company will, as promptly as
practicable (but in any event within 30 days) after written notice,
at any time during the seven year period following the date hereof,
prepare and file at the request of any "Majority Holder" (as
hereinbelow defined), a Registration Statement with the Commission
and appropriate state securities authorities sufficient to permit
the public offering and sale of the Registrable Securities by the
holders thereof, and will use its best
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<PAGE> 11
efforts, at its own expense, through its officers, directors,
auditors and counsel, in all matters necessary or advisable, to
cause such Registration Statement to become effective as promptly
as practicable following filing thereof; provided, however, that
the Company shall only be obligated to file two such Registration
Statements under this subparagraph (ii). Promptly upon receipt of
the notice hereunder requesting registration, the Company will
begin to prepare the necessary Registration Statement. The Company
covenants and agrees to give written notice of any request for
registration hereunder to all holders of Registrable Securities
within ten (10) days from the date of the Company's receipt of any
such request. After receiving notice from the Company as provided
herein, holders of Registrable Securities may request the Company
to include their Registrable Securities in the Registration
Statement to be filed pursuant to this subsection (ii) hereof by
notifying the Company of their decision to have such securities so
included within ten (10) days of their receipt of the Company's
notice. The term "Majority Holder" as used herein shall mean any
holder or any combination of holders of Registrable Securities, if
included in such holders' Registrable Securities are that aggregate
number of Shares (including Shares already issued, but not yet
sold, and Shares issuable pursuant to the exercise of any
outstanding portion of the Warrant) as would constitute a majority
of the aggregate number of Shares (including Shares already issued,
but not yet sold, and Shares issuable pursuant to the exercise of
any outstanding portion of the Warrant) included in all of the
Registrable Securities.
(c) The Company will maintain any Registration Statement or post-effective
amendment filed under subparagraph (b) hereof current under the Securities Act
until the earlier of (a) the sale of all of the securities subject to such
Registration Statement or (b) nine months from the effective date thereof.
(d) All fees, disbursements and out-of-pocket expenses and costs incurred
by the Company in connection with the preparation and filing of any Registration
Statement under subparagraphs (i) and (ii) of subsection 11(b) and in complying
with applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company, except that the Warrantholder or
holder of Shares shall pay the costs to the Company of any special audit which
may be required in connection with any Registration Statement requested by such
Warrantholder or holder of Shares pursuant to Section 11(b)(ii), if such request
does not coincide with availability of the Company's audited financial
statements which would be required for inclusion therewith. The Warrantholder
or holder of Shares shall bear the
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<PAGE> 12
cost of underwriting discounts and commissions, if any, applicable to the Shares
being registered and the fees and expenses of its counsel. The Company shall
use its best efforts to qualify any of the securities for sale in such states as
such Warrantholder or holder of Shares reasonably designates and shall furnish
indemnification in the manner provided in Section 12 hereof. However, the
Company shall not be required to qualify in any state which will require an
escrow or other restriction relating to the Company and/or the sellers. The
Company at its expense will supply the Warrantholder and any holder of Shares
with copies of such Registration Statement and the prospectus or offering
circular included therein and other related documents in such quantities as may
be reasonably requested by the Warrantholder or holder of Shares.
(e) The Company shall not be required by this Section 11 to file a
Registration Statement if, in the opinion of counsel for both the Warrantholder
or holder of Shares and the Company (or, should they not agree, in the opinion
of another counsel experienced in securities law matters acceptable to counsel
for the Warrantholder or holder of Shares and the Company) the proposed
offering or other transfer as to which such registration is requested is exempt
from applicable federal and state securities laws and would result in all
purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Securities Act.
(f) The Company agrees that until all Shares have been sold under a
Registration Statement or pursuant to Rule 144 under the Securities Act, it
will keep current in filing all materials required to be filed with the
Commission in order to permit the holders thereof to sell Shares under such
Rule 144.
(g) No provision contained herein shall preclude the Company from selling
securities pursuant to any Registration Statement in which it is required to
include the Warrants and/or Shares pursuant to this Section 11.
(h) If, in connection with a registration which includes Registrable
Securities pursuant hereto, the Company shall enter into an underwriting
agreement with one or more underwriters selected for such underwriting, such
agreement shall contain such representations, warranties and covenants by the
Company and such other terms as are customarily contained in agreements of that
type used by the underwriters. The holders of Registrable Securities shall be
parties to any underwriting agreement relating to an underwritten sale of their
Registrable Securities and may, at the underwriter's option, and as a condition
to the offering be required to make representations and warranties to or for the
benefit of such underwriters. Such holders of Registrable Securities shall not
be required to make any representations or warranties to or agreements with the
Company or the underwriters
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<PAGE> 13
except as they may relate to such holders of Registrable Securities and their
intended methods of distribution.
Section 12. Indemnification.
(a) In the event of the filing of any Registration Statement with respect
to the Warrant or the Shares pursuant to Section 11 hereof, the Company agrees
to indemnify and hold harmless the Warrantholder and each holder of any such
Shares covered by such Registration Statement, and each person, if any, who
controls the Warrantholder or any holder of such Shares within the meaning of
the Securities Act ("Distributing Holders") against any losses, claims, damages
or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Distributing Holders may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any such Registration Statement, or any related preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the Company by the
Distributing Holders, specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and hold
harmless the Company, and each person, if any, who controls the Company within
the meaning of the Securities Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and all attorneys' fees)
to which the Company or any such controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
a Registration Statement requested by such Distributing Holder, or any related
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state
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<PAGE> 14
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in such Registration Statement, preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such Distributing Holder, specifically for use in the preparation thereof and
provided further that the indemnity agreement contained in this Section 12(b)
shall not inure to the benefit of the Company with respect to any person
asserting such loss, claim, damage or liability who purchased the Shares which
are the subject thereof if the Company failed to send or give (in violation of
the Securities Act or the rules and regulations promulgated thereunder) a copy
of the prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such Shares,
where the Company was obligated to do so under the Securities Act or the rules
and regulations promulgated thereunder. This indemnity agreement will be in
addition to any liability which the Distributing Holders may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 12
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 12, notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified
party otherwise than as to the particular item as to which indemnification is
then being sought solely pursuant to this Section 12. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, assume the defense thereof, subject to
the provisions herein stated and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 12 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that, if the indemnified party is the Distributing Holder, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of
- 14 -
<PAGE> 15
such counsel has been specifically authorized in writing by the indemnifying
party or (ii) the named parties to any such action (including any impleaded
parties) include both the Distributing Holder and the indemnifying party and the
Distributing Holder shall have been advised by such counsel that there may be
one or more legal defenses available to the indemnifying party different from or
in conflict with any legal defenses which may be available to the Distributing
Holder (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of the Distributing Holder, it being
understood, however, that the indemnifying party shall, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable only for the reasonable fees and expenses of one separate firm of
attorneys for the Distributing Holder, which firm shall be designated in writing
by the Distributing Holder). No settlement of any action against an indemnified
party shall be made without the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld.
Section 13. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the Distributing
Holder makes a claim for indemnification pursuant to Section 12 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that the express provisions of Section 12 hereof
provide for indemnification in such case or (ii) contribution under the
Securities Act may be required on the part of any Distributing Holder, then the
Company and the applicable Distributing Holder shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), in either such case
(after contribution from others) on the basis of relative fault as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, on the one hand,
or the applicable Distributing Holder, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Holder
agree that it would not be just and equitable if contribution pursuant to this
Section 13 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 13. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 13 shall be
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<PAGE> 16
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
Section 14. Notices. Any notice pursuant to this Agreement by the
Company or by the Warrantholder shall be in writing and shall be deemed to have
been duly given if delivered by hand or if mailed by certified mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to the Warrantholder - [ ] Address; with a copy to Zimet, Haines,
Friedman & Kaplan, 460 Park Avenue, New York, New York 10022, Attention: James
Martin Kaplan, Esq.;
(b) If to the Company - addressed to What A World!, Inc., Suite 100,
McCormick Center II-B, 10901 Roosevelt Boulevard, St. Petersburg, Florida 33716,
Attention: David Miller
or to such other address as any such party may designate by notice to the other
party. Notices shall be deemed given at the time they are delivered personally
or three days after they are mailed in the manner set forth above.
Section 15. Assignment, Etc. This Agreement is binding upon and inures
to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement and the Warrant cannot be amended or
modified by the parties hereto, except by written agreement executed by the
parties. This Agreement and the Warrant cannot be assigned by either party
without the written consent of the other party; provided, however, that the
consent of the Company in connection therewith shall not be unreasonably
withheld, and provided further, that in connection with any assignment by the
Warrantholder of this Agreement and the Warrant, the transferee shall first
agree in writing to be bound by the terms of this Agreement as if such
transferee were a Warrantholder. If requested by the Company, the
Warrantholder shall furnish to the Company an opinion of counsel reasonably
satisfactory to the Company to the effect that such assignment is in accordance
with applicable federal and state securities laws.
Section 16. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 17. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
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<PAGE> 17
Section 18. Merger or Consolidation of the Company. The Company will not
merge or consolidate with or into any other corporation or sell all or
substantially all of its property to another person, unless the provisions of
Section 8.4 are complied with.
Section 19. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
contracts made and to be performed entirely within such State, without regard
to its principles of conflicts of laws.
Section 20. Severability. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
Section 21. Entire Agreement. This Agreement (together with any exhibits
hereto) constitutes the entire agreement of the parties with respect to its
subject matter, and supersedes all prior agreements and understandings of the
parties, oral and written, including without limitation the Original Agreement,
with respect to its subject matter.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
Attest: WHAT A WORLD!, INC.
By: By:
---------------------- ----------------------------
Name: Name: David Miller
Title: Title: President
[Corporate Seal]
--------------------------------
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<PAGE> 19
Exhibit A to Warrant and Registration Agreement
WARRANT TO PURCHASE [ ] COMMON SHARES
VOID AFTER 5:00 P.M., NEW YORK TIME, ON THE DATE
INDICATED BELOW
WHAT A WORLD!, INC.
INCORPORATED UNDER THE LAWS
OF THE COMMONWEALTH OF DELAWARE
This certifies that, for value received, [ ], the registered holder
hereof, or assigns (the "Warrantholder"), is entitled to purchase from What A
World!, Inc., a Delaware corporation (the "Company"), at any time during the
period ending at 5:00 p.m., New York time, on August 31, 2001, at the purchase
price per Share (the "Warrant Price") of $1.00, the number of Shares set forth
above. The number of Shares purchasable upon exercise of this Warrant and the
Warrant Price per Share shall be subject to adjustment from time to time as set
forth in the Warrant and Registration Agreement referred to below.
This Warrant may be exercised in whole or in part by presentation of this
Warrant with the Purchase Form on the reverse side hereof duly executed and
simultaneous payment of the Warrant Price (subject to adjustment) at the
principal office of the Company. Payment of such price shall be made, at the
option of the Warrantholder, in cash or by check.
This Warrant evidences the right to purchase an aggregate of up to [ ]
shares and is issued under and in accordance with the Warrant and Registration
Agreement dated as of August __, 1996 (the "Warrant and Registration
Agreement") among the Company and the Warrantholder and is subject to the terms
and provisions contained in the Warrant and Registration Agreement, to all of
which the Warrantholder by acceptance hereof consents.
Upon any partial exercise of this Warrant, there shall be signed and
issued to the Warrantholder a new Warrant in respect of the Shares as to which
this Warrant shall not have been exercised. This Warrant may be exchanged at
the principal office of the Company for Warrants in respect of the same
aggregate number of Shares as are evidenced by the Warrant or Warrants
exchanged. No fractional shares will be issued upon the exercise of rights to
purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Warrants. This Warrant is transferable at the
office of the Company in the manner and subject to the limitations set forth in
the Warrant and Registration Agreement.
- 19 -
<PAGE> 20
This Warrant does not entitle the Warrantholder to any of the rights of a
shareholder of the Company.
WHAT A WORLD!, INC.
By:
-----------------------------
Name: David Miller
Title: President
[Corporate Seal]
Attest:
By:
--------------------------
Name:
Title:
Dated as of August __, 1996
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<PAGE> 21
What A World!, Inc.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
shares (the "Shares"), provided for therein, and requests that
certificates for the Shares be issued in the name of:
- -------------------------------------------------------------------------------
(Please Print Name, Address and Social Security Number)
- -------------------------------------------------------------------------------
and, if said number of Shares shall not be all the Shares purchasable
hereunder, that a new Warrant certificate for the balance of the Shares
purchasable under the within Warrant certificate be registered in the name of
the undersigned Warrantholder or its Assignee as below indicated and delivered
to the address stated below.
The undersigned hereby makes payment of the aggregate amount of $______,
representing $_____ for each such Share.
Dated:_____________, 19__
Name of Warrantholder or Assignee:________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________________
Signature:_____________________________________________________________________
Signature Guaranteed: Note: Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.
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<PAGE> 22
ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- ------------------------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
- ------------------------------------------------------------------------------
the within Warrant, hereby irrevocably constituting and appointing ___________
Attorney to transfer said Warrant on the books of the Company, with full power
of substitution in the premises.
Dated:____________, 19___ _________________________________
Signature of Registered Holder
Signature Guaranteed: Notice: Signature must conform in all respects
to name of holder as specified on the face
of the Warrant Certificate.
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<PAGE> 1
EXHIBIT 10.3
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of August 28, 1996, made by WHAT A WORLD!,
INC., a Delaware corporation (the "Grantor"), in favor of David B. Cornstein,
as agent (together with any successor in such capacity and representative or
designee thereof, the "Agent"), for the Lenders (as hereinafter defined).
WHEREAS, each of David B. Cornstein ("Cornstein"), David F. Miller
("Miller") and Hugh H. Jones, Jr. ("Jones" and together with Cornstein and
Miller, the "Lenders") has concurrently herewith agreed to lend to the Grantor
up to $270,000, $270,000 and $60,000, respectively or an aggregate of $600,000
(the "Loans"), subject to the terms and conditions set forth in the notes
evidencing the Loan to be executed and delivered by Grantor to each of the
Lenders simultaneously herewith (the "Notes").
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make the Loans, the Grantor hereby agrees with the Agent for his
benefit and for the ratable benefit of the Lenders as follows:
1. Grant of Security. As collateral security for the prompt and complete
payment, performance and observance by the Grantor of its present and future
obligations under the Notes, whether at stated maturity, by acceleration or
otherwise (including, without limitation, all interest thereon at the rate(s)
provided in the Notes, whether accruing prior or subsequent to the commencement
of a bankruptcy or similar proceeding involving the Grantor as a debtor) (all
of the foregoing being herein referred to as the "Obligations"), the Grantor
hereby grants to the Agent for his benefit and the ratable benefit of the
Lenders, a continuing first priority security interest in, and a right of
set-off against, and the Grantor hereby assigns to the Agent, the collateral
described in paragraph 2 below (the "Collateral").
2. Description of Collateral. The Collateral is described as follows and
on any separate schedule(s) at any time or from time to time, furnished by the
Grantor to the Agent (all of which are hereby deemed part of this Security
Agreement) and also includes all accessions to the Collateral, substitutions
and replacements thereof, all items of Collateral now owned or existing and
hereafter acquired, created or arising, and all products and proceeds thereof
(including, without limitation, claims of the Grantor against third parties for
loss or damage to or destruction of any Collateral):
(a) all equipment in all of its forms, wherever located, now
or hereafter existing, including, but not
<PAGE> 2
limited to, all fixtures and all parts thereof and all accessions
thereto (any and all such equipment, fixtures, parts and accessions
being the "Equipment");
(b) all inventory in all of its forms, wherever located, now
or hereafter existing, including, but not limited to, (i) all raw
materials, work in process and finished products, intended for sale
or lease or to be furnished under contracts of service in the
ordinary course of business, of every kind and description; (ii)
goods in which the Grantor has an interest in mass or a joint or
other interest or right of any kind (including, without limitation,
goods in which the Grantor has an interest or right as consignee);
and (iii) goods which are returned to or repossessed by the
Grantor, and all accessions thereto and products thereof and
documents (including, without limitation, all warehouse receipts,
negotiable documents, bills of lading and other title documents)
therefor (any and all such inventory, accessions, products and
documents being the "Inventory");
(c) all accounts, contract rights, chattel paper, instruments,
certificated and uncertificated securities, letters of credit,
deposit accounts, insurance policies, general intangibles
(including, without limitation, all pension reversions, tax
refunds, trade names, trademarks, patents, copyrights, other
intellectual property and licenses thereof and all contracts and
agreements) and all other obligations of every kind, now or
hereafter existing, whether or not arising out of or in connection
with the sale or lease of goods or the rendering of services, and
all rights now or hereafter existing in and to all security
agreements, leases and all other contracts and agreements, and
other contracts securing or otherwise relating to any such
accounts, contract rights, chattel paper, instruments, certificated
and uncertificated securities, letters of credit, deposit accounts,
insurance policies, general intangibles or obligations (and all
such accounts, contract rights, chattel paper, instruments,
certificated and uncertificated securities, letters of credit,
deposit accounts, insurance policies, general intangibles and
obligations being the "Receivables," and any and all such security
agreements, leases and other contracts being the "Related
Contracts");
(d) all other goods and personal property, whether tangible or
intangible (including, without limitation, any proprietary computer
software), or whether now owned or hereafter acquired and wherever
located;
- 2 -
<PAGE> 3
(e) all instruments, files, books, ledger sheets, records and
documents covering or relating to all of the foregoing Collateral
(including, without limitation, computer records, disks, tapes and
other media on which information relating to the Collateral is
stored or recorded and all cash registers, computer software,
management information systems and other systems and copies of
every kind thereof relating to the foregoing Collateral); and
(f) all proceeds of every kind and nature, including proceeds
of proceeds, of any and all of the foregoing Collateral (including,
without limitation, proceeds which constitute property of the types
described in clauses (a) through (e) of this paragraph 2) and, to
the extent not otherwise included, all (i) payments under insurance
whether or not the Agent is the loss payee thereof, or any
indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing
Collateral and (ii) cash and cash equivalents.
3. Grantor Remains Liable. Anything herein to the contrary
notwithstanding,
(a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral (including, without
limitation, the Related Contracts) to the extent set forth therein
to perform all of its duties and obligations thereunder to the same
extent as if this Security Agreement had not been executed;
(b) the exercise by the Agent or any Lender of any of the
rights hereunder shall not release the Grantor from any of its
duties or obligations under the contracts and agreements included in
the Collateral (including, without limitation, the Related
Contracts); and
(c) neither the Agent nor any Lender shall have any obligation
or liability under the contracts and agreements included in the
Collateral (including, without limitation, the Related Contracts)
by reason of this Security Agreement, nor shall the Agent or any
Lender be obligated to perform any of the obligations or duties of
the Grantor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
4. Representations, Warranties and Covenants of the Grantor. The Grantor
hereby represents and warrants (which representations and warranties shall
survive the execution and delivery hereof) and covenants that:
- 3 -
<PAGE> 4
(a) Place of Perfection; Records. Except for Equipment and
Inventory that is en route to the Grantor, all of the Grantor's
Equipment and Inventory is located at the places specified in
Schedule I hereto. The location of the Grantor's chief executive
office, principal place of business and other places of business,
the books and records relating to Collateral, and the originals of
all instruments, letters of credit and chattel paper that evidence
Receivables are and have been during the four month period prior to
the date hereof located at the addresses set forth on Schedule II
hereto and the Grantor will not change any of the same, without
prior written notice to and consent of the Agent. The originals of
all instruments, letters of credit and chattel paper that evidence
Receivables have been, and all such instruments, letters of credit
and chattel paper which may be hereafter created shall be (upon
receipt by the Grantor thereof) delivered to the Agent. None of
the Accounts existing on the date hereof is evidenced by a
promissory note or other instrument. Any Collateral, perfection of
a security interest in which is made by notation or a certificate
of title or pursuant to any federal law, is described on Schedule
III hereto.
(b) Use of Collateral. The Collateral is and will be used in
the Grantor's business and not for personal, family, household or
farming use. The Grantor will use the Collateral for lawful
purposes only, with all reasonable care and caution and in
conformity with all applicable laws, ordinances and regulations,
except where the failure to so conform would not have a material
adverse effect on the business, operations, liabilities, assets,
properties, prospects or condition (financial or otherwise) of the
Grantor.
(c) Sale or Other Disposition of Collateral. The Grantor will
not assign, sell, lease, transfer, or otherwise dispose of or
abandon, nor suffer or permit any of the same to occur with respect
to, any Collateral, and the inclusion of "proceeds" of the
Collateral under the security interest granted herein shall not be
deemed a consent by the Agent to any sale or other disposition of
any Collateral except as expressly permitted herein.
Notwithstanding the foregoing, the Grantor shall be permitted to
sell, assign, lease or otherwise dispose of Inventory in the
ordinary course of business.
(d) Access to Collateral. The Grantor shall permit the Agent
(or any representative of the Agent) to have access to and the
right of inspection of the Collateral and any records pertaining
thereto (including, without limitation, computer records and files)
and the Grantor
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<PAGE> 5
hereby grants to the Agent for his benefit and for the ratable
benefit of the Lenders a security interest in all such records,
papers and instruments to secure the payment, performance and
observance of the Obligations. Grantor shall permit the Agent (or
any representative of the Agent) the right to make extracts from and
to receive from the Grantor originals or true copies of such records
and any papers and instruments relating to any Collateral upon
request therefor.
(e) Nature of Security Interest. The grant of a security
interest in the Collateral pursuant to this Security Agreement
creates a valid and perfected first priority security interest in
the Collateral, securing the payment, performance and observance of
the Obligations, subject to any filings of UCC-1 financing
statements or any other actions required pursuant to the Uniform
Commercial Code of the relevant jurisdiction (the "UCC"), in the
case of any intellectual property, subject to any filings with the
United States Patent and Trademark Office or the United States
Copyright Office, with respect to any collateral assignments of
insurance, subject to delivery of notice of such assignment to the
applicable insurance company and with respect to any promissory note
or other Collateral the nature of which requires the taking of
possession, subject to the Agent taking possession of such
Collateral.
(f) Further Assurances. The Grantor will, at its sole cost
and expense, perform all acts and execute all documents reasonably
requested by the Agent from time to time to evidence, perfect,
maintain or enforce the Agent's first priority security interest
granted herein or otherwise in furtherance of the provisions of
this Security Agreement. Without limiting the generality of the
foregoing, the Grantor will:
(i) mark conspicuously each negotiable document or other
document of title included in the Inventory and each letter
of credit, instrument and chattel paper included in the
Receivables and at the request of the Agent, each Related
Contract and each of its records pertaining to the Collateral
with a legend, in form and substance satisfactory to the
Agent, including that such document, chattel paper or
Collateral is subject to the security interest granted
hereby;
(ii) if any Receivable shall be evidenced by a
promissory note, certificated security or other document or
instrument, within 10 days of the date hereof and at all
times thereafter, deliver and
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<PAGE> 6
pledge to the Agent hereunder for his benefit and for the
ratable benefit of the Lenders such note, document or
instrument duly endorsed and accompanied by duly executed
instruments of transfer or assignment, in form and substance
satisfactory to the Agent;
(iii) at any time and from time to time, execute and
deliver to the Agent such financing or continuation
statements, or amendments thereto, pursuant to the UCC,
applications for certificates of title and other papers,
documents or instruments as may be requested by the Agent in
connection with this Security Agreement, and the Grantor
hereby authorizes the Agent to execute and file at any time
and from time to time one or more financing or continuation
statements or copies thereof or of this Security Agreement
with respect to the Collateral signed only by the Agent where
permitted by law; a carbon, photographic or other reproduction
of this Security Agreement or any financing statement covering
the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law; and
(iv) within 30 days of the date hereof and at all times
thereafter, ensure that each certificate of title,
registration or other title document relating to any motor
vehicle owned by Grantor lists the Agent as the holder of a
first lien on such motor vehicle.
(g) No Commingling. From and after the occurrence of an Event
of Default (as defined in the Notes) and so long as any Event of
Default shall be continuing, proceeds of the Collateral received by
the Grantor shall not be commingled with other property of the
Grantor, but shall be segregated, held by the Grantor in trust for
the Agent, and immediately delivered to the Agent in the form
received, duly endorsed in blank where appropriate to effectuate
the provisions hereof, the same to be held by the Agent as
additional Collateral hereunder or, at the Agent's option, to be
applied to payment of the Obligations, whether or not due, in the
following order:
(i) First, to payment of all costs and expenses of the
Agent and the Lenders incurred in connection with the
preservation, collection and enforcement of the Obligations
and the security interest granted herein, including, without
limitation, any amounts advanced by the Agent or the Lenders
to protect or preserve the Collateral;
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<PAGE> 7
(ii) Second, to payment of that portion of the
Obligations constituting accrued and unpaid interest and
fees; and
(iii) Third, to payment of that portion of the
Obligations constituting principal of the Notes.
(h) Trade Names. Except for any trade or other names set
forth on Schedule IV hereto, the Grantor has not, during the five
year period prior to the date hereof, been known by or used any
trade name, fictitious name or any corporate name other than the
Grantor's name as set forth in this Security Agreement.
5. Agent's Rights.
(a) In his sole discretion, the Agent may, at any time and from time to
time:
(i) if an Event of Default occurs and is continuing, in his
name or in the Grantor's name or otherwise, notify any obligor of
any account, contract, document, instrument, chattel paper, letter
of credit or general intangible included in the Collateral to make
payment to the Agent;
(ii) if an Event of Default occurs and is continuing, demand,
sue for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for, or make any
compromise or settlement deemed desirable by the Agent with respect
to, any Collateral, and/or extend the time of payment, arrange for
payment in installments, or otherwise modify the terms of, or
release, any Collateral or Obligations, all without notice to or
consent by the Grantor and without otherwise discharging or
affecting the Obligations, the Collateral or the security interest
granted herein;
(iii) whether or not an Event of Default is continuing, for
the account of the Grantor, pay any amount or do any act necessary
or advisable for the insuring, maintaining, preservation or
protection of the Collateral and required of the Grantor hereunder
and which the Grantor fails to do or pay, and any such payment
shall be deemed an advance by the Agent to the Grantor payable on
demand together with interest at the highest rate then payable on
any of the Obligations. The Agent agrees to give the Grantor, to
the extent practicable in the sole judgment of the Agent, (A) three
(3) days' prior notice (which may be oral) of any payment made
pursuant to this clause (iii); and (B) concurrent
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<PAGE> 8
notice of acts done pursuant to this clause (iii), provided,
however, that the failure to give such notice shall not affect the
validity of any such actions or affect the obligation of the Grantor
to reimburse the Agent for any amounts paid under this clause (iii);
and
(iv) transfer to or register in the name of the Agent or his
nominee any Collateral consisting of securities, and, whether or
not so transferred or registered, while an Event of Default is
continuing, the Agent shall be entitled to receive and retain all
income, dividends (including stock dividends and rights to
subscribe) and other distributions thereon as part of the
Collateral and to exchange any such Collateral upon the
reorganization, recapitalization or readjustment of any entity
issuing such securities and to exercise all rights with respect
thereto as if he were the absolute owner thereof, provided that,
until the occurrence of an Event of Default and whether or not the
Collateral is transferred to or registered in the name of the Agent
or his nominee, and after an Event of Default is cured or waived,
the Grantor shall be entitled to exercise the right to vote such
Collateral and, if the Collateral has been so transferred or
registered, the Agent shall take such action as the Grantor may
reasonably request to enable the Grantor to exercise such right for
any purpose which is not inconsistent with the terms of this
Security Agreement or the Obligations and which would not have an
adverse effect on the value of the Collateral.
(b) In his sole discretion, the Agent may, at any time and from time to
time, assign, transfer or deliver to any transferee of any Obligations, any
security interest in and rights with respect to any Collateral, whereupon the
Agent shall be fully discharged from all responsibility and the transferee
shall be vested with all powers and rights of the Agent hereunder with respect
thereto, but the Agent shall retain all rights and powers with respect to any
Collateral not assigned, transferred or delivered. The Agent agrees to give
the Grantor concurrent notice of any such assignment, transfer or delivery to a
transferee, provided, however, that the failure to give such notice shall not
affect the validity of any such assignment, transfer or delivery.
(c) At his option, the Agent may apply any insurance monies received at
any time to the cost of repairs to or replacements for the Collateral and/or to
payment of the Obligations, whether or not due, in any order the Agent may
determine, any surplus (after payment of all costs, reasonable attorneys' fees
and disbursements) to be remitted to the Grantor, the Grantor remaining liable
for any deficiency.
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<PAGE> 9
6. Expenses. The Grantor will upon demand pay the Agent for all
reasonable out-of-pocket costs and expenses which the Agent may pay or incur
pursuant to the provisions of this Security Agreement or in perfecting,
defending, protecting or enforcing this Security Agreement or the security
interest granted herein or in enforcing payment of the Obligations or otherwise
in connection with the provisions hereof, including but not limited to court
costs, collection charges, travel expenses, and reasonable attorneys' fees, all
of which, together with interest thereon, shall be part of the Obligations and
shall be payable on demand.
7. Remedies. Upon the occurrence and during the continuance of any Event
of Default, the Agent may, without notice to or demand upon the Grantor,
declare any Obligations immediately due and payable and the Agent shall have
the following rights and remedies (to the extent permitted by applicable law)
in addition to all rights and remedies of a secured party under the UCC
(whether or not the UCC applies to the affected Collateral) or of the agent
under the Obligations, all such rights and remedies being cumulative and in
addition to all other remedies in favor of the Agent existing at law or in
equity, not exclusive, and enforceable alternatively, successively or
concurrently:
(a) The Agent may at any time and from time to time, with or
without judicial process or the aid and assistance of other, to the extent the
Agent is not prohibited from doing so under applicable law (the Grantor hereby
waiving its rights and benefits under such law to the extent such rights and
benefits can be legally waived), enter upon any premises in which any
Collateral may be located and, without resistance or interference by the
Grantor, take possession of the Collateral; and/or dispose of any Collateral on
any such premises; and/or require the Grantor to assemble and make available to
the Agent at the expense of the Grantor any Collateral at any place and time
designated by the Agent which is reasonably convenient to both parties; and/or
remove any Collateral from any such premises for the purpose of effecting sale
or other disposition thereof (and if any of the Collateral consists of motor
vehicles, the Agent may use the license plates); and/or sell, resell, lease,
assign and deliver, grant options for or otherwise dispose of any Collateral in
its then condition or following any commercially reasonable preparation or
processing, at public or private sale or proceedings or otherwise, by one or
more contracts, in one or more parcels, at the same or different times, with or
without having the Collateral at the place of sale or other disposition, for
cash and/or credit, and upon any terms, at such place(s) and time(s) and to such
person(s) as the Agent deems best, all without demand, notice or advertisement
whatsoever except that where an applicable statute requires reasonable notice of
sale or other disposition the Grantor hereby agrees that ten (10) days prior
notice to the address of the Grantor as set forth in this Security Agreement
shall be deemed reasonable notice thereof.
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<PAGE> 10
(b) If any Collateral is sold by the Agent upon credit or for
future delivery, the Agent shall not be liable for the failure of the purchaser
to pay for same and in such event the Agent may resell such Collateral. In no
event shall the Grantor be credited with any part of the proceeds of sale of any
Collateral until cash payment thereof has actually been received by the Agent.
(c) The Agent or any Lender may purchase any Collateral at any
public sale and, if any Collateral is of a type customarily sold in a
recognized market or is of the type which is the subject of widely distributed
standard price quotations, the Agent or any Lender may purchase such Collateral
at private sale, free from any equity or right of redemption, which is hereby
waived and released, and in each case may make payment therefor by any means,
including, without limitation, by release or discharge of Obligations in lieu
of cash payment.
(d) The Agent shall apply the cash proceeds actually received from
any sale or other disposition of the Collateral to the payment of the
Obligations as provided for in Section 4(g) hereof. Grantor shall remain
liable and will pay the Agent on demand any deficiency remaining, which,
together with interest thereon (at the rate specified in the Notes), shall be
part of the Obligations and be payable on demand, with any surplus to be paid
to the Grantor, subject to any duty of the Agent imposed by law to the holder
of any subordinate security interest in the Collateral known to the Agent.
(e) The Agent may appropriate, set-off and apply to the payment of
the Obligations, any Collateral in or coming into the possession of the Agent or
his agents, without notice to the Grantor and in such manner as the Agent may
in his sole discretion determine.
(f) No demand, advertisement or notice, all of which are hereby
expressly waived, shall be required in connection with any sale or other
disposition of any part of the Collateral which threatens to decline speedily
in value or which is of a type customarily sold on a recognized market;
otherwise the Agent shall give the Grantor at least ten (10) days prior notice
of the time and place of any public sale and of the time after which any
private sale or other disposition is to be made, which notice Grantor agrees is
reasonable, all other demands, advertisements and notices being hereby waived.
(g) The Agent shall not be obligated to make any sale of
Collateral if he shall determine not to do so, regardless of the fact that
notice of sale may have been given. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale
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<PAGE> 11
may, without further notice, be made at the time and place to which the same was
so adjourned.
8. Agent Appointed Attorney-in-Fact. (a) To effectuate the terms and
provisions hereof, the Grantor hereby appoints the Agent as the Grantor's
attorney-in-fact for the purpose of carrying out the provisions of this
Security Agreement and, from and after the occurrence and during the
continuance of an Event of Default, taking any action and executing any
instrument which the Agent may deem necessary or advisable to accomplish the
purposes hereof. Without limiting the generality of the foregoing, the Agent
shall have the right and power, from and after the occurrence and during the
continuance of an Event of Default, to:
(i) receive, open and dispose of all mail addressed to the
Grantor and notify the Post Office authorities to change the
address for delivery of mail addressed to Grantor to such address
as the Agent may designate;
(ii) endorse the name of the Grantor on any notes,
acceptances, checks, drafts, money orders, instruments or other
evidences of Collateral that may come into the Agent's possession;
(iii) sign the name of the Grantor on any invoices, documents,
drafts against and notices to any account of the Grantor or
obligors of the Grantor, assignments and requests for verification
of accounts;
(iv) execute proofs of claim and loss;
(v) execute endorsements, assignments or other
instruments of conveyance or transfer;
(vi) adjust and compromise any claims under insurance policies
or otherwise; execute releases; and
(vii) do all other acts and things necessary or advisable in
the sole discretion of the Agent to carry out and enforce this
Security Agreement or the Obligations.
(b) All acts done under the foregoing authorization are hereby
ratified and approved and neither the Agent nor any designee or agent thereof
shall be liable for any acts of commission or omission, for any error of
judgment or for any mistake of fact or law (except for any acts of commission
or omission of gross negligence or willful misconduct).
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<PAGE> 12
(c) This power of attorney, being coupled with an interest, is
irrevocable while any Obligations remain unpaid or unperformed.
9. Agent's Duties; Reasonable Care. (a) The Agent shall have the duty to
exercise reasonable care in the custody and preservation of any Collateral in
his possession, which duty shall be fully satisfied if the Agent maintains safe
custody of such Collateral.
(b) Except as hereinabove specifically set forth, the Agent shall
have no further obligation to ascertain the occurrence of, or to notify the
Grantor with respect to, any matters relating to any Collateral and shall not
be deemed to assume any such further obligation as a result of the
establishment by the Agent of any internal procedures with respect to any
Collateral in his possession, nor shall the Agent be deemed to assume any other
responsibility for, or obligation or duty with respect to, any Collateral, or
his use, of any nature or kind, or any matter or proceedings arising out of or
relating thereto, including, without limitation, any obligation or duty to take
any action to collect, preserve or protect his or the Grantor's rights in the
Collateral or against any prior parties thereto, but the same shall be at the
Grantor's sole risk and responsibility at all times.
(c) The Grantor hereby releases the Agent and the Lenders from any
claims, causes of action and demands at any time arising out of or with respect
to this Security Agreement, the Obligations, the Collateral and his use and/or
any actions taken or omitted to be taken by the Agent with respect thereto
(except such claims, causes of action and demands arising from the gross
negligence or willful misconduct of the Agent), and the Grantor hereby agrees
to hold the Agent harmless from and with respect to any and all such claims,
causes of action and demands (except such claims, causes of action and demands
arising from the gross negligence or willful misconduct of the Agent).
10. Rights and Remedies Not Waived. The Agent's prior recourse to any
Collateral shall not constitute a condition of any demand, suit or proceeding
for payment or collection of the Obligations. No act, omission or delay by the
Agent shall constitute a waiver of his rights and remedies hereunder or
otherwise. No single or partial waiver by the Agent of any default hereunder
or right or remedy which he may have shall operate as a waiver of any other
default, right or remedy or of the same default, right or remedy on a future
occasion.
11. Agent May Perform. If the Grantor fails to perform any agreement
contained herein, the Agent may himself perform, or cause performance of, such
agreement, and the reasonable expenses of the Agent incurred in connection
therewith shall be payable by
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<PAGE> 13
the Grantor under paragraph 6 hereof; the Agent agrees to give the Grantor
concurrent notice of any action taken pursuant to this paragraph 11, provided,
however, that the failure to give such notice shall not affect the validity of
any such action.
12. Waiver of July Trial and Setoff; Consent to Jurisdiction; etc. (a)
In any litigation in any court with respect to, in connection with, or arising
out of this Security Agreement, the Collateral, or any instrument or document
delivered pursuant to this Security Agreement, or the validity, protection,
interpretation, collection or enforcement thereof, or any other claim or
dispute howsoever arising, between the Grantor and the Lenders or the Agent,
THE GRANTOR, to the fullest extent it may effectively do so, (i) waives the
right to interpose any setoff, recoupment, counterclaim or cross-claim in
connection with any such litigation, irrespective of the nature of such setoff,
recoupment, counterclaim or cross-claim, unless such setoff, recoupment,
counterclaim or cross-claim could not, by reason of any applicable federal or
state procedural laws, be interposed, pleaded or alleged in any other action
and (ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION. THE
GRANTOR AGREES THAT THIS PARAGRAPH 12 IS A SPECIFIC AND MATERIAL ASPECT OF THIS
SECURITY AGREEMENT AND ACKNOWLEDGES THAT THE LENDERS WOULD NOT EXTEND TO THE
GRANTOR ANY LOAN OR FINANCIAL ACCOMMODATIONS UNDER THE NOTES IF THIS PARAGRAPH
12 WERE NOT PART OF THIS SECURITY AGREEMENT.
(b) The Grantor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any federal court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Security Agreement, the Collateral or any
document or instrument delivered pursuant to this Security Agreement. The
Grantor hereby waives, to the fullest extent it may effectively do so, the
defenses of forum non conveniens and improper venue.
13. Admissibility of Security Agreement. The Grantor agrees that any copy
of this Security Agreement signed by the Grantor and transmitted by telecopier
for delivery to the Agent shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the
original is in existence.
14. Notices. Wherever this Security Agreement provides for notice to any
party (except as expressly provided to the contrary), it shall be given in
writing by messenger, electronic transmission, telegraph, telex or postage
prepaid, registered or recorded delivery, airmail letter sent to the address
set forth below, or to such other address as the party affected may hereafter
designate in writing to the Grantor and the Agent. Any such notice shall be
effective when received by the party to whom addressed; provided that if given
or made by postage prepaid, registered or recorded delivery, airmail letter or
by telegraph or telex, it
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<PAGE> 14
shall be deemed to have been received at the earlier of (i) when actually
received or (ii) three (3) business days after the same was posted or sent (and
in proving such, it shall be sufficient to prove that the envelope containing
the same was properly addressed and posted as aforesaid or sent), and provided
that if given or made by telegraph or telex, it shall be deemed to have been
received at the time of dispatch.
To Grantor:
WHAT A WORLD!, INC.
Suite 100
McCormick Center II-B
10901 Roosevelt Boulevard
St. Petersburg, FL 33716
To Agent:
David B. Cornstein
c/o Finlay Enterprises, Inc.
521 Fifth Avenue
New York, New York 10175
15. Terms. All terms defined in the UCC and used herein shall have the
meanings as defined in the UCC, unless the context otherwise requires.
16. Amendments and Modification. No provision hereof shall be modified,
altered or limited except by written instrument expressly referring to this
Security Agreement and to such provision, and executed by the party to be
charged.
17. Continuing Security Interest. This Security Agreement shall create a
continuing first priority security interest in the Collateral and shall (i)
remain in full force and effect until the performance in full of the
Obligations (ii) be binding upon and inure to the benefit of the Grantor, its
successors and assigns, and (iii) be binding upon and inure to the benefit of,
and be enforceable by, the Agent, the Lenders and their respective successors,
transferees and assigns.
18. Security Interest Absolute. All rights of the Agent and security
interests hereunder, and all of the obligations of the Grantor hereunder, shall
be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of any provision of
the Notes or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the
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<PAGE> 15
Obligations or any other amendment or waiver of or any consent to any
departure from the Notes;
(iii) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Grantor or a third party
grantor of a security interest.
19. Counterparts. This Security Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original and all of
which shall together constitute one and the same agreement.
20. GOVERNING LAW. THIS SECURITY AGREEMENT AND THE OBLIGATIONS SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
21. Captions; Separability. (a) The captions of the paragraphs and
subparagraphs of this Security Agreement have been inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Security Agreement.
(b) If any term of this Security Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby.
22. Schedules. The Lenders are authorized to annex hereto any schedules
referred to herein which are approved by Grantor (which approval shall not be
unreasonably withheld or delayed).
23. Acknowledgment of Receipt. The Grantor acknowledges receipt of a copy
of this Security Agreement.
24. Gender. In construing this Security Agreement, feminine or neuter
pronouns shall be substituted for those masculine in form and vice versa in any
place in which the context so requires.
25. Appointment of Agent.
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<PAGE> 16
(a) Each Lender hereby designates David B. Cornstein ("Cornstein")
to act as agent for such Lender under this Security Agreement and Cornstein
hereby accepts such appointment. Each Lender hereby irrevocably authorizes
Agent to take such action on his behalf under the provisions of this Security
Agreement and to exercise such powers and to perform such duties hereunder as
are specifically delegated to or required of Agent by the terms hereof and such
other powers as are reasonably incidental thereto and the Agent shall hold all
Collateral, payments of principal, interest and fees received pursuant to this
Security Agreement, for the ratable benefit of Lenders. Agent may perform any
of his duties hereunder by or through his agents or employees. As to any
matters not expressly provided for by this Security Agreement, Agent shall not
be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Lenders who in
the aggregate have provided a majority of the then outstanding aggregate amount
of Loans at the time in question (the "Required Lenders"), and such
instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Security Agreement or applicable law.
(b) Agent shall have no duties or responsibilities except those
expressly set forth in this Security Agreement. Neither Agent nor any of his
employees or agents shall be liable for any action taken or omitted by any of
them hereunder or in connection herewith unless caused by their gross
negligence or willful misconduct. Agent shall not have by reason of this
Security Agreement a fiduciary relationship in respect of any Lender; and
nothing in this Security Agreement, expressed or implied, is intended to or
shall be so construed as to impose upon Agent any obligations in respect of
this Security Agreement except as expressly set forth herein.
(c) Agent may resign on ten (10) days' written notice to each of
the Lenders and Grantor and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Grantor. Any
such successor Agent shall succeed to the rights, powers and duties of Agent,
and the term "Agent" shall mean such successor agent effective upon such
appointment.
(d) If Agent shall request instructions from the Lenders with
respect to any act or action (including failure to act) in connection with this
Security Agreement, Agent shall be entitled to refrain from such act or taking
such action unless and until Agent shall have received instructions from the
Required Lenders; and Agent shall not incur liability to any person by reason
of so refraining.
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<PAGE> 17
(e) Agent shall be entitled to rely, and shall be fully protected
in relying, upon any note, writing, resolution, notice, statement, certificate,
telex, teletype or telecopier message, cablegram, order or other document or
telephone message believed by him to be genuine and correct and to have been
signed, sent or made by the proper person or entity, and, with respect to
all legal matters pertaining to this Security Agreement and his duties
hereunder, upon advice of counsel selected by him. Agent may employ agents and
attorneys-in-fact and shall not be liable for the default or misconduct of any
such agents or attorneys-in-fact selected by Agent with reasonable care.
(f) Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default, unless Agent has received notice from a
Lender or Grantor describing such or Event of Default and stating that such
notice is a "notice of default". In the event that Agent receives such a
notice, Agent shall give notice thereof to the Lenders. Agent shall take such
action with respect to such Event of Default as shall be reasonably directed by
the Required Lenders; provided, however, that unless and until Agent shall have
received such directions, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Event of
Default as he shall deem advisable in the best interests of the Lenders.
(g) Each Lender will reimburse and indemnify Agent in proportion
to his respective portion of the Loans outstanding at the time in question,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against Agent in performing his duties hereunder, or in any way relating to or
arising out of this Security Agreement; provided, that, Lenders shall not be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent's gross negligence or willful misconduct.
(h) If Agent shall be a Lender, Agent shall have the same rights
and powers under this Security Agreement as any other Lender and as if he were
not performing the duties as Agent specified herein; and the term "Lender" or
any similar term shall, unless the context clearly otherwise indicates, include
Agent in his capacity as a Lender.
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<PAGE> 18
IN WITNESS WHEREOF, the Grantor has duly executed or caused this Security
Agreement to be duly executed as of the date first above set forth.
WHAT A WORLD!, INC.
By:/s/ David F. Miller
------------------------------
Name: David F. Miller
Title: President
AGREED:
/s/ David B. Cornstein
--------------------------------
David B. Cornstein, individually
and as Agent
/s/ David F. Miller
--------------------------------
David F. Miller
/s/ Hugh H. Jones, Jr.
--------------------------------
Hugh H. Jones, Jr.
<PAGE> 19
SCHEDULE I
LOCATION OF THE EQUIPMENT AND INVENTORY
<TABLE>
<S> <C>
WHAT A WORLD!, INC. WHAT A WORLD!, INC.
Tampa Bay Center Aventura Mall
3302 West M.L. King Boulevard #2031 19575 Biscayne Boulevard
Tampa, Florida 33607 Suite 1197
N. Miami, Florida 33180
WHAT A WORLD!, INC.
Governor's Square Mall WHAT A WORLD!, INC.
1500 Apalachee Parkway #2078 Monmouth Mall
Tallahassee, Florida 32301 Route 35 and Wyckoff Rd #2144
Eatontown, New Jersey 07724
WHAT A WORLD!, INC.
Orange Park Mall WHAT A WORLD!, INC.
1910 Wells Road, Space #1050 Orlando Fashion Square Mall
Orange Park, Florida 32073 Space #D64
3201 East Colonial Drive
WHAT A WORLD!, INC. Orlando, Florida 32803
Treasure Coast Square Mall
3202 N.W. Federal Highway WHAT A WORLD!, INC.
Jensen Beach, Florida 34957 10901 Roosevelt Boulevard
Bldg. B, Suite 100
WHAT A WORLD!, INC. St. Petersburg, Florida 33716
The Falls
8888 S.W. 136th Street
Suite 403
Miami, Florida 33156
WHAT A WORLD!, INC.
Staten Island Mall
2655 Richmond Avenue
Space T-131
Staten Island, New York 10314
WHAT A WORLD!, INC.
Countryside Mall
27001 U.S. 19 North #1042
Clearwater, Florida 34621
WHAT A WORLD!, INC.
DeSoto Square Mall
303 U.S. 301, Blvd. West #209
Bradenton, Florida 34205
WHAT A WORLD!, INC.
Paddock Mall
3100 S.W. College RD #454
Ocala, Florida 34474
</TABLE>
- 19 -
<PAGE> 20
SCHEDULE II
CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS
WHAT A WORLD!, INC.
Suite 100
McCormick Center II-B
10901 Roosevelt Boulevard
St. Petersburg, Florida 33716
OTHER PLACES OF BUSINESS
WHAT A WORLD!, INC.
Countryside Mall
29001 U.S. 19 North #1042
Clearwater, Florida 34621
WHAT A WORLD!, INC.
Governor's Square Mall
1500 Apalachee Parkway #2078
Tallahassee, Florida 32301
WHAT A WORLD!, INC.
Tampa Bay Center
3302 West M.L. King Boulevard #2031
Tampa, Florida 33607
WHAT A WORLD!, INC.
DeSoto Square Mall
303 U.S. 301 Blvd. West #209
Bradenton, Florida 34205
WHAT A WORLD!, INC.
Orange Park Mall
1910 Wells Road #1050
Orange Park, Florida 32073
SEE SCHEDULE I FOR ADDITIONAL LOCATIONS
LOCATION OF ORIGINAL INSTRUMENTS, BOOKS AND RECORDS, LETTERS OF CREDIT AND
CHATTEL PAPER
<PAGE> 21
SCHEDULE III
COLLATERAL WHERE PERFECTION OF A SECURITY INTEREST THEREIN IS MADE BY
NOTATION TO A CERTIFICATE OF TITLE OR PURSUANT TO FEDERAL LAW
None
<PAGE> 22
SCHEDULE IV
TRADENAMES, FICTITIOUS NAMES, CORPORATE NAMES OTHER THAN GRANTOR'S NAME
What A World!
- 22 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-START> FEB-04-1996
<PERIOD-END> AUG-03-1996
<CASH> 346,608
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,144,959
<CURRENT-ASSETS> 1,722,471
<PP&E> 2,953,188
<DEPRECIATION> 457,513
<TOTAL-ASSETS> 4,250,076
<CURRENT-LIABILITIES> 560,397
<BONDS> 0
0
0
<COMMON> 21,181
<OTHER-SE> 4,538,782
<TOTAL-LIABILITY-AND-EQUITY> 4,250,076
<SALES> 2,521,133
<TOTAL-REVENUES> 2,544,184
<CGS> 1,309,639
<TOTAL-COSTS> 1,309,639
<OTHER-EXPENSES> 2,067,326
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,230
<INCOME-PRETAX> (846,011)
<INCOME-TAX> 0
<INCOME-CONTINUING> (846,011)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (846,011)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> (.40)
</TABLE>
