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NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF
SERIES D PREFERRED STOCK
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
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New World Coffee - Manhattan Bagel, Inc. (the "Corporation") certifies that
pursuant to the authority contained in Article 4 of its Amended and Restated
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, its Board of
Directors has adopted the following resolution creating a series of the
Preferred Stock, $0.001 par value, designated as Series D Convertible Preferred
Stock:
RESOLVED, that a series of Preferred Stock, $0.001 par value, of the
Corporation be hereby created, and that the designation and amount thereof and
the voting powers, preferences, and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
Designation and Amount. There is hereby established a series of the
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Preferred Stock designated "Series D Preferred Stock" (herein referred to as
"Series D Preferred Stock"), consisting of 25,000 shares and having the relative
rights, designations, preferences, qualifications, privileges, limitations, and
restrictions applicable thereto as follows:
1. Dividends.
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(a) The holders of shares of Series D Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors of
the Corporation, and to the extent of funds legally available therefor,
cumulative dividends payable quarterly, on the eleventh day of February, May,
August, and November in each year commencing on November 11, 2000, with
dividends for partial quarters based on the dates of issuance and redemption
accruing pro rata. Such dividends shall be paid, for each quarterly period
ending on or before August 11, 2001, at the rate of $75.00 per share per annum,
payable each quarter as $18.75 as payment-in-kind Series D Preferred Stock
valued at the Liquidation Preference set forth below, and for each quarterly
period thereafter at the rate of $140.00 per share per annum, payable each
quarter as $35.00 in payment-in-kind Series D Preferred Stock valued at such
Liquidation Preference; provided, however, that if the Corporation shall fail to
redeem the Series D Preferred Stock as required by the terms of the Series D
Preferred Stock and Warrant Purchase Agreement dated
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August 11, 2000 (the "Purchase Agreement"), and such failure shall continue for
a period of 90 days following the Mandatory Redemption Date (as defined in the
Purchase Agreement), dividends shall thereupon increase by an amount of $20.00
per share per annum, payable-in-kind as provided above, and provided further
that to the extent that the Corporation has insufficient available surplus to
declare the payment-in-kind dividend, the Board of Directors of the Corporation
shall undertake to use its best efforts to increase the available surplus and
thereafter shall immediately declare such dividend. Dividends on the Series D
Preferred Stock shall be cumulative so that if, for any dividend accrual period,
dividends at the rate hereinabove specified are not declared and paid or set
aside for payment, the amount of accrued but unpaid dividends shall accumulate,
and shall be added to the dividends payable for subsequent dividend accrual
periods. If the funds legally available for the payment of such dividends are
insufficient to pay in full the dividends payable on all outstanding shares of
Series D Preferred Stock, the total available funds may be paid in partial
dividends to the holders of the outstanding shares of Series D Preferred Stock
ratably in proportion to the fully accrued dividends to which they are entitled.
Each issued and outstanding share of Series D Preferred Stock shall entitle the
holder of record thereof to receive an equal proportion of said dividends
(adjusted for issuance dates).
(b) No dividends or other distributions of any kind shall
be declared or paid on, nor shall the Corporation redeem, purchase or acquire
any shares of the Common Stock, any of the Series A Preferred Stock, the Series
B Preferred Stock or the Series C Preferred Stock or any other junior class or
series of stock other than stock dividends and distributions of the right to
purchase common stock and repurchase any such rights in accordance with the
Rights Agreement dated June 7, 1999, unless all dividends on the Series D
Preferred Stock accrued for all past dividend periods shall have been paid.
2. Liquidation Preference.
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(a) In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of the
Series D Preferred Stock shall be entitled to receive, on a pro rata basis, such
amount, paid prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock or any other
junior class or series of stock by reason of their ownership thereof, an amount
equal to $1,000 per share of Series D Preferred Stock then outstanding
("Liquidation Preference") (as adjusted for any stock dividends, combinations or
splits with respect to such shares), plus all accrued or declared but unpaid
dividends on such share for each share of Series D Preferred Stock then held by
them. In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the Series D Preferred Stock
shall rank pari passu with any Parity Stock hereinafter existing or created. If
upon the occurrence of such event, the assets and funds thus distributed among
the holders of the Series D Preferred Stock shall be insufficient to permit the
payment to the holders of the Series D Preferred Stock and of any Parity Stock
the full amounts to which they otherwise would be entitled, the holders of
Series D Preferred Stock and such Parity Stock shall share ratably in any
distribution of the entire assets and funds of the Corporation legally available
for distribution pro rata in proportion to the respective liquidation preference
amounts which would otherwise be payable upon
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liquidation with respect to the outstanding shares of the Series D Preferred
Stock and such Parity Stock if all liquidation preference dollar amounts with
respect to such shares were paid in full.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2, the remaining assets and funds of the
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Corporation legally available for distribution, if any, shall be distributed
among the holders of the Common Stock pro rata based on the number of shares of
Common Stock held by each, and the holders of Series D Preferred Stock shall not
be entitled to participate in such distribution.
(c) For purposes of this Section 2, a liquidation,
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dissolution or winding up of this Corporation shall be deemed to be occasioned
by, or to include (A) a change in 50% or more of the members of the Board of
Directors, nominated and recommended by the Board of Directors for election at
the 2000 Annual Meeting of Stockholders, (B) a sale of all or substantially all
of the assets of the Corporation or (C) any other transaction which results in
the disposition of 50% or more of the voting power of all classes of capital
stock of the Corporation on a combined basis (an event or series of events under
subsections (A), (B) and (C) above shall be referred to as a "Change of Control
Event"). The holders of 67% or more of the voting power of the then outstanding
shares of the Series D Preferred Stock may execute a written waiver of any
Change of Control Event.
3. Protective Rights.
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(a) So long as any shares of Series D Preferred Stock
remain outstanding, the Corporation shall not, without the vote or written
consent by the holders of at least 67% of the then outstanding shares of the
Series D Preferred Stock, voting together as a single class:
(i) amend or repeal any provision of the
Corporation's Certificate of Incorporation or By-Laws in a manner which
materially adversely affects the rights and preferences of the holders of Series
D Preferred Stock;
(ii) authorize or issue shares of any class of
stock having any preference or priority as to dividends or assets superior to or
on a parity with the Series D Preferred Stock;
(iii) pay or declare any dividend on any other
type or class of securities, other than a dividend payable in common stock or
rights under the Rights Plan;
(iv) authorize a sale of any substantial portion
of the assets of the Corporation (other than sales of stores owned by the
Corporation or its subsidiaries), or a recapitalization or reorganization of the
Corporation (other than stock splits, combinations and/or dividends);
(v) take any action that results in the
Corporation incurring or assuming more than $1,000,000 of funded indebtedness
(other than borrowings under the Corporation's existing line of credit, either
on an individual or cumulative basis), except as
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contemplated by the Corporation and described in the Purchase Agreement as of
dated August 11, 2000;
(vi) merge or consolidate with or into any
person, or enter into any agreement to accomplish such merger or consolidation,
except as contemplated by the Corporation and described in the Purchase
Agreement as of dated August 11, 2000;
(vii) effect or allow fundamental change the
nature of the Corporation's business; or
(viii) otherwise materially affect the rights,
privileges and preferences of the holders of Corporation's Series D Preferred
Stock.
4. Voting Rights.
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(a) Holders, except as otherwise required under the laws of the
State of Delaware or as set forth herein, shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the stockholders of
the Corporation.
(b) The majority of the then outstanding Series D Preferred Stock,
voting or consenting, as the case may be, as one class, will be entitled to
elect the minimum number of directors that shall consist of at least two-
sevenths (2/7) of the then existing board of directors. Until such elections
take place, Leonard Tannenbaum and Eve Trkla shall be considered thus elected.
At any meeting held for the purpose of electing directors at which the Holders
shall have the right, voting separately as a class, to elect directors, the
presence in person or by proxy of the Holders of a majority of the outstanding
shares of Series D Preferred Stock shall be required to constitute a quorum of
such Holders. Any vacancy occurring in the office of a director elected by the
Holders pursuant to this Section 4(b) may be filled by the remaining director
elected by the Holders unless and until such vacancy shall be filled by the
Holders.
(c) If (i) dividends on the Series D Preferred Stock are in arrears
and unpaid for any quarterly period, which failure to pay shall continue for a
period of (A) ten (10) days, as to any cash dividend, and (B) thirty (30) days,
as to any dividend payable in kind; or (ii) the Corporation fails to discharge
any redemption obligation with respect to the Series D Preferred Stock (delivery
of the Notes as set forth in Section 1.3 of the Purchase Agreement shall
constitute discharge of the Company's redemption obligation) and such failure
continues more than 90 days following a Mandatory Redemption Date; then (A) the
number of members comprising the Corporation's Board of Directors shall
automatically increase by such number so that such additional directors (but
including the Board seats elected by the Holders of Series D Preferred Stock
pursuant to Section 4(b) above) shall constitute not less than 50% of the Board
of Directors of the Corporation and (B) the holders of the majority of the then
outstanding Series D Preferred Stock, voting or consenting, as the case may be,
as one class, will be entitled to elect directors to the Board of Directors to
fill the vacancies created by such increase. Such voting rights will continue
until such time as, in the case of a dividend default, all dividends in arrears
on the Series D Preferred Stock are paid in full and, in the case of the failure
to redeem, until payment in cash or until the Notes are delivered, at which time
the term of the directors elected
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pursuant to the provisions of this paragraph shall terminate. The event
described is referred to herein as a "Voting Rights Triggering Event."
(d) Immediately after voting power to elect directors shall have
become vested and be continuing in the Holders pursuant to Section 4(c) or if
vacancies shall exit in the offices of directors elected by the Holders, a
proper officer of the Corporation shall call a special meeting of the Holders
for the purpose of electing the directors which such Holders are entitled to
elect. Any such meeting shall be held at the earliest practicable date, and the
Corporation shall provide Holders with access to the lists of Holders, pursuant
to the provisions of this Section 4(d). At any meeting held for the purpose of
electing directors at which the Holders shall have the right, voting separately
as a class, to elect directors, the presence in person or by proxy of the
Holders of at least a majority of the outstanding shares of Series D Preferred
Stock shall be required to constitute a quorum of such Holders.
(e) Any vacancy occurring in the office of a director elected by the
Holders pursuant to Section 4(c) may be filled by the remaining director elected
by the Holders unless and until such vacancy shall be filled by the Holders.
(f) The Corporation shall not modify, change, affect or amend the
Certificate of Incorporation or this Certificate of Designation to affect
materially and adversely the specified rights, preferences or privileges of the
Holders of the Series D Preferred Stock or increase the authorized Series D
Preferred Stock, without the affirmative vote or consent of Holders of at least
a 67% of the shares of Series D Preferred Stock then outstanding, voting or
consenting, as the case may be, as one class.
(g) In any case in which the Holders shall be entitled to vote
pursuant to this Section 4 or pursuant to the laws of the State of Delaware,
each Holder shall be entitled to one vote for each share of Series D Preferred
Stock held.
(h) In lieu of voting at a meeting, Holders may act by written consent
in accordance with Section 228 of the General Corporation Law of the State of
Delaware ("GCL").
(i) Except as otherwise required by the GCL, Holders of at least 67%
of the then outstanding shares of Series D Preferred Stock, voting or
consenting, as the case may be, separately as a class, may waive compliance with
any provisions of this Certificate of Designation.
5. No Reissuance of Series D Preferred Stock. No share or shares of
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Series D Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such reacquired
shares shall be cancelled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
6. Counterparts. This Certificate may be signed in any number of
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counterparts, each of which will be an original, with the same effect as if the
signatures hereto were upon the same instrument.
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IN WITNESS WHEREOF, the Corporation has executed this Certificate of
Designation to be prepared and executed by the officers named below as of this
11th day of August, 2000.
/s/ R. Ramin Kamfar
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Name: R. Ramin Kamfar
Title: Chief Executive Officer
/s/ Michael Konig
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Name: Michael Konig
Title: Assistant Secretary
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