AMENDED AND RESTATED STOCK
SUBSCRIPTION
AND SHARE TRANSFER
AGREEMENT
THIS AMENDED AND RESTATED STOCK SUBSCRIPTION
AGREEMENT AND SHARE TRANSFER AGREEMENT (this “
Agreement ”) is made and entered into effective as of
December 29, 2006, by and between New World Brands, Inc., a
Delaware corporation (the “ Company ”), P&S
Spirit, LLC, a Nevada limited liability company (the “
Subscriber ”), and David Kamrat (“D.
Kamrat”) and Noah Kamrat (“N. Kamrat”, and
together with D. Kamrat the “Kamrats”).
RECITALS:
On December 29, 2006, the Company and the
Subscriber entered into a Stock Subscription Agreement (the “
Original Subscription Agreement ”), which the parties
hereto now desire to amend and restate in its entirety, effective
as of the date of the execution thereof.
Pursuant to the terms and conditions of hereof,
the Company desires to issue and sell, and the Subscriber desires
to purchase, shares of Series A Convertible Preferred Stock, par
value $0.01 per share, of the Company (the “ Series A
Preferred Stock ”), as well as warrants (“
Warrants ”) to purchase additional shares of Series A
Preferred Stock, on the terms and subject to the conditions set
forth herein.
The Subscriber’s agreement to enter into
this Agreement is conditioned upon achieving a certain proportional
stock ownership. The Kamrats and the Subscriber believe that it is
in their interests as shareholders to facilitate the
Subscriber’s investment in the Company at a price both
advantageous to the Company and acceptable to the Subscriber. To
accommodate those ends, the parties have agreed that the Kamrats
will transfer a total of 3,827,655 shares of Qualmax Common Stock
(as defined below) to the Subscriber. In addition, to accommodate
the Kamrats’ willingness to transfer the Qualmax Common Stock
to the Subscriber, the Company has agreed to issue to the Kamrats a
Warrant representing the right to purchase 9.300378 shares of
Series A Preferred Stock (convertible into 27,777,778 shares of the
Company’s common stock, par value $0.01/share). D. Kamrat
owns a total of 6,221,053 shares of common stock, par value $0.001
per share (the “ Qualmax Common Stock ”), of
Qualmax, Inc., a Delaware corporation (“ Qualmax
”), and N. Kamrat owns a total of 6,328,153 shares of Qualmax
Common Stock. Qualmax, in turn, owns 100 shares of Series A
Preferred Stock, which shares of Series A Preferred Stock
represent, immediately prior to the consummation of the
transactions contemplated by the Subscription Agreement,
approximately 86% of the voting power of the outstanding shares of
capital stock of the Company.
NOW THEREFORE, in consideration of the premises
and of the mutual covenants and conditions herein contained and
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby amend and
restate the Original Subscription Agreement in its entirety as
follows.
1.
Purchase of Shares and
Warrants .
(a)
Tranche A Shares and
Warrants . At the Tranche
A Closing (as defined below), the Company irrevocably agrees to
issue and sell to the Subscriber, and the Subscriber
irrevocably
agrees to purchase from the Company, a total of 11.160454 shares of
Series A Preferred Stock (the “ Tranche A Shares
”, which shares are convertible into 33,333,333 shares of
common stock, par value $0.01 per share (the “ Common
Stock ”), of the Company), at a purchase price of
$268,806.27 per share, for an aggregate purchase price of Three
Million Dollars ($3,000,000) (the “ Tranche A Purchase
Price ”). In addition, in consideration for the
Subscriber’s payment of the Tranche A Purchase Price, at the
Trance A Closing the Company agrees issue to the Subscriber a
warrant to purchase a total of 9.300378 shares of Series A
Preferred Stock (convertible into 27,777,778 shares of Common
Stock) at a price per share of $268,806.27 (the “Tranche A
Subscriber Warrants ”).
(b)
Tranche B-1 Shares
. Subject to Sections 1(e)
and 1(f) hereof and the satisfaction of the other conditions
set forth in Section 2(b) hereof, in the event the
Company’s consolidated unaudited financial statements as
filed on Form 10-QSB (or, Form 10-Q, if applicable) for the second
quarter ending June 30, 2007 reflect EBITDA of: (A) $543,000 or
greater for the three month period ending June 30, 2007; or (B)
$618,000 or greater for the six month period ending June 30, 2007
(the “ Tranche B-1 Closing Condition ”), then at
the Tranche B-1 Closing (as defined below), the Company irrevocably
agrees to issue and sell to the Subscriber, and the Subscriber
irrevocably agrees to purchase, a total of 3.720151 shares of
Series A Preferred Stock (the “ Tranche B-1 Preferred
Shares ”), at a purchase price of $268,806.27 per share,
convertible into 11,111,111 shares of Common Stock, for a total
purchase price of One Million Dollars ($1,000,000) (the “
Tranche B-1 Purchase Price ”); provided ,
however , in the event that prior to the satisfaction of the
Tranche B-1 Closing Condition, the certificate of incorporation of
the Company has been amended to cause the automatic conversion of
the issued and outstanding shares of Series A Preferred Stock into
shares of Common Stock, in lieu of the purchase and sale of the
Tranche B-1 Preferred Shares at the Tranche B-1 Closing, the
Company shall issue and sell to the Subscriber, and the Subscriber
shall purchase from the Company, a total of 11,111,111 shares of
Common Stock (the “ Tranche B-1 Common Shares
”), at a purchase price of $0.09 per share. The Tranche B-1
Preferred Shares or Tranche B-1 Common Shares issued to the
Subscriber at the Tranche B-1 Closing may hereinafter be referred
to separately as the “ Tranche B-1 Shares
”.
(c)
Tranche B-2 Shares
. Subject to Sections 1(e)
and 1(f) hereof and the satisfaction of the other conditions
set forth in Section 2(c) hereof, in the event the
Company’s consolidated unaudited financial statements as
filed on Form 10-QSB (or, Form 10-Q, if applicable) for the third
quarter ending September 30, 2007 reflect EBITDA of: (A) $885,000
or greater for the three month period ending September 30, 2007; or
(B) $1,503,000 or greater for the nine month period ending
September 30, 2007 (the “ Tranche B-2 Closing
Condition ”), then at the Tranche B-2 Closing (as defined
below), the Company irrevocably agrees to issue and sell to the
Subscriber, and the Subscriber irrevocably agrees to purchase, a
total of 3.720151 shares of Series A Preferred Stock (the “
Tranche B-2 Preferred Shares ”), at a purchase price
of $268,806.27 per share, convertible into 11,111,111 shares of
Common Stock, for a total purchase price of One Million Dollars
($1,000,000) (the “ Tranche B-2 Purchase Price
”); provided , however , in the event that
prior to the satisfaction of the Tranche B-2 Closing Condition, the
certificate of incorporation of the Company has been amended to
cause the automatic conversion of the issued and outstanding shares
of Series A Preferred Stock into shares of Common Stock, in lieu of
the purchase and sale of the Tranche B-2 Preferred Shares at the
Tranche B-2 Closing, the Company shall issue and sell to the
Subscriber, and the Subscriber shall purchase from the Company, a
total of 11,111,111 shares of Common Stock (the “ Tranche
B-2 Common Shares ”), at a purchase price of $0.09 per
share. The Tranche B-2 Preferred Shares or Tranche B-2 Common
Shares issued to the Subscriber at the Tranche B-2 Closing may
hereinafter be referred to separately as the “ Tranche B-2
Shares ” and, together with the Tranche B-1 Shares, the
“ Tranche B Shares ”.
(d) Aggregate Tranche B Shares
. If the Tranche B-1 Closing
Condition is not achieved, but the Tranche B-2 Closing Condition is
achieved, then at the Tranche B-2 Closing (as defined below), the
Company irrevocably agrees to issue and sell to the Subscriber, and
the Subscriber irrevocably agrees to purchase, a total of 7.440303
shares of Series A Preferred Stock (the “ Aggregate
Tranche B Preferred Shares ”), at a purchase price of
$268,806.27 per share, convertible into 22,222,222 shares of Common
Stock, for a total purchase price of Two Million Dollars
($2,000,000) (the “ Aggregate Tranche B Purchase Price
”); provided , however , in the event that
prior to the satisfaction of the Tranche B-2 Closing Condition, the
certificate of incorporation of the Company has been amended to
cause the automatic conversion of the issued and outstanding shares
of Series A Preferred Stock into shares of Common Stock, in lieu of
the purchase and sale of the Aggregate Tranche B Preferred Shares
at the Tranche B-2 Closing, the Company shall issue and sell to the
Subscriber, and the Subscriber shall purchase from the Company, a
total of 22,222,222 shares of Common Stock (the “
Aggregate Tranche B Common Shares ”), at a purchase
price of $0.09 per share. The Aggregate Tranche B Preferred Shares
or Aggregate Tranche B Common Shares issued to the Subscriber at
the Tranche B-2 Closing may hereinafter be referred to separately
as the “ Aggregate Tranche B Shares
”.
(e) Optional Purchases by the Subscriber
.
(i) In the event the Tranche B-1 Closing Condition
is not satisfied, the Subscriber shall have the option, but not the
obligation, to purchase the Tranche B-1 Preferred Shares (or the
Tranche B-1 Common Shares, if applicable), at the Tranche B-1
Purchase Price in the manner set forth in Section 1(b)
above. The election of the
Subscriber to
purchase shares pursuant to this Section 1(e)(i) shall be
made by providing written notice (an “ Election Notice
”) to the Company no later than ten (10) days after the
Company has filed a Form 10-QSB (or, Form 10-Q, if applicable) for
the period ending June 30, 2007 indicating whether or not the
Subscriber elects to exercise any of its rights under this
Section 1 (e)(i) .
(ii) In the event: (A) the Tranche B-1 Closing
Condition is satisfied but the Tranche B-2 Closing Condition is not
satisfied, the Subscriber shall have the option, but not the
obligation, to purchase the Tranche B-2 Preferred Shares (or the
Tranche B-2 Common Shares, if applicable), at the Tranche B-2
Purchase Price in the manner set forth in Section 1(c)
above; or (B) neither the Tranche B-1 Closing Condition nor the
Tranche B-2 Closing Condition is satisfied, the Subscriber shall
have the option, but not the obligation, to purchase the Aggregate
Tranche B Preferred Shares (or the Aggregate Tranche B Common
Shares, if applicable), at the Aggregate Tranche B Purchase Price
in the manner set forth in Section 1(d) above. The election
of the Subscriber to purchase shares pursuant to clauses (ii)(A) or
(ii)(B) above shall be made by providing an Election Notice to the
Company no later than ten (10) days after the Company has filed a
Form 10-QSB (or, Form 10-Q, if applicable) for the period ending
September 30, 2007 indicating whether or not the Subscriber elects
to exercise any of its rights under this clause (e)(ii).
(f) EBITDA . For purposes of Sections 1(b) and
(c) hereof: (i) the term “ EBITDA ” means
earnings before interest, taxes, depreciation and amortization, as
determined in accordance with the Company’s consolidated
unaudited financial statement for the relevant period, prepared in
accordance with GAAP consistently applied; and (ii) the Tranche B-1
Closing Condition and Tranche B-2 Closing Condition, as applicable,
shall be deemed to have been satisfied upon delivery by the Company
to the Subscriber of financial statements as filed on the
applicable Form 10-QSB (or Form 10-Q if applicable) and evidencing
the satisfaction of the Tranche B-1 Closing Condition and Tranche
B-2 Closing Condition, as applicable. Notwithstanding anything
contained herein to the contrary, the EBITDA targets provide for in
Sections 1(b) and (c) will be subject to a margin of
error of $100,000, meaning that EBITDA results within $100,000 of
the target will be treated as reaching the target for purposes of
satisfying the Tranche B-1 Closing Condition and/or the Tranche B-2
Closing Condition, as applicable.
2.
Closings .
(a)
Tranche A Closing
. The purchase and sale of the
Tranche A Shares and the Warrants shall be effective on the date
hereof at 3:00 p.m. (EST), remotely at the offices of Kramer Levin
Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York,
New York on the date hereof (the “ Tranche A Closing
”). The obligations of the Company to issue and sell, and of
the Subscriber to purchase, the Tranche A Shares at the Tranche A
Closing shall be conditioned on the following:
(i)
the Subscriber shall deliver, or
cause to be delivered, to the Company:
(A)
a counterpart signature page to this Agreement executed by a duly
authorized officer of the Subscriber;
|
|
|
the Tranche A
Purchase Price, in immediately available funds by wire transfer to
an account designated by the Company in writing to the
Subscriber;
|
|
|
|
a counterpart
signature page to the Amended and Restated Voting Agreement, in the
form attached as Exhibit A hereto (the “ Voting
Agreement ”), executed by a duly authorized officer of
the Subscriber, Selvin and Sylvia Passen, TBTE Dr. Selvin Passen
and Oregon Spirit, LLC (collectively, the “ Subscriber
Affiliates ”);
|
|
|
|
a counterpart
signature page to the Amended and Restated Lock-Up Agreement, in
the form attached as Exhibit B hereto (the “
Lock-Up Agreement ” and, together with the Voting
Agreement, the “ Ancillary Agreements ”),
executed by a duly authorized officer of the Subscriber and each
other Passen Holder (as defined in the Lock-Up Agreement);
and
|
|
|
|
a counterpart
signature page to the Amended and Restated Escrow Agreement, a copy
of which shall also be delivered to the escrow agent thereunder, in
the form attached as Exhibit C hereto (the “ Escrow
Agreement ” and, together with the Voting Agreement and
the Lock-Up Agreement, the “ Ancillary Agreements
”), executed by a duly authorized officer of the
Subscriber;
|
|
|
|
the stock
certificate representing the Tranche A Shares issued pursuant to
the Original Subscription Agreement, which stock certificate will
be cancelled by the Company; and
|
(iii)
the Company shall deliver, or cause
to be delivered, to the Subscriber:
|
|
|
a counterpart
signature page to this Agreement executed by a duly authorized
officer of the Company;
|
|
|
|
a counterpart
signature page to the Voting Agreement, executed by a duly
authorized officer of the Company, Qualmax, Inc., M. David Kamrat,
Noah Kamrat, Jane Kamrat and Tracy Habecker (collectively, the
“ Qualmax Affiliates ”);
|
|
|
|
a counterpart
signature page to the Lock-Up Agreement, executed by a duly
authorized officer of the Company and each Qualmax Holder (as
defined in the Lock-Up Agreement);
|
|
|
|
a counterpart
signature page to the Escrow Agreement, a copy of which shall also
be delivered to the escrow agent thereunder, executed by a duly
authorized officer of the Company, together with delivery to the
escrow agent of one or more stock certificates representing the
Tranche B-1 Shares and Tranche B-2 Shares;
|
|
|
|
a stock
certificate representing the Tranche A Shares executed by a duly
authorized officer of the Company pursuant to the terms of this
Agreement;
|
|
|
|
a counterpart
signature page to the Warrant Agreement, in the form attached as
Exhibit D hereto (the “ Warrant Agreement
”), executed by a duly authorized officer of the Subscriber,
which Warrant Agreement shall represent the rights of the
Subscriber in respect of the Warrants; and
|
|
|
|
a certificate
copy of the Certificate of Amendment to the Certificate of
Designation, Preferences and Rights of the Series A Preferred
Stock, in the form attached as Exhibit E hereto, evidencing
the increase of the authorized number of shares of Series A
Preferred Stock from 100 to 200.
|
(b)
Tranche B-1 Closing
. The purchase and sale of the
Tranche B-1 Shares, if applicable, shall take place at 3:00 p.m.
(EST), remotely at the offices of Kramer Levin Naftalis &
Frankel LLP, 1177 Avenue of the Americas, New York, New York no
later than five (5) business days following the satisfaction, or
waiver, of the Tranche B-1 Closing Condition (the “
Tranche B-1 Closing ”) and subject to delivery and/or
receipt of the following:
(i) the Subscriber shall deliver, or cause to be
delivered, to the Company: (A) the Tranche B-1 Purchase Price, in
immediately available funds by wire transfer to an account
designated by the Company in writing to the Subscriber; and (B) a
certificate executed by a duly authorized officer of the Subscriber
certifying that the representations and warranties made by the
Subscriber in Section 3 hereof are true and correct in all
material respect as of the date of the Tranche B-1 Closing (except
to the extent a representation or warranty is expressly limited by
its terms to another date); and
(ii) the Company shall deliver, or cause to be
delivered, to the Subscriber: (A) in accordance with the terms of
the Escrow Agreement, a stock certificate representing the Tranche
B-1 Shares purchased at the Tranche B Closing; and (B) a
certificate executed by a duly authorized officer of the Company
certifying that (i) the representations and warranties made by the
Company in Section 4 hereof are true and correct in all
material respect as of the date of the Tranche B-1 Closing (except
to the extent a representation or warranty is expressly limited by
its terms to another date), and (ii) there shall have been no
material adverse change in the business, condition (financial or
otherwise), assets,
liabilities
(contingent or otherwise), operations or results of operations of
the Company since the date of this Agreement.
(c) Tranche B-2 Closing. The purchase and sale of the Tranche B-2
Shares, or, if applicable, the Aggregate Tranche B Shares, shall
take place at 3:00 p.m. (EST), remotely at the offices of Kramer
Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New
York, New York no later than five (5) business days following the
satisfaction, or waiver, of the Tranche B-2 Closing Condition, or
the receipt of an Election Notice from the Subscriber, as
applicable (the “ Tranche B-2 Closing ”) and
subject to delivery and/or receipt of the following:
(i) the Subscriber shall deliver, or cause to be
delivered, to the Company: (A) the Tranche B-2 Purchase Price or
the Aggregate Tranche B Purchase Price, as applicable, in
immediately available funds by wire transfer to an account
designated by the Company in writing to the Subscriber; and (B) a
certificate executed by a duly authorized officer of the Subscriber
certifying that the representations and warranties made by the
Subscriber in Section 3 hereof are true and correct in all
material respect as of the date of the Tranche B-2 Closing (except
to the extent a representation or warranty is expressly limited by
its terms to another date); and
(ii) the Company shall deliver, or cause to be
delivered, to the Subscriber: (A) in accordance with the terms of
the Escrow Agreement, a stock certificate representing the Tranche
B-2 Shares, or the Aggregate Tranche B Shares, as applicable,
purchased at the Tranche B-2 Closing; and (B) a certificate
executed by a duly authorized officer of the Company certifying
that (i) the representations and warranties made by the Company in
Section 4 hereof are true and correct in all material
respect as of the date of the Tranche B-2 Closing (except to the
extent a representation or warranty is expressly limited by its
terms to another date), and (ii) there shall have been no material
adverse change in the business, condition (financial or otherwise),
assets, liabilities (contingent or otherwise), operations or
results of operations of the Company since the date of the Tranche
B-1 Closing.
(d) The Company shall use the cash proceeds
received in connection with the sale and issuance of the shares of
Series A Preferred Stock, or Common Stock, hereunder for working
capital and other purposes generally consistent with the use of
proceeds illustration attached as Annex A hereto, as the
same may be approved and modified by the board of directors of the
Company from and after the Tranche A Closing. The Company agrees to
repay from the proceeds received from the Tranche A Purchase Price,
the principal amount of the loan made by Oregon Spirit, LLC to the
Company on December 1, 2006 in the amount of $500,000 at the
Tranche A Closing (the “ Oregon Loan ”), at
which time any and all obligations, including accrued and unpaid
interest, due and payable in respect of the Oregon Loan shall be
satisfied in full and the Company shall have no further obligation
to make payments in respect thereof.
3.
Share Transfer by
Kamrats, Warrants Issued to Kamrats
.
At the Tranche A Closing, in
addition to the foregoing, the Company shall issue to the Kamrats
certain Warrants, and the Kamrats will transfer the Qualmax
Transfer Shares (as defined below) to the Subscriber, as
follows:
(a)
Kamrat Warrants
. The Company shall issue at the
Tranche A Closing to each of D. Kamrat and N. Kamrat a Warrant to
purchase a total of 4.650189 shares of Series A Preferred Stock
(convertible into 13,888,889 shares of Common Stock) at a price per
share of $268,806.27 (in total the “ Kamrat Warrants
”), and at the Tranche A Closing shall deliver to the Kamrats
a counterpart signature page to the Kamrat Warrant Agreement, in
the form attached as Exhibit D hereto (the “Kamrat
Warrant Agreement ”), executed by a duly authorized
officer of the Company, which Kamrat Warrant Agreement shall
represent the rights of the Kamrats in respect of the
Warrants.
(b)
Qualmax Transfer
Shares . The Kamrats will
transfer at the Tranche A Closing a total of 3,827,655 shares of
their Qualmax Common Stock (the “ Qualmax Transfer
Shares ”) to the Subscriber, and promptly after closing
shall deliver to the Subscriber a copy of a letter of instruction
executed by a duly authorized officer of Qualmax to Qualmax’s
transfer agent directing the issuance of a stock certificate
representing the Qualmax Transfer Shares executed by a duly
authorized officer of Qualmax, pursuant to the terms of this
Agreement.
(c) Post-Merger Share Adjustment
. In the event of a merger between
Qualmax and the Company, or a share exchange or any other event as
a result of which Qualmax shareholders receive shares of the
Company’s stock in exchange for all of their Qualmax shares
(the “ Merger ”), the number of shares of
Qualmax Common Stock (issued immediately prior to the Merger)
transferred or transferable to the Subscriber pursuant to this
Section 3 shall be increased or decreased, if necessary, and
Qualmax and/or Company shares transferred between the Subscriber
and the Kamrats accordingly, in order to provide that, immediately
after the Merger:
(i) the sum of all shares of the Company’s
stock (on an as converted basis, adjusted for splits, stock
dividends, and the like) (A) held by each of Noah Kamrat, David
Kamrat, Jane Kamrat and Tracy Habecker (the “ Kamrat
Family ”) at the time of the Tranche A Closing, and
shares issuable upon exercise of the Warrant by the Kamrats, and
(B) issued or distributed to the Kamrat Family, or any of them, as
a result of the Merger, is equal to
(ii) the sum of (A) 7,500,000 (that number
representing the shares of the Company’s common stock
acquired by Oregon Spirit, LLC on September 14, 2006),
|
