<PAGE>
SECURITIES AND EXCHANGE COMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SCETION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
_________________________
Date of Report: July 12, 1996
NEW WORLD COFFEE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3690261
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or organization)
379 West Broadway, New York, NY 10012
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 343-0552
Exhibit index is located on page 3.
Total number of pages in this report is 41.
<PAGE>
Item 5 Other Events
------------
On June 28, 1996, the registrant completed a $3.75 million private
placement equity financing. The placement consisted of 375 shares of Class
A Preferred Stock which carries a dividend of 8% per annum payable at the
time of conversion or redemption of the Preferred Stock. The Class A
Preferred Stock is convertible into common stock at a rate not to exceed
$3.975 per share. The Class A Preferred Stock shall automatically be
converted into Common Stock of the Company at the end of three years from
the time of the closing.
Item 7 Exhibits
--------
Exhibit 1 - Certificate of Designation of Preferred Stock
Exhibit 2 - Registration Rights Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEW WORLD COFFEE, INC.
(Registrant)
Dated: July 12, 1996 By:
Jerold Novack
Vice President Finance
- 2 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No Description Numbered Pages
- ------------ --------------------------------------------- --------------
<S> <C> <C>
1 Certificate of Designation of Preferred Stock 9
2 Registration Rights Agreement 10
</TABLE>
- 3 -
<PAGE>
EXHIBIT 1
NEW WORLD COFFEE, INC.
(Certificate of Designation of Preferred Stock)
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES A PREFERRED STOCK
OF
NEW WORLD COFFEE, INC.
It is hereby certified that:
1. The name of the Company (hereinafter called the "Company") is New
World Coffee, Inc., a Delaware corporation.
2. The certificate of incorporation of the Company authorize the
issuance of Two Million (2,000,000) shares of preferred stock, $0.001 par value
per share, and expressly vests in the Board of Directors of the Company the
authority provided therein to issue any or all of said shares in one (1) or more
series and by resolution or resolutions to establish the designation and number
and to fix the relative rights and preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Series A issue of Preferred Stock:
RESOLVED, that Four Hundred (400) of the Two Million (2,000,000)
authorized shares of Preferred Stock of the Company shall be designated Series A
Preferred Stock, $0.001 par value per share, and shall possess the rights and
preferences set forth below:
Section 1. Designation and Amount. The shares of such series shall
----------------------
have a par value of $0.001 per share and shall be designated as Series A
Preferred Stock (the "Series A Preferred Stock") and the number of shares
constituting the Series A Preferred Stock shall be Four Hundred (400). The
Series A Preferred Stock shall be offered at a purchase price of Ten Thousand
Dollars ($10,000,00) per share (the "Original Series A Issue Price"), with an
eight percent (8%) per annum accretion rate as set forth herein.
Section 2. Rank. The Series A Preferred Stock shall rank: (i) junior
----
to any other class or series of capital stock of the Company hereafter created
specifically ranking by its terms senior to the Series A Preferred Stock
(collectively, the "Senior Securities"); (ii) prior to all of the Company's
Common Stock, $0.001 par value per share ("Common Stock"); (iii) prior to any
class or series of capital stock of the Company hereafter created not
specifically ranking by its terms senior to or on parity with any Series A
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
"Junior Securities"); and (iv) on parity with any class or series of capital
stock of the Company hereafter created specifically ranking by its terms on
parity with the Series A Preferred Stock ("Parity Securities") in each case as
to distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (all such distributions being referred
to collectively as "Distributions").
Section 3. Dividends. The Series A Preferred Stock will bear no
---------
dividends, and the holders of the Series A Preferred Stock ("Holders") shall not
be entitled to receive dividends on the Series A Preferred Stock.
Section 4. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, the Holders of shares of Series A
Preferred Stock shall be entitled to receive, immediately after any
distributions to Senior Securities required by the Company's Certificate of
Incorporation or any certificate of designation, and prior in preference to any
distribution to Junior Securities but in parity with any distribution to Parity
Securities, an amount per share equal to the sum of (i) the Original Series A
Issue Price for each outstanding share of Series A Preferred Stock and (ii) an
amount equal to eight percent (8%) of the Original Series A Issue Price per
annum for the period that has passed since the date that, in connection with the
consummation of the purchase by Holder of shares of Series A Preferred Stock
from the Company, the escrow agent first had in its
1
<PAGE>
possession funds representing full payment for the shares of Series A Preferred
Stock (such amount being referred to herein as the "Premium"). If upon the
occurrence of such event, and after payment in full of the preferential amounts
with respect to the Senior Securities, the assets and funds available to be
distributed among the Holders of the Series A Preferred Stock and Parity
Securities shall be insufficient to permit the payment to such Holders of the
full preferential amounts due to the Holders of the Series A Preferred Stock and
the Parity Securities, respectively, then the entire assets and funds of the
Company legally available for distribution shall be distributed among the
Holders of the Series A Preferred Stock and the Parity Securities, pro rata,
based on the respective liquidation amounts to which each such series of stock
is entitled by the Company's Certificate of Incorporation and any certificate(s)
of designation relating thereto.
(b) Upon the completion of the distribution required by subsection
4(a), if assets remain in the Company, they shall be distributed to holders of
Junior Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
(c) At each Holder's option, a sale, conveyance or disposition of all
or substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company is disposed of shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 4; provided further that an event described in the prior clause that the
Holder does not elect to treat as a liquidation and a consolidation, merger,
acquisition, or other business combination of the Company with or into any other
company or companies shall not be treated as a liquidation, dissolution or
winding up within the meaning of this Section 4, but instead shall be treated
pursuant to Section 5(f) hereof.
(d) In the event that, immediately prior to the closing of a
transaction described in Section 4(c) which would constitute a liquidation
event, the cash distributions required by Section 4(a) or Section 6 have not
been made, the Company shall either: (i) cause such closing to be postponed
until such cash distributions have been made, or (ii) cancel such transaction,
in which event the rights of the Holders of Series A Preferred Stock shall be
the same as existing immediately prior to such proposed transaction.
Section 5. Conversion. The record Holders of this Series A Preferred
----------
Stock shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each record Holder of Series A Preferred Stock
shall be entitled, beginning on the Last Closing Date, and at any time
thereafter, subject to the Company's right of redemption set forth in Section
6(a), at the office of the Company or any transfer agent for the Series A
Preferred Stock (the "Transfer Agent"), to convert Preferred Stock (in multiples
of one (1) share ) at the Fixed Conversion Price (as that term is defined
below). In addition, each record Holder of Series A Preferred Stock shall be
entitled (at the times and in the amounts set forth below) and subject to the
Company's right of redemption set forth in Section 6(a), at the office of the
Company or any transfer agent for the Series A Preferred Stock (the "Transfer
Agent"), to convert (in multiples of one (1) share of Preferred Stock) as
follows: (x) up to one-third (1/3) of the shares of Series A Preferred Stock
initially issued to such Holder at any time beginning sixty (60) days following
the date of the last closing of a purchase and sale of Series A Preferred Stock
that occurs pursuant to the offering of the Series A Preferred Stock by the
Company (the "Last Closing Date") and at any time thereafter, (y) up to an
additional one-third (1/3) of the shares of Series A Preferred Stock initially
issued to such Holder at any time beginning ninety (90) days following the Last
Closing Date and at any time thereafter, and (z) all remaining Series A
Preferred Stock held by such Holder at any time beginning one hundred twenty
(120) days following the Last Closing Date (each of the time periods referenced
in subclauses (x), (y) and (z) is hereinafter referred to singularly as a
"Conversion Gate") at the office of the Company or any Transfer Agent for the
Series A Preferred Stock, into that number of fully-paid and non-assessable
shares of Common Stock of the Company calculated in accordance with the
following formula (the "Conversion Rate"):
2
<PAGE>
Number of shares issued upon conversion of one (1) share of Series A
Preferred Stock =
Premium + 10,000
----------------
Conversion Price
where,
. Premium = (.08)(N/365)(10,000), where N= the number of days between
(i) the date that, in connection with the consummation of the initial
purchase by Holder of shares of Series A Preferred Stock from the Company,
the escrow agent first had in its possession funds representing full
payment for the shares of Series A Preferred Stock for which conversion is
being elected, and (ii) the applicable Date of Conversion (as defined in
Section 5(c)(iv) below) for the shares of Series A Preferred Stock for
which conversion is being elected, and
. Conversion Price = the lesser of (x) 100% of the average Closing Bid
Price, as that term is defined below, for the five (5) trading days ending
on June 14, 1996, which amount is equal to $3.975 (the "Fixed Conversion
Price"), or (y) .85 times the average Closing Bid Price, as that term is
defined below, of the Company's Common Stock for the five (5) trading days
immediately preceding the Date of Conversion, as defined below (the
"Variable Conversion Price").
At the Company's option, upon conversion, it may elect to pay the Premium
in cash, in which case the Number of shares issued upon conversion of one (1)
share of Series A Preferred Stock =
10,000
------
Conversion Price
In the event the Company elects to pay the Premium in cash, the Company shall
promptly notify the Subscriber in writing and shall pay such Premium by check
within five (5) business days from the date of the Notice of Conversion.
For purposes hereof, the term "Closing Bid Price" shall mean the closing
bid price on the Nasdaq National Market System, or if no longer traded on the
Nasdaq National Market System, the closing bid price on the principal national
securities exchange or the Nasdaq Small Cap Market on which the Common Stock is
so traded and if not available, the mean of the high and low prices on the
principal national securities exchange or the National Market System on which
the Common Stock is so traded.
(b) Mechanics of Conversion. In order to convert Series A Preferred
Stock into full shares of Common Stock, the Holder shall (i) fax, on or prior to
11:59 p.m., New York City time (the "Conversion Notice Deadline") on the date of
conversion, a copy of the fully executed notice of conversion ("Notice of
Conversion") to the Company at the office of the Company or its designated
transfer agent (the "Transfer Agent") for the Series A Preferred Stock stating
that the Holder elects to convert, which notice shall specify the date of
conversion, the number of shares of Series A Preferred Stock to be converted,
the applicable conversion price and a calculation of the number of shares of
Common Stock issuable upon such conversion (together with a copy of the front
page of each certificate to be converted) and (ii) surrender to a common courier
for delivery to the office of the Company or the Transfer Agent, the original
certificates representing the Series A Preferred Stock being converted (the
"Preferred Stock Certificates"), duly endorsed for transfer; provided, however,
that the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless either the Preferred
Stock Certificates are delivered to the Company or its Transfer Agent as
provided above, or the Holder notifies the Company or its Transfer Agent that
such certificates have been lost, stolen or destroyed (subject to the
requirements of subparagraph (i) below). Upon receipt by Company of a facsimile
copy of a Notice of Conversion, Company shall promptly send, via facsimile, a
confirmation of receipt of the Notice of Conversion to Holder which shall
specify that the Notice of Conversion has been received and the name and
telephone number of a contact person at the Company whom the Holder should
contact regarding information related to the Conversion. In the case of a
dispute as to the calculation of the Conversion Rate, the Company shall promptly
issue to the Holder the number of Shares that are not disputed and
3
<PAGE>
shall submit the disputed calculations to its outside accountant via facsimile
within three (3) days of receipt of Holder's Notice of Conversion. The Company
shall cause the accountant to perform the calculations and notify Company and
Holder of the results no later than forty-eight (48) hours from the time it
receives the disputed calculations. Such accountant's calculation shall be
deemed conclusive absent manifest error.
(i) Lost or Stolen Certificates. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Series A Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity or security reasonably satisfactory
to the Company, and upon surrender and cancellation of the Preferred Stock
Certificate(s), if mutilated, the Company shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date. However, Company shall
not be obligated to re-issue such lost or stolen Preferred Stock Certificates if
Holder contemporaneously requests Company to convert such Series A Preferred
Stock into Common Stock.
(ii) Delivery of Common Stock Upon Conversion. The Transfer Agent or
the Company (as applicable) shall use its best efforts to, no later than the
close of business on the second (2nd) business day and shall, in any event no
later than the close of business on the third (3rd) business day (the
"Deadline") after receipt by the Company or the Transfer Agent of a facsimile
copy of a Notice of Conversion and receipt by Company or the Transfer Agent of
all necessary documentation duly executed and in proper form required for
conversion, including the original Preferred Stock Certificates to be converted
(or after provision for security or indemnification in the case of lost or
destroyed certificates, if required), issue and surrender to a common courier
for either overnight or (if delivery is outside the United States) two (2) day
delivery to the Holder at the address of the Holder as shown on the stock
records of the Company a certificate for the number of shares of Common Stock to
which the Holder shall be entitled as aforesaid.
(iii) No Fractional Shares. If any conversion of the Series A Preferred
Stock would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion, in the aggregate,
shall be the next lower number of shares.
(iv) Date of Conversion. The date on which conversion occurs (the
"Date of Conversion") shall be deemed to be the date set forth in such Notice of
Conversion, provided (i) that the advance copy of the Notice of Conversion is
faxed to the Company before 11:59 p.m., New York City time, on the Date of
Conversion, and (ii) that the original Preferred Stock Certificates representing
the shares of Series A Preferred Stock to be converted are surrendered by
depositing such certificates with a common courier for delivery to the Company
or the Transfer Agent, as provided above as soon as practicable after the Date
of Conversion. The person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record Holder or Holders of such shares of Common Stock on the Date of
Conversion
(c) Reservation of Stock Issuable Upon Conversion. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Series A Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all then outstanding
Series A Preferred Stock. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of Series A Preferred Stock, the Company will take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose. The taking of such action shall not affect the rights and remedies
available to the Holders arising as a result of the failure to have enough
authorized shares.
(d) Automatic Conversion. Each share of Series A Preferred Stock
outstanding on the date which is three (3) years after the Last Closing Date
automatically shall be converted into Common Stock on such date at the
Conversion Rate then in effect (calculated in accordance with the formula in
Section 5(a) above), and the date which is three (3) years after the Last
Closing Date shall be deemed the Date of Conversion with respect to such
conversion.
4
<PAGE>
(e) Adjustment to Conversion Rate.
(i) Adjustment to Fixed Conversion Price Due to Stock Split, Stock
Dividend, Etc. If, prior to the conversion of all of the Series A Preferred
Stock, the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, or other similar event, the Fixed Conversion Price shall
be proportionately reduced, or if the number of outstanding shares of Common
Stock is decreased by a combination or reclassification of shares, or other
similar event, the Fixed Conversion Price shall be proportionately increased.
(ii) Adjustment to Variable Conversion Price. If, at any time when
any shares of the Series A Preferred Stock are issued and outstanding, the
number of outstanding shares of Common Stock is increased or decreased by a
stock split, stock dividend, or other similar event, which event shall have
taken place during the reference period for determination of the Conversion
Price for any conversion of the Series A Preferred Stock, then the Variable
Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event for
all five (5) trading days immediately preceding the Date of Conversion.
(iii) Adjustment Due to Merger, Consolidation, Etc. If, prior to the
conversion of all Series A Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity or
there is a sale of all or substantially all the Company's assets or there is a
change of control transaction not deemed to be a liquidation pursuant to section
4(c), then the Holders of Series A Preferred Stock shall thereafter have the
right to receive upon conversion of Series A Preferred Stock, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such stock,
securities and/or other assets which the Holder would have been entitled to
receive in such transaction had the Series A Preferred Stock been converted
immediately prior to such transaction, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holders
of the Series A Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for the adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Series A
Preferred Stock) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities thereafter deliverable upon the exercise hereof.
The Company shall not effect any transaction described in this subsection
5(f)(iii) unless (a) it first gives thirty (30) business days prior notice of
such merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event (during which time the Holder shall be
entitled to convert its shares of Series A Preferred Stock into Common Stock)
and (b) the resulting successor or acquiring entity (if not the Company) assumes
by written instrument the obligations of the Company under this Certificate of
Designation including this subsection 5(f)(iii).
(iv) No Fractional Shares. If any adjustment under this Section 5(f)
would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion shall be the next
lower number of shares.
Section 6. Redemption by Company.
---------------------
(a) Company's Right to Redeem Upon Receipt of Notice of Conversion.
If the Conversion Price of the Company's Common Stock is less than the Fixed
Conversion Price (as defined in Section 5(a)), at the time of receipt of a
Notice of Conversion pursuant to Section 5, the Company shall have the right, in
its sole discretion, to redeem in whole or in part any Series A Preferred Stock
submitted for conversion, immediately prior to and in lieu of conversion
("Redemption Upon Receipt of Notice of Conversion"). If the Company elects to
redeem some, but not all, of the Series A Preferred Stock submitted for
conversion, the Company shall redeem from among the Series A Preferred Stock
submitted by the various shareholders for conversion on the applicable date, a
pro-rata amount from each such Holder so submitting Series A Preferred Stock for
conversion.
5
<PAGE>
(i) Redemption Price Upon Receipt of a Notice of Conversion. The
redemption price per share of Series A Preferred Stock under this Section 6(a)
shall be calculated in accordance with the following formula ("Redemption
Rate"):
[[(.08)(N/365)(10,000)] + 10,000] x Closing Bid Price on Date of Conversion
---------------------------------------------------------------------------
Conversion Price
where,
"N", "Date of Conversion", "Closing Bid Price" and "Conversion Price" shall
have the same meanings as defined in Section 5.
(ii) Mechanics of Redemption Upon Receipt of Notice of Conversion.
The Company shall effect each such redemption by giving notice of its election
to redeem, by facsimile, by 5:00 p.m. New York City time the next business day
following receipt of a Notice of Conversion from a Holder, and the Company shall
provide a copy of such redemption notice by overnight or two (2) day courier, to
(A) the Holder of the Series A Preferred Stock submitted for conversion at the
address and facsimile number of such Holder appearing in the Company's register
for the Series A Preferred Stock and (B) the Company's Transfer Agent. Such
redemption notice shall indicate whether the Company will redeem all or part of
the Series A Preferred Stock submitted for conversion and the applicable
redemption price.
(b) Company's Right to Redeem at its Election. At any time,
commencing twelve (12) months and one (1) day after the Last Closing Date, the
Company shall have the right, in its sole discretion, to redeem ("Redemption at
Company's Election"), from time to time, any or all of the Series A Preferred
Stock; provided (i) Company shall first provide thirty (30) business days
advance written notice as provided in subparagraph 6(b)(ii) below (which can be
given beginning thirty (30) business days prior to the date which is twelve (12)
months and one (1) day after the Last Closing Date), and (ii) that the Company
shall only be entitled to redeem Series A Preferred Stock having an aggregate
Stated Value (as defined below) of at least Five Hundred Thousand Dollars
($500,000) or the then outstanding balance of Series A Preferred Stock, if less
than Five Hundred Thousand Dollars ($500,000). If the Company elects to redeem
some, but not all, of the Series A Preferred Stock, the Company shall redeem a
pro-rata amount from each Holder of the Series A Preferred Stock.
(i) Redemption Price At Company's Election. The "Redemption Price At
Company's Election" shall be calculated as a percentage of Stated Value, as that
term is defined below, of the Series A Preferred Stock redeemed pursuant to this
Section 6(b), which percentage shall vary depending on the date of Redemption at
Company's Election (as defined below), and shall be determined as follows:
<TABLE>
<CAPTION>
Date of Notice of Redemption at Company's Election % of Stated Value
-------------------------------------------------- -----------------
<S> <C>
12 months and 1 day to 18 months following Last Closing Date 130%
18 months and 1 day to 24 months following Last Closing Date 125%
24 months and 1 day to 30 months following Last Closing Date 120%
30 months and 1 day to 36 months following Last Closing Date 115%
</TABLE>
For purposes hereof, "Stated Value" shall mean the Original Series A Issue
Price (as defined in Section 4(a)) of the shares of Series A Preferred Stock
being redeemed pursuant to this Section 6(b), together with the accrued but
unpaid Premium (as defined in Section 4(a)).
(ii) Mechanics of Redemption at Company's Election. The Company shall
effect each such redemption by giving at least thirty (30) business days prior
written notice ("Notice of Redemption At Company's Election") to (A) the Holders
of the Series A Preferred Stock selected for redemption, at the address and
facsimile number of such Holder appearing in the Company's Series A Preferred
stock register and (B) the Transfer Agent, which Notice of Redemption At
Company's Election shall be deemed to have been delivered three (3) business
days after the Company's mailing (by overnight or two (2) day courier, with a
copy by facsimile) of such Notice of Redemption At Company's Election. Such
Notice of Redemption At Company's Election shall indicate (i) the number of
shares of Series A Preferred Stock that have been selected for
6
<PAGE>
redemption, (ii) the date which such redemption is to become effective (the
"Date of Redemption At Company's Election") and (iii) the applicable Redemption
Price At Company's Election, as defined in subsection (b)(i) above.
Notwithstanding the above, Holder may convert into Common Stock pursuant to
section 5, prior to the close of business on the Date of Redemption at Company's
Election, any Series A Preferred Stock which it is otherwise entitled to
convert, including Series A Preferred Stock that has been selected for
redemption at Company's election pursuant to this subsection 6(b); provided,
however, that the Company shall still be entitled to exercise its right to
redeem upon receipt of a Notice of Conversion pursuant to section 6(a).
(c) Company Must Have Immediately Available Funds or Credit
Facilities. The Company shall not be entitled to send any Redemption Notice and
begin the redemption procedure under Sections 6(a) and 6(b) unless it has:
(i) the full amount of the redemption price in cash, available in a
demand or other immediately available account in a bank or similar financial
institution; or
(ii) immediately available credit facilities, in the full amount of
the redemption price with a bank or similar financial institution; or
(iii) an agreement with a standby underwriter willing to purchase from
the Company a sufficient number of shares of stock to provide proceeds necessary
to redeem any stock that is not converted prior to redemption; or
(iv) a combination of the items set forth in (i), (ii) and (iii)
above, aggregating the full amount of the redemption price.
(d) Payment of Redemption Price.
(i) Each Holder submitting Preferred Stock being redeemed under this
Section 6 shall send their Series A Preferred Stock Certificates so redeemed to
the Company or its Transfer Agent, and the Company shall pay the applicable
redemption price to that Holder within five (5) business days of the Date of
Redemption at Company's Election. The Company shall not be obligated to deliver
the redemption price unless the Preferred Stock Certificates so redeemed are
delivered to the Company or its Transfer Agent, or, in the event one (1) or more
certificates have been lost, stolen, mutilated or destroyed, unless the Holder
has complied with Section 5(c)(i).
(ii) If Company elects to redeem pursuant to Section 6(a) hereof, and
Company fails to pay Holder the redemption price within the time frame as
required by this Section 6(d), then Company shall issue shares of Common Stock
to any such Holder who has submitted a Notice of Conversion in compliance with
Section 5(c) hereof. The shares to be issued to Holder pursuant to this
provision shall be the number of shares determined using a Conversion Price (as
defined in Section 6 hereof) that equals the lesser of (i) the Conversion Price
on the date Holder sends its Notice of Conversion to Company or Transfer Agent
via facsimile or (ii) the Conversion Price on the date the Transfer Agent issues
Common Stock pursuant to this Section 6(d)(ii).
(e) Blackout Period. Notwithstanding the foregoing, the Company may
not either send out a redemption notice or effect a redemption pursuant to
Section 6(b) above during a Blackout Period (defined as a period during which
the Company's officers or directors would not be entitled to buy or sell stock
because of their holding of material non-public information), unless the Company
shall first disclose the non-public information that resulted in the Blackout
Period; provided, however, that no redemption shall be effected until at least
ten (10) days after the Company shall have given the Holder written notice that
the Blackout Period has been lifted.
(f) Company's Intention to Redeem. Notwithstanding anything
contained in this Certificate of Designation to the contrary, the Company
intends to exercise its discretion to redeem Series A Preferred Stock pursuant
to Section 5(a) above in the event that the exercise of conversion rights by the
Holders of the Series A Preferred Stock pursuant to Section 5(a) above or in the
event of automatic conversion pursuant to Section 5(d) above would result in the
issuance of greater than 944,610 shares of Common Stock in the aggregate
pursuant to the Certificate of Designation.
7
<PAGE>
Section 7. Advance Notice of Redemption.
----------------------------
(a) Holder's Right to Elect to Receive Notice of Cash Redemption by
the Company. Holder shall have the right to require Company to provide advance
notice stating whether the Company will elect to redeem Holder's shares of
Series A Preferred Stock in cash, pursuant to the Company's redemption rights
discussed in Section 6(a).
(b) Mechanics of Holder's Election Notice. Holder shall send notice
("Election Notice") to the Company and such other person(s) as the Company may
designate, via facsimile, stating Holder's intention to require Company to
disclose that if Holder were to exercise his, her or its right of conversion
(pursuant to Section 5) whether Company would elect to redeem a specific number
of shares of Holder's Series A Preferred Stock for cash in lieu of issuing
Common Stock. The Company is required to disclose to Holder what action the
Company would take over the subsequent twenty (20) business day period,
including the date of such Election Notice, as further discussed in subsection
7(c).
(c) Company's Response. Upon receipt by the Company of a facsimile
copy of an Election Notice, Company shall immediately send, via facsimile, a
confirmation of receipt of the Election Notice to Holder, which shall specify
that the Election Notice has been received and the name and telephone number of
a contact person at the Company whom the Holder should contact regarding
information related to the requested advance notice. Thereafter, the Company
must respond by the close of business on the next business day following receipt
of Holder's Election Notice (1) via facsimile and (2) by depositing such
response with an overnight or two (2) day courier. The Company's response must
state whether it would redeem the shares, in whole or in part, or allow
conversion into shares of Common Stock without redemption. If Company does not
respond to Holder within one (1) business day via facsimile and overnight or two
(2) day courier, Company shall be required to issue to Holder Common Stock upon
Holder's conversion within the subsequent twenty (20) business day period of
Holder's Election Notice. However, if the Company's Common Stock price
decreases so that under the Conversion Rate Company would be required to issue
more than an additional ten percent (10% ) of shares of Common Stock than Holder
was entitled to receive at the time Holder sent Company its Election Notice,
then Company shall no longer be bound to convert Holder's Preferred Stock into
Common Stock but may elect to redeem for cash.
Section 8. Voting Rights. The Holders of the Series A Preferred Stock
-------------
shall have no voting power whatsoever, except as otherwise provided by the
General Corporation Law of the State of Delaware ("Delaware Law"), and no Holder
of Series A Preferred Stock shall vote or otherwise participate in any
proceeding in which actions shall be taken by the Company or the shareholders
thereof or be entitled to notification as to any meeting of the shareholders.
Notwithstanding the above, Company shall provide Holder with notification
of any meeting of the shareholders regarding any major corporate events
affecting the Company. In the event of any taking by the Company of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire any share of any class or any other
securities or property (including by way of merger, consolidation or
reorganization), or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Company, or any proposed liquidation, dissolution or winding up of the
Company, the Company shall mail a notice to Holder, at least ten (10) days prior
to the record date specified therein, of the date on which any such record is to
be taken for the purpose of such dividend, distribution, right or other event,
and a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
To the extent that under Delaware Law the vote of the Holders of the Series
A Preferred Stock, voting separately as a class, is required to authorize a
given action of the Company, the affirmative vote or consent of the Holders of
at least a majority of the shares of the Series A Preferred Stock represented at
a duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series A Preferred Stock (except as otherwise may be
required under
8
<PAGE>
Delaware Law) shall constitute the approval of such action by the class. To the
extent that under Delaware Law the Holders of the Series A Preferred Stock are
entitled to vote on a matter with holders of Common Stock, voting together as
one (1) class, each share of Series A Preferred Stock shall be entitled to a
number of votes equal to the number of shares of Common Stock into which it is
then convertible using the record date for the taking of such vote of
stockholders as the date as of which the Conversion Price is calculated. Holders
of the Series A Preferred Stock also shall be entitled to notice of all
shareholder meetings or written consents with respect to which they would be
entitled to vote, which notice would be provided pursuant to the Company's by-
laws and applicable statutes.
Section 9. Protective Provision. So long as shares of Series A Preferred
--------------------
Stock are outstanding, the Company shall not without first obtaining the
approval (by vote or written consent, as provided by Delaware Law) of the
Holders of at least seventy-five percent (75%) of the then outstanding shares of
Series A Preferred Stock, and at least seventy-five percent (75%) of the then
outstanding Holders:
(a) alter or change the rights, preferences or privileges of the
Series A Preferred Stock or any Senior Securities so as to affect adversely the
Series A Preferred Stock; provided, however, that no such change may be approved
at any time on or prior to the fortieth (40th) day following the Last Closing
Date unless such change is unanimously approved by all Holders;
(b) create any new class or series of stock having a preference over
or on parity with the Series A Preferred Stock with respect to Distributions (as
defined in Section 2 above) or increase the size of the authorized number of
Series A Preferred; or
(c) do any act or thing not authorized or contemplated by this
Designation which would result in taxation of the holders of shares of the
Series A Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
In the event Holders of at least seventy-five percent (75%) of the then
outstanding shares of Series A Preferred Stock and at least seventy-five percent
(75%) of the then outstanding Holders agree to allow the Company to alter or
change the rights, preferences or privileges of the shares of Series A Preferred
Stock, pursuant to subsection (a) above, so as to affect the Series A Preferred
Stock, then the Company will deliver notice of such approved change to the
Holders of the Series A Preferred Stock that did not agree to such alteration or
change (the "Dissenting Holders") and Dissenting Holders shall have the right
for a period of thirty (30) business days to convert pursuant to the terms of
this Certificate of Designation as they exist prior to such alteration or change
(notwithstanding the sixty (60) day, ninety (90) day, and one hundred twenty
(120) day holding requirements set forth in Section 5(a) hereof), or continue to
hold their shares of Series A Preferred Stock provided, however, that the
Dissenting Holders may not convert anytime on or before the fortieth (40th) day
following the Last Closing Date.
Section 10. Status of Converted or Redeemed Stock. In the event any
-------------------------------------
shares of Series A Preferred Stock shall be converted or redeemed pursuant to
Section 5 or Section 6 hereof, the shares so converted or redeemed shall be
canceled, shall return to the status of authorized but unissued Preferred Stock
of no designated series, and shall not be issuable by the Company as Series A
Preferred Stock.
Section 11. Preference Rights. Nothing contained herein shall be
-----------------
construed to prevent the Board of Directors of the Company from issuing one (1)
or more series of Preferred Stock with dividend and/or liquidation preferences
junior to the dividend and liquidation preferences of the Series A Preferred
Stock.
Signed on ____________________, 1996 ___________________________________
R. Ramin Kamfar, President
Attest:
____________________________
_________________, Secretary
9
<PAGE>
EXHIBIT 2
NEW WORLD COFFEE, INC.
(Registration Rights Agreement)
<PAGE>
NEW WORLD COFFEE, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
June __, 1996, by and among NEW WORLD COFFEE, INC., a Delaware corporation
("Company"), and the subscribers ("Subscribers") to the Company's offering
("Offering") of up to Four Million Dollars ($4,000,000) of Series A Preferred
Stock ("Preferred Stock") pursuant to the Regulation S Subscription Agreement
between the Company and the Subscribers of even date herewith ("Subscription
Agreement").
1. DEFINITIONS. For purposes of this Agreement:
-----------
(a) The terms "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933 (the "Act") and
Rule 415 thereunder, and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means the Company's Common Stock
(the "Common Stock") issuable or issued upon conversion of the Preferred Stock
issued to Subscribers in the Offering; provided, however, that after the
expiration of the Restricted Period (as defined in the Subscription Agreement),
shares of Common Stock obtainable on conversion of the Preferred Stock (in whole
or in part), shall not constitute Registrable Securities, if those shares of
Common Stock may be sold or transferred in the U.S. free of any restrictive
legend, including without limitation under Rule 144;
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock which have been
issued or are issuable upon conversion of the Preferred Stock at the time of
such determination;
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any permitted assignee thereof.
2. REQUESTED REGISTRATION.
----------------------
(a) the Holders hereby request, and the Company hereby agrees that
within twenty (20) business days of the Last Closing of the Offering, the
Company shall file a registration statement ("Registration Statement") on Form
S-1, SB-1 or SB-2 (or other suitable form), covering the resale of all shares of
Registrable Securities then outstanding.
(b) The Registration Statement shall be done as a "shelf" registration
statement under Rule 415, and the Company shall use its best efforts to maintain
effective until the earlier of (i) the date the distribution described in the
Registration Statement is completed; (ii) the date the Company is eligible to
and has filed an alternate registration statement which is effective and which
the Company will use its best efforts to maintain until the distribution
described therein is completed; (iii) the date all Registrable Securities
otherwise have been sold; or (iv) the date this Agreement has been terminated
pursuant to Section 15 hereof. The Company shall use its best efforts to have
the Registration Statement declared effective within sixty (60) days of the Last
Closing.
EXHIBIT B
1
<PAGE>
(c) The Holders have the right to convert the Preferred Stock into
Common Stock pursuant to the terms of the Subscription Agreement and the
Certificate of Designation of Series A Preferred Stock of the Company and sell
the Common Stock under Regulation S and applicable exemptions until such time
that the Registration Statement becomes effective.
(d) Notwithstanding anything to the contrary contained herein, any
Holder (together with any assignee of its rights) (collectively referred to as
"Excluded Holders") shall be entitled, by written notice to the Company
delivered at any time prior to the filing of the Registration Statement
contemplated by this Section 2, to elect to have the Registrable Securities
issued or issuable to it excluded from the Registration Statement. The Company
acknowledges that the Excluded Holders shall retain their rights under Section 3
(in which case a demand registration under Section 3(a) may be initiated by the
Excluded Holders of Registrable Securities obtained or obtainable upon
conversion of at least twenty-five percent (25%) of the shares of the Preferred
Stock outstanding which are owned by Excluded Holders) and Section 4 hereof
notwithstanding their request to be excluded from the Requested Registration.
3. DEMAND REGISTRATION.
-------------------
(a) At any time beginning after the end of the Restricted Period (as
defined in the Subscription Agreement), the Holders of Registrable Securities
obtained or obtainable upon conversion of at least twenty-five percent (25%) of
the shares of the Preferred Stock outstanding may notify the Company in writing
that they demand that the Company file a registration statement under the Act
covering the registration of all of the Registrable Securities then outstanding.
Upon receipt of such notice, the Company shall, within ten (10) days, give
written notice of such request to all Holders and shall, subject to the
limitations of subsection 3(b), effect as soon as practicable, and in any event
within thirty(30) days of the receipt of such request, the registration under
the Act of all Registrable Securities which the Holders request, by notice given
to the Company within ten (10) days of receipt of the Company's notice, to be
registered as expeditiously as reasonably possible after the mailing of such
notice by the Company (a "Demand Registration"). The Registration Statement
shall be done as a "shelf" registration statement under Rule 415, and the
Company shall use its best efforts to maintain effective until the earlier of
(i) the date the distribution described in the Registration Statement is
completed; (ii) the date the Company is eligible to and has filed an alternate
registration statement which is effective and which the Company will use its
best efforts to maintain until the distribution described therein is completed;
(iii) the date all Registrable Securities otherwise have been sold; or (iv) the
date this Agreement has been terminated pursuant to Section 15 hereof.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 3 and the Company shall
include such information in the written notice referred to in subsection 3(a).
In such event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 7(f)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders, and reasonably acceptable to the Company; provided that no Holder shall
be required to make any representations other than with respect to its ownership
of Registered Securities and its intended method of distribution.
2
<PAGE>
(c) The Company agrees to include all Registrable Securities held by
all Holders in such Registration Statement without cutback or reduction. In the
event the Company breaches its obligation of the preceding sentences, any
Holders of the Registrable Securities which were not included in such
Registration Statement shall be entitled to additional Demand Registrations for
such excluded securities on the same terms as the Demand Registration described
in this Agreement.
(d) The Company is not obligated to effect a demand registration under
this Section 3 if in the written opinion of counsel to the Company reasonably
acceptable to the person or persons from whom written request for registration
has been received (and satisfactory to the Company's transfer agent to permit
the transfer) that registration under the Act is not required for the immediate
transfer of the Registrable Securities pursuant to Rule 144 or other applicable
provision. The Company represents that it will use its best efforts to become
eligible to use Form S-3 for the registration contemplated hereby and, to the
extent that it is so eligible, will use such form to effect such registration.
(e) The Company represents that it is eligible to effect the
registration contemplated hereby on Form S-1, SB-1 or SB-2 and will continue to
take such actions as are necessary to maintain such eligibility.
(f) Except as provided in paragraph (c) above, the Company shall not
be obligated to effect more than one (1) Demand Registration.
4. PIGGYBACK REGISTRATION. If (but without any obligation to do so)
----------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
Common Stock under the Act in connection with the public offering of such
securities (other than a registration relating solely to the sale of securities
to participants in a Company stock plan or a registration on Form S-4
promulgated under the Act or any successor or similar form registering stock
issuable upon a reclassification, upon a business combination involving an
exchange of securities or upon an exchange offer for securities of the issuer or
another entity), the Company shall, at such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given by fax within ten (10) days after mailing of such notice by the Company,
which request shall state the intended method of disposition of such shares by
such Holder, the Company shall cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered (a
"Piggyback Registration").
5. LIMITATION ON OBLIGATIONS TO REGISTER.
-------------------------------------
(a) In the case of a Piggyback Registration on an underwritten public
offering by the Company, if the managing underwriter determines and advises in
writing that the inclusion in the registration statement of all Registrable
Securities proposed to be included would interfere with the successful marketing
of the securities proposed to be registered by the Company, then the number of
such Registrable Securities to be included in the registration statement shall
be allocated among all Holders who had requested Piggyback Registration, in the
proportion that the number of Registrable Securities which each such Holder
seeks to register bears to the total number of Registrable Securities sought to
be included by all Holders; provided that in no event shall the number of
Registrable Securities be less than thirty-five percent (35%) pro-rata of the
total number of shares included in such registration.
(b) Notwithstanding anything to the contrary herein, the Company shall
have the right (i) to defer the initial filing or request for acceleration of
effectiveness of any Demand Registration or Piggyback Registration or (ii) after
effectiveness, to suspend effectiveness of any such registration statement, if,
in the good faith judgment of the board of directors of the Company
3
<PAGE>
and upon the advice of counsel to the Company, such delay in filing or
requesting acceleration of effectiveness or such suspension of effectiveness is
necessary in light of the existence of material non-public information
(financial or otherwise) concerning the Company disclosure of which at the time
is not, in the opinion of the board of directors of the Company upon the advice
of counsel, (A) otherwise required and (B) in the best interests of the Company;
provided however that the Company will use its best efforts to terminate such
delay or suspension as soon as practicable and, in any event will not delay
effectiveness of such registration for more than two (2) months from the date of
the demand or suspend effectiveness for more than twenty (20) days, unless it is
then engaged in an acquisition that would make such registration impracticable,
in which case it will use its best efforts to eliminate such impracticability as
soon as possible.
6. OBLIGATIONS TO INCREASE AVAILABLE SHARES. In the event that the
-----------------------------------------
number of shares available under a registration statement filed pursuant to
Section 2 or 3 is insufficient to cover all of the Registrable Securities then
outstanding, the Company shall amend that registration statement, or file a new
registration statement, or both, so as to cover all shares of Registrable
Securities then outstanding. The Company shall effect such amendment or new
registration within sixty (60) days of the date the registration statement filed
under Section 2 or 3 is insufficient to cover all the shares of Registrable
Securities then outstanding. Any Registration Statement filed hereunder shall,
to the extent permissible by the Rules of the Securities and Exchange Commission
("SEC"), state that, in accordance with Rule 416 under the Act, such
Registration Statement also covers such indeterminate numbers of additional
shares of Common Stock as may become issuable upon conversion of the Preferred
Stock to prevent dilution resulting from stock changes or by reason of changes
in the conversion price in accordance with the terms thereof.
7. OBLIGATIONS OF THE COMPANY. Whenever required under this Agreement
--------------------------
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective.
(b Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) With respect to any Demand Registration, use best efforts to keep
such registration statement effective until the Holders of Registrable
Securities covered by such registration statement have completed the
distribution described in the registration statement.
(d) Furnish to the Holders (i) such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them and (ii)
copies of all correspondence to or with the SEC. Each Holder shall be furnished
with copies of drafts, or all filings prior to filing and given sufficient time
to provide comments thereon.
(e) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders of
the Registrable Securities covered by such registration statement, provided that
the Company shall not be required in connection therewith or as a
4
<PAGE>
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(f) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(g) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act upon the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(h) Furnish, at the request of any Holder whose shares are being
registered pursuant to this Agreement, on the date that such Registrable
Securities are delivered to the underwriters for sale in connection with a
registration pursuant to this Agreement, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
(i) Maintain the listing of the Common Stock on Nasdaq Small Cap
Market, Nasdaq National Market System or a National Securities Exchange.
8. FURNISH INFORMATION. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Agreement that
the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities or to determine that registration is not
required pursuant to Rule 144 or other applicable provision of the Act.
9. EXPENSES OF REQUESTED OR DEMAND REGISTRATION. All expenses other
--------------------------------------------
than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2 or 3, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and
including the reasonable fees and disbursements incurred of only one counsel for
the selling Holders, shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 2 or 3 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all Holders who had
requested such registration shall bear such expenses); provided further,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 2 and 3.
5
<PAGE>
10. EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 4 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto (and including the reasonable fees and
disbursements incurred of only one counsel for the selling Holders selected by
them), but excluding underwriting discounts and commissions relating to
Registrable Securities.
11. INDEMNIFICATION. In the event any Registrable Securities are
---------------
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each "Holder Indemnified Persons" (defined for purposes of this
Section 11 as each Holder, the officers and directors of each Holder acting in
their capacity as such, any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the "1934
Act")), against any losses, claims, damages, expenses, or liabilities (joint or
several) (hereinafter referred to singularly as "Loss" and collectively as
"Losses") to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such Losses (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement, or alleged
untrue statement, of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) 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, or (iii) any violation by the
Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities law;
and the Company will reimburse each such Holder Indemnified Person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Loss or action; provided, however, that the
indemnity agreement contained in this subsection 11(a) shall not apply to
amounts paid in settlement of any such Loss or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such Loss or action to the extent that it arises out of or is based upon a
Violation which occurs in either (i) reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder Indemnified Person or (ii) based upon a
prospectus which included a Violation after the Company has advised the Holder
not to sell pursuant to such prospectus, and has made available an amended or
supplemental prospectus that corrects such Violation.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the "Company Indemnified Persons" (defined for the purpose of
this Section 11 as the Company, each of its directors in their capacity as such,
each of its officers who have signed the registration statement in their
capacity as such, each person, if any, who controls the Company within the
meaning of the Act in their capacity as such, any underwriter and any other
Holder Indemnified Person selling securities in such registration statement),
against any Loss (joint or several) to which the Company or any such director,
officer, controlling person, or underwriter or controlling person, or other such
Holder Indemnified Person may become subject, under the Act, the 1934 Act or
other federal or state law, insofar as such Loss (or actions in respect thereto)
arises out of or is based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company and any such Company
Indemnified Person in connection with investigating or defending any such Loss
or action; provided, however, that the indemnity agreement contained in this
subsection 11(b) shall not apply
6
<PAGE>
to amounts paid in settlement of any such Loss or action if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld; provided, that, in no event shall any indemnity under
this subsection 11(b) exceed the net proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under this Section
11 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 11, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonably incurred fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 11, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 11 to the extent it is prejudicial.
(d) The obligations of the Company and Holders under this Section 11
shall survive the redemption and conversion, if any, of the Preferred Stock, the
completion of any offering of Registrable Securities in a registration statement
under this Agreement, and otherwise.
12. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company, if
true, that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act, (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or regulation
of the SEC which permits the selling of any such securities without
registration.
13. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
--------------------------------
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each Holder, each future Holder, and the
Company; provided that no amendment or waiver that materially and adversely
7
<PAGE>
affects the rights of any Holder shall be effective against such Holder unless
such Holder agrees thereto.
14. NOTICES. All notices required or permitted under this Agreement
-------
shall be made in writing signed by the party making the same, shall specify the
section under this Agreement pursuant to which it is given, and shall be
addressed if to (i) the Company at: President, 379 West Broadway, New York, NY
10012; Telephone No. (212) 343-0552; Telecopy No. (212) 343-0176 with a copy to
Alan I. Annex, Esq., Camhy Karlinsky & Stein LLP, 1740 Broadway, New York, NY
10019; Telephone No. (212) 977-6600, Telecopy (212) 977-8389 and (ii) the
Holders at their respective last address as the party shall have furnished in
writing as a new address to be entered on such register. Any notice, except as
otherwise provided in this Agreement, shall be made by fax and shall be deemed
given at the time of transmission of the fax.
15. TERMINATION. This Agreement shall terminate on the later to occur
-----------
of (a) the date that is five (5) years from the date of this Agreement and (b)
the date that is ninety (90) days after the date on which all Preferred Stock
has been converted into Common Stock; but without prejudice to (i) the parties'
rights and obligations arising from breaches of this Agreement occurring prior
to such termination or (ii) other indemnification obligations under this
Agreement.
16. ASSIGNMENT. No assignment, transfer or delegation, whether by
----------
operation of law or otherwise, of any rights or obligations under this Agreement
by the Company or any Holder, respectively, shall be made without the prior
written consent of the majority in interest of the Holders or the Company,
respectively; provided that the rights of a Holder may be transferred to a
subsequent holder of the Holder's Registrable Securities (provided such
transferee shall provide to the Company, together with or prior to such
transferee's request to have such Registrable Shares included in a Demand
Registration or Piggyback Registration, a writing executed by such transferee
agreeing to be bound as a Holder by the terms of this Agreement); and provided
further that the Company may transfer its rights and obligations under this
Agreement to a purchaser of all or a substantial portion of its business if the
obligations of the Company under this Agreement are assumed in connection with
such transfer, either by merger or other operation of law (which may include
without limitation a transaction whereby the Registrable Shares are converted
into securities of the successor in interest) or by specific assumption executed
by the transferee.
17. PAYMENTS FOR FAILURE TO REGISTER OR FAILURE TO LIST. If the
----------------------------------------------------
Registration Statement required under Section 2 hereof is not effective on or
prior to ninety (90) days after the Last Closing, and the Company unreasonably
fails to respond to any request for information from the SEC related to such
Registration Statement within twenty (20) business days of such request, then
the Company shall pay to all Holders of outstanding Preferred Stock an aggregate
amount equal to three-fourths percent (3/4 percent) per month of the aggregate
amount of Preferred Stock sold in the Offering, compounded monthly, and accruing
daily, payable in Common Stock, which Common Stock shall also be deemed
"Registrable Securities" hereunder; provided, however, that such additional
amounts shall not be payable for so long as any delay in the effectiveness of
the Registration Statement is due, in whole or in part, directly, to causes
beyond the control of the Company. If the Company fails to effect a Demand
Registration within sixty (60) days of a demand made pursuant to Section 3
hereof, then the Company shall pay to all Holders of outstanding Preferred Stock
a penalty equal to the amount of the Conversion Default Payment ("Conversion
Default Payment") set forth in Section 7(b) of the Regulation S Subscription
Agreement between the Company and the Subscribers ("Subscription Agreement") for
each day beyond 60 days of the receipt of a request for a Demand Registration
until such registration is complete. If, on the date (the "Conversion
Eligibility Date") that shares of Preferred Stock become eligible for conversion
into Common Stock, the Common Stock is not listed on the National Market System,
Small Cap Market or any national securities exchange, then the Company shall pay
to all Holders of outstanding Preferred Stock that is eligible for immediate
conversion a
8
<PAGE>
penalty equal to the amount of the Conversion Default Payment (as that term is
defined in Section 7.6(b) of the Subscription Agreement) for each day beyond the
Conversion Eligibility Date until such listing is complete.
18. GOVERNING LAW. This Registration Rights Agreement shall be
-------------
governed by and construed in accordance with the laws of the state of New York
applicable to agreements made in and wholly to be performed in that
jurisdiction, except for matters arising under the Act or the Securities
Exchange Act of 1934, which matters shall be construed and interpreted in
accordance with such laws. Any action brought to enforce, or otherwise arising
out of, this Agreement shall be heard and determined only in either a federal or
province court sitting in the State of New York, New York County.
[INTENTIONALLY LEFT BLANK]
9
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date first above written.
NEW WORLD COFFEE, INC.
By: ________________________________
R. Ramin Kamfar
President
Address: 379 West Broadway
New York, NY 10012
INVESTOR(S)
___________________________________
Investor's Name
By:_________________________________
(Signature)
Address: ____________________________________
____________________________________
10
